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  • Article Market Update, Market Condition: Neutral Quiet
  • Trading Education Three Forex Trading Systems Revealed in October
  • Trading Tip SQN Report Coming Next Week

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Cristina was born and raised in Brazil until her family immigrated to Portugal when she was a teenager. She completed her studies and started working in Portugal in retail finance. She then continued her career in Moscow and London restructuring retail banks. In 2010 she moved to the Caribbean to live with the love of her life. Since then she has been free-lancing as a management consultant and learning to trade in pursuit of financial freedom. In 2013 she discovered the Van Tharp Institute and her trading education has taken off. She has been using the Matrix book as a guide to create her own personal version of the Super Trader Program and has been delighted with the results so far. She aims to achieve financial independence by December 2016 and plans on living a blissful life afterwards as a beach-bum.

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Market Update for Period Ending July 31, 2014

Market Condition — Neutral Quiet

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I always say that people do not trade the markets; they trade their beliefs about the markets. In that same way, I'd like to point out that these updates reflect my beliefs. If my beliefs and your beliefs are not the same, you may not find them useful. I find the market update information useful for my trading, so I do the work each month and am happy to share that information with my readers.

However, if your beliefs are not similar to mine, then this information may not be useful to you. Thus, if you are inclined to do some sort of intellectual exercise to prove one of my beliefs wrong, simply remember that everyone can usually find lots of evidence to support their beliefs and refute others. Just simply know that I admit that these are my beliefs and that your beliefs might be different.

These monthly updates are in the first issue of Tharp's Thoughts each month. This allows us to get the closing month's data. These updates cover 1) the market type (first mentioned in the April 30, 2008 edition of Tharp's Thoughts), 2) the five week status on each of the major US stock market indices, 3) our four star inflation-deflation model plus John Williams' statistics, and 4) tracking the dollar. I will now report on the strongest and weakest areas of the overall market as a separate SQN™ Report. And that may come out twice a month if there are significant market charges.

Part I: Van Commentary—The Big Picture

The S&P 500 has had 14 new high closes in the last two months.   We’ve moved from strong bull to neutral (new high closes with a very small range change percent) in one month.  We have also moved into an inflationary phase. Gold and silver are starting to move up. August could prove to be an interesting month. And that’s the big picture in a nutshell.

Debt Clock

The State of the United States

Month Ending

National Debt

Federal Tax Revenue

Federal Spending

Trade Deficit

Debt Per Family

Unfunded Liabilities

Workforce (taxpayers)

People supported by them

July 31 2012

$15.93 trillion

$2.364 trillion

$3.632 trillion

$810 billion





Dec 30 2012

$16.42 trillion

$2.452 trillion

$3.540 trillion

$740.7 billion





July 31, 2013



$3.535 trillion

$703 billion


Unfunded Liabilities

115.2 million


Dec 31, 2013

$17.27 trillion

$2,82 trillion

$3,480 trillion

$692 billion


$127.2 trillion

115.0 million


Jan 31, 2014

$17.32 trillion

$2.84 trillion

$3.494 trillion

$676 billion


$127.7 trillion

115.2 million


Feb 28, 2014

$17.38 trillion

$2.86 trillion

$3.503 trillion

$683 billion


$128.1 trillion

115.4 million


Mar 31, 2014

$17.57 trillion

$2.89 trillion

$3.519 trillion

$683 billion


$128.6 trillion

115.6 million


Apr 30, 2014


$2.91 trillion

$3.528 trillion

$683 billion


$128.9 trillion

115.8 million


May 31, 2014


$2.93 trillion

$3.54 trillion

$689 billion


$129.4 trillion

116.0 million


Jun 30, 2014

$17.54 trillion

$2.95 trillion

$3.51 trillion

$697 billion


$124.8 trillion

116.1 million


Jul 31, 2014

$17.61 trillion

$2.95 trillion

$3.52 trillion

$695 billion


$119.7 trillion

116.3 million

104.8 M

Right now our total unfunded liabilities are $119.7 trillion; with most of that being Medicare and prescription drug liability at $82.7 trillion and $21.2 trillion, respectively.   Social security unfunded liability is only a little less than our total debt at $15.9 trillion.  All three of those figures dropped by at least $1 trillion between May and Jun and then another $5 trillion from June to July.  Much of those drops were due to a decrease in the Medicare liability – which could be the government just that deciding Obamacare will decrease the future deficits.  In this instance, however, the social security liability was also decreased which means more government statistical changes were made to make these figures look better.   There are lies, damn lies, and government statistics.

