Do they ring a gong at the bottom?

Trading lore says that they do not ring a gong at the bottom.  At "A Dash" we are interested in any successful approach -- fundamental or technical.  We are open to human interpretation of data and that derived from systems.  We have discussed a number of fundamental considerations in recent weeks, but fundamental analysis is tricky.  Earnings projections are open to dispute, and valuation may be ignored when sentiment is negative.

While the current month-long selling spree continues unabated, traders may well ask when a tradeable bottom has occurred.

Individual investors who have been worried about recession and stocks have similar questions.  Should they bail out?  Should they defer annual retirement contributions to stocks?  What is the signal to deploy fresh investments?

A Survey of Advice

Let us take a look at advice from some top traders and bloggers.  We shall then share the output of one of our own successful proprietary models.  All of the insights come from people we respect, feature on our site, and read daily.

Trader Mike,  has an interesting indicator: Visitors searching for information on inverse ETF's!  Mike concludes that we are getting close, but perhaps not there yet.  Read his entire post for some great charts and analysis.

Brett Steenbarger looks at the increasing VIX and discusses what it means.  Dr. Brett does not yet see the extreme levels suggesting a decline has ended.

Adam Warner, also looking at the VIX,  calls it "a start."

Charles Kirk, sees some technical indicators as close.  You need a membership to see the complete analysis, and it is worth the price.

Bill Luby, the  VIX expert, has  pointers to several great articles he has written, and also notes that the VIX has not really spiked.

Gary D. Smith follows the ISEE sentiment index, which has made a new record low.  Gary points out the good track record of this approach in marking bottoms.

Bespoke Investment Group also looks at the VIX, noting the levels still short of some past spikes.  Take a look at the article to see the expected beautiful charting.

Barry Ritholtz, drawing upon data from his new Fusion IQ method, shows a great chart of stocks below the 200-day moving average.  He carefully points out that while the readings are at bottoming levels, it is a process, not a specific call to buy.

At StockPickr.com James Altucher has generously shared the system trading methods he has developed and used successfully.  Traders should check out System Trades of the Day, which includes the QQQQ crash method.

Last but not certainly not least is Doug Kass.  He is like a human computer, looking for various sources and information to guide trading.  He has been accurate on the many problems facing the market, so his decision to buy deserves extra respect.   Doug has highlighted some financial stocks to buy and has turned more constructive on the market.  His bullish trading calls have worked extremely well in the many years we have followed him.

If one is looking to make an aggressive buy, reading these featured sources is essential.

The Gong Model

One of the systems we use is named the "Gong Model."  Our modeling guru, Vince Castelli, has developed a two-stage method.  In the first stage, the hammer is drawn back.  In the second stage it has rung.  When the gong rings, it is, as Barry Ritholtz suggests in describing his method, not an immediate buy signal, but the start of a process.  The results after some weeks are very good, but it is more geared to intermediate-term investors.

While we cannot reveal more specifics about this approach, it is still in a stage where the hammer is being drawn back.  The gong has not yet rung.  The hammer is not yet cocked.  We find this a bit surprising, but that is why one follows a disciplined system.  Readers will note that the result is consistent with the interpretation of several sources we cited.

TCA-ETF Update

In the current environment it is no surprise that the TCA-ETF model has reduced position size.  The readings for hedges have been negative for about ten days, but there have still been some sector buys.  It has been a bad time for any long-only system, but it goes with the territory.  The table below shows the current sector ratings.  There has been a lot of shifting, but the declines have been broad-based.  When looking at the rankings, readers should look at the number of sectors getting a "buy" signal, seven of 44.  The table is delayed.  As of tonight, there is only one sector in the buy range.

Since the model has a long-term track record, the key for our investors is timing on re-entry.  When the gong rings, investors will have a good opportunity, especially if choosing the right sectors.