Bold Enough to Call A Top? (by Andy Crowder)

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Well, I already made that mistake. 1.9% lower. Check out my post from last Tuesday.

But, 1.9% lower really isn’t that far. Especially if you consider all of the bearish indicators that currently reside on  a sentiment and technical basis.

I use very few indicators. I am a strong believer in the linear regression of time and price.  You know, mean-reversion,  bell curves, simple overbought/oversold indicators. Simple, logical, intellectual and more importantly mathematically sound indicators that are the first step towards long-term trading success. Emotions are nonexistent. Time and price determine my parameters.

Basically, I apply statistical principles first and foremost. And the credit spreads I apply all have the probability of success edge. Combine the two, well, it is in my opinion, THE foundation for long-term trading success.

But I also believe in sentiment, especially on a short-term basis. While I never trade based solely on sentiment, it is certainly I filter or screen that I apply.

And now both are overwhelmingly bearish on a short to intermediate-term basis.

Short-term look no further than the High-Probability, Mean-Reversion Indicator below. All of the major indices remain in a short-term overbought to very overbought state. Couple that with almost every sentiment measure in a bearish state and yes, I remain bearish for the moment.

I think this chart by highly-acclaimed Sentiment analyst Jason Goepfert of says it all.

Certainly, food for thought.

Remember, keep it simple, remain patient and allow opportunities to come to you. Once they do, apply statistically proven strategies like credit spreads. Use option theoreticals, like probability of success to make your final decisions. And of course, the final and most important piece, use position-sizing to effectively and other risk-management techniques to maintain order within your portfolio.

Apply all of these principles, like I do in my Theta Driver Strategy and you will be well on your way to long-term success. It’s not easy, it shouldn’t be, but I can tell you that it is worth the effort. Allow yourself the independence of successfully managing a portion of your own wealth. Make your own decisions and make them with conviction.

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