According to the debt clock, our official national debt stands at $17.61 trillion, up $70 billion from the prior month and up $710 billion in the last year.  The US population is at 318.6 million with taxpayers standing at 116.3 million.   Retirees now stand at 47.8 million.   The number of disabled people collecting social security stands at 11.1 million, while food stamp recipients total 46 million. All of those figures are up from last month.  Still, that’s 108.4 million people that are supported by the government.  By “government” I mean the 116.3 million taxpayers who also support the 4.4 million federal employees.   Plus there are 19.7 million state and local employees supported by other taxes.  In reality, about 11.6 million taxpayers pay 90% of U.S. taxes.  This means that 11.6 million workers are supporting 105 million other people through the government.   In addition the top 1% of American tax payers pay 40% of the tax bill.  Do these numbers add up to you?  Do they seem sustainable?

The debt clock also has some new numbers.   It shows the official unemployment rate at 9.7 million while the actual number unemployed is 18.6 million.   And these numbers are conservative compared with those published by which show unemployment levels at near depression level statistics.


(To see a larger version of this image, click here.)

Part II: The Current Stock Market Type Is Neutral Quiet

As you know, I look at the market SQN® score for the daily percent changes in the S&P 500 Index over 200, 100, 50 and 25 days. For our purposes, the S&P 500 Index defines the market.    

On July 31st, the Market SQN® scores for 200 and the 50 day periods were both in the Bull range.  The Market SQN for 25 days, however, was in bear territory. While I look at the other periods, I use the 100 day period to label the market type.  On July 30th, the Market SQN score for 100 days was still bullish at 0.86 but it moved down to 0.49 on the 31st into Neutral.   I consider the Market SQN band from 0.7 to 0 to be neutral because it can provide a good warning of things to come.

Volatility for the entire month (actually since late April) stayed in the Quiet range.

In the last six months or so, I have really started looking at the range change percentage for various periods.  On July 31, the S&P 500 dropped 2% which brought the 100-day range change a lot lower to +2.85%, down from +11.72% one month earlier on June 28th.  In June, we had five new S&P 500 closing highs and just had two more new highs on July 23rd and July 24th – which makes the range change drop for July pretty amazing.

Rather than show you the regular charts of market type, I’m showing the table below with the Market SQN for 100 days, the market type, and the range change percentages -  


If you remember from May, I mentioned that while we were having new all-time high closes, the range change percent was only about 5% which was why the market type was in neutral.   I also said that even though such signs occurred in 2000 and 2007 (prior to huge declines) that market type was not predictive.   I said the market could collapse, stay the same, or become stronger.   In late June, early July, the market had a double digit range change and it was a Strong Bull market type.   Since then, however,  the range change dropped to only 2.85% — a sideways market at best and this is starting to look very ominous.

Below is a chart of the weekly changes in the three major US Indices.  All three indices are up for the year, but not by a lot.  We have had 27 record high closes with 5 of them being in July, yet the S&P 500 is only up 4.5% on the year and 2.8% over the last 100 days. The NASDAQ is up nearly 8% on the year and the DOW is just barely up 0.62%.  It wouldn’t surprise me if “they” added AAPL to the Dow sometime this year to make it a better performer.


Part III: Our Four Star Inflation-Deflation Model

In the simplest terms, inflation means that stuff gets more expensive, and deflation means that stuff gets cheaper. There’s a correlation between the inflation rate and market levels, so the inflation rate can help traders understand big-picture processes.  Because the CRB:CCI index was discontinued in April, 2013,  I switched to the ETF called DBC for commodity prices but I left in the CCI data from 2005 to 2012 as a reference.


This data is up to date through July 31st.  Looking back over the most recent two-month and six-month periods provides the current month’s individual component scores and the total score below.










Total Score











July 14










This was the second month in a row and only the second of the last 16 where we measured a move toward inflation. 

Part IV: Tracking the Dollar

A new set of laws took effect in July where basically, the US makes foreign financial firms police US citizens or face a 30% fee on the sale of their U.S. assets.  The US government seems to have declared a fiscal tax war on some of its own citizens and logically speaking, appears to have made a very dangerous move.  One investment advisory service was saying that this new law could cause a massive flow of money out of the US dollar and a move away from it as the world’s reserve currency.  What really happened in July, however, is that the stock market got very strong early in the month and the dollar became very strong also.  While we had lows in early May around 79, the USD Index skyrocketed in July ending up around 81.4.  That’s not a mass exodus from the dollar.


General Comments

Just a reminder that the 100 day Market SQN hit its high for the year of 2.02 on January 14th.   Right now, it’s below 0.5 and in neutral territory. 

When you look at the real CPI and consider that the GDP has to grow more than the CPI for us not to have negative numbers, then we have essentially been in a recession since 2000 (except for one quarter).  We just don’t know it because the government manipulates statistics.  According to, real unemployment is more like 23%.   Two graphs from are shown below. 



