Market Sentiment Anomalies Create Rare Upside Opportunity for December 2020

The recent discovery of two stock market sentiment anomalies has created a rare upside investment opportunity for gains of above 36% in December and 86% by February 2020.  The two anomalies:

• Thanksgiving Melt Up Anomaly. The average gain for 12 of past 14 November 20 to 30 ten-day periods for S&P 500 was 3.5%.   The only two exceptions, 2015 and 2018 were preceded by the significant market corrections for August 2015 and October 2018.
• Bullish Sentiment Anomaly. The November 13, 2020 occurrence of the anomaly, the fourth since January 2018, indicates an extremely high probability for the S&P 500 to decline by as much as 12.7% from its recent 2020 high by December 20, 2020.  Based on the index’s behavior after the anomaly’s three prior occurrences there is a 66% probability that the S&P 500 could continue its decline in 2021.

The Thanksgiving Melt Up Anomaly is now driving the S&P 500 to a higher November all-time high.  The Bullish Sentiment Anomaly is the cause for a violent correction for the S&P 500 to begin in early December 2020.  The chart below depicts the four 45% to 59% Bullish sentiment readings which occurred near to the all-time highs for the S&P 500 from the beginning of 2018 to November 13, 2020:

Within five weeks of the three prior Bullish Sentiment Anomalies occurring the S&P 500 declined by a minimum of 9.7%. Two of the three total declines depicted in the table below were more than 100% greater than the five-week declines. 

There exists a rare opportunity for gains of 36% or more from November 13, 2020 through Christmas Day.  The upside is due to my discovery that VXX shares which trade the CBOE’s VIX (market volatility Index) can be utilized to increase the performance of the BBT algorithm’s short the market signals.

For the two occurrences, in which the S&P 500 continued on to new lows after the five weeks, the BBT Algorithm’s signals to trade the S&P 500 long (SPY) and inverse (SH) ETFs generated gains of 44.5% for the fourth quarter of 2018 and 49.5% for January to March of 2020 period.  The BBT’s signals to trade the VXX ETN and SPY combination produced a gain of 86.4% for Q4 of 2018.  The performance of BBT’s signals to trade the VIX ETFs was not available at press time due to intraday prices not being available.  

Long and short index and VIX trading ETFs and ETNs which are powered by the BBT Algorithm’s signals provide significant upside in both declining and advancing markets.   Click below to watch a video about the BBT’s Algorithm’s performance metrics including track records and risk tolerance levels and the products which it powers.

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