Timing Signals Update

This is an update on some timing signals I’ve followed for a number of years now in a basic “dashboard”.

  • TL;DR: A few of the shorter-term ones have flipped to bullish, while the intermediate ones have switched to an up-trend - while still officially “bearish”. Signs of improvement from the relentless cyclical bear of the last 6 months, but definitely not an “all-clear” yet.

  • The classic “weekly” MACD has flipped to bullish as of this week on S&P, Naz and small caps. schrts.co/cvKvIGux (PPO is possibly a better version of MACD).

  • The short term daily version of the MACD went bullish 7/8.

  • The breadth indicator percent of stocks above 50D moving average (PAMA50) has risen through 50 to 54-56, out of bearish, into what I label “neutral”.

  • The short term PAMA10 on small caps (the S&P 600) went from @30 to a spike at 90 in the last week.

The BearCatchers and other slower-acting intermediate-term signals are still “bearish”, but the trend change in other signals (above and others) indicate that “a” bottom has formed since the 2nd-3rd week of June about 4 weeks ago. That said, this could be the biggest fakeout bounce since December ‘08 - or not.



a” bottom has formed since the 2nd-3rd week of June about 4 weeks ago. That said, this could be the biggest fakeout bounce since December ‘08

It can’t be the “Bull Trap” part in this chart I’ve stolen from Jim, or?


We are already far below that, right?


It can’t be the “Bull Trap”, part…"
That’s the sickening part of chart reading.
But none of us can go back in time to take those trades and make a ton of money. We are all subjected to decide what happens next at the very “hard right edge” of the chart. That next bar has not been printed yet!

Buffett? quote: “In the business world, the rearview mirror is always clearer than the windshield.”


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We are already far below that, right?

I have no idea where we are on the graph, but the market hasn’t fallen very much in the grand scheme of things, so I wouldn’t take that view as a comfort.
If you want to have a sense of how far East you are, it’s sometimes more important to know where you started than how far you have come.
Ten minutes driving east from Atlanta versus two hours driving east from San Diego?

To get a sense of scale you have to step back and look at how much the broad US market has risen lately before the recent drop started.

The peak just before the pandemic drop seemed very expensive at the time in most senses.
For example, 31% more expensive since the “modern expensive era” average since 1995 based on the earnings yield using smoothed real earnings.

Despite the recent hiccup, the total return since that absolute pre-pandemic peak has still been +21.1% (!).
Admittedly it’s up only 5.3% after adjusting for inflation, but still, that’s starting from a pretty expensive level.
Offhand, my impression is that on average only the most extreme part of the froth has been blown off–still a lot of air under us.

The better news is that dispersion of valuation levels seems to have been increased.
This is probably a prerequisite for market conditions that give a chance of doing well.
Some things are still seemingly very expensive, others seem quite attractive.
If you’ve been invested in crypto and SAAS so far this year it has been very…emotional? Educational?
If you’ve been in oil or big pharma or dollar stores, you’re wondering what all the fuss is about.



This Bear is being driven by macro events. DoubleLine found two major drivers of equity drawdown: equity valuations and severity of recession. Look at Figure 3 in this pdf:

Finding a Bottom in Equities
DoubleLine Macro Asset Allocation Team, June 2022

Current drawdown: -24%
13 Bear Markets median: -30%
Non-Recession median: -28%
Recession median: -35%