I just heard that golf revenue is down so much that Dick’s sporting goods just laid off more than 500 PGA professionals.  I haven’t played golf in a long time, but my guess is that the courses are also much less crowded.  Movie revenue, a mainstay of American entertainment is also down in 2014.    At an annualized rate, 2014 movie revenue is projected at $1.29 billion; the lowest level since 1996.  These are just two signs that America is feeling the pinch.

While our business is doing well because of our Super Trader Program, we’re finding that many Americans have given up on the idea of trading for a living.   If you go to your local Barnes and Noble store, you’ll find that investment books are now limited almost exclusively to books by Jim Cramer, Suzie Orman, Robert Kiyosaki, and a few written about Warren Buffet.  You have to know about most good trading books and find them online at The stock market is up simply because the Fed’s money printing isn’t going into the economy via bank lending but straight into the stock market.

The market picture has definitely changed over the month of July.  When I was searching for what the media was saying about the 2% plunge on the 31st, however, I came across a headline from the day before.  It’s not a magazine cover but it’s a good sign that the future of the stock market might not be that bad yet for a while -

Why You Should Prepare for the Next Bear Market Now
By David Ning July 30, 2014 11:19 AM

Last month, I gave the following prescription and I will continue to include it in this update for at least the rest of the year.   This is my prescription for growth in the US economy.   Politicians please read.

1) Kill deficit spending immediately by stopping wars and spending on what we mistakenly call “defense.”   We can’t afford to be the world peace keeper any more.  We spend more than a trillion per year on “defense.”   

2) Make sure no more deficit spending continues by passing a law calling for a re-election of new politicians any year the government cannot spend within their means.  (I heard this first from Warren Buffet and borrowed it).

3) Right now the U.S. education system cannot compete with those of many other countries outside of the US except at the university level.  And our best universities are filled with brilliant foreign students.  Great, let’s accept the situation as it is and allow the brilliant foreign students who getting masters and Ph.D. degrees to immediately become U.S. citizens instead of forcing them to return to their own countries to use the skills we taught them abroad. 

4) Give a $50,000 tax rebate to any US citizen getting a Ph.D. in the United States to help them pay for their education or their education loans.

5) Allow US companies to compete in the world in a big way by eliminating the tax on the foreign earnings of US citizen living abroad.  Taxing foreign earnings of US citizens living in the US is fine, but not those who must live abroad to help our corporations grow and who must also pay foreign tax on their earnings. 

6) Reduce Corporate Income tax from some of the highest levels in the world to competitive levels.  Do this partially by not taxing foreign earnings from US corporates that are used to stimulate the economy.   This would eliminate the US trade deficit fairly quickly.

7) I personally ordered a Tesla model S for delivery in October.   Right now the government gives people a $7500 credit for something that could totally eliminate the US dependency on foreign oil and dramatically reduce air pollution.   Tesla has actually released their patents to the rest of the world.   The model S actually met two of the criteria that I wanted in a car (great power -- 0-60 in 4.2 seconds) and great gas mileage (infinite).   I didn’t think it met the third (something I could have fun driving around the US).   But it now looks like by the time I get my car they will have a ring of charging stations around the US and I will be able to drive around the US for FREE in 2015 and perhaps even do the same in many parts of Canada by the end of 2016.  Let’s encourage the US to help Tesla (an American company) with their mission.  Obviously, this recommendation is more a personal bias.

I’ve published this list for several months and item seven is the only one that has gotten a strong negative comment.  It’s interesting that you only have to say one thing to push people’s buttons.  Last month I said my delivery was in December, partially because my wife and I were planning to go on a cruise in October.   The cruise has been canceled so I moved up my delivery date to October.   One of my former Super Traders already has a Tesla (he bought a demo so he didn’t have to wait) and he says he loves it.

Until next month’s update, this is Van Tharp.



When we raise the price of the Super Trader program (as we just did), we announce that increase many months ahead and we let as many people who are interested join during the last month with the old price.   Since I normally allow two people per month to join the program, this offer often takes up most of the remaining slots for the year.  This year, ten people, including my new Research Assistant Wayne Welsh, joined in July which means only two slots remain for the rest of 2014.   I would expect those to fill up after our Peak 101 workshop in Berlin.  If you have an interest in possibly joining the Super Trader program this year, please check our website as we have made some changes recently.


About the Author: Trading coach and author Van K. Tharp, Ph.D. is widely recognized for his best-selling books and outstanding Peak Performance Home Study Program—a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Van Tharp at His newest book, Trading Beyond The Matrix, is available now at


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Trading Tip

July 2014 SQN® Report: Coming Next Week

Normally, we include the monthly SQN report along with the Market Update. However, Van believes that the market is on the verge of a change and that it would be more beneficial to write and publish the SQN report next week, along with a brief update on any changes in the market type that have occurred. Look for that report in next week's edition of Tharp's Thoughts.


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