Stocksino Signal · 28 years ·
Every level of the oscillator, drawn where it actually sits, with what the next ten days were worth from there. Reach past the dashed line and the level beat doing nothing at all. Stop short of it and it didn’t.
When you own stocks you make a little money on most days. It is not much.
But days are not all the same. Some days pay a lot more than others. This gauge looks for those days.
When the line drops to −60, the next two weeks paid about four times what two normal weeks pay. On SPY that is +1.20% against +0.33%. It held up in every stretch of the last 28 years.
Now the part most people leave out. We are wrong a lot. About one time in three, we lose money. The worst one lost $1,552 on every $10,000. That was real. It can happen again.
Now look at the top half. A couple of rungs creep past the dashed line, but only by a hair, and the rest sit right on it. In plain words: after a high reading the market just does what it normally does.
Every rung measures the same thing — what buying there paid — so the whole ladder reads on one scale. Which raises the fair question: if buying at a high reading loses money, does selling short there make money?
We measured it. Mostly no. Held as a short, SPY loses at +40, +50, +60, +70 and +78. Only the two most extreme rungs make anything at all, and the best of them — +100 — compounds to 1.12x over 28 years. That is +0.4% a year, on 34 trades, carrying a short’s borrow cost, its open-ended risk and its tax treatment. On QQQ no level works at all: +78 turns $10,000 into $6,800.
The reason the intuition misleads is that the market drifts up. A short has to beat that drift before it earns anything, so “a worse than average two weeks for a buyer” is a long way from “a good two weeks for a seller.”
A high reading is not a sell signal. It is a “don’t buy” signal, which is worth knowing and is not the same thing. We could pretend otherwise and sell you twice as many alerts. The numbers say don’t, so we don’t.