Tharp's Thoughts
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  • Feature Article: August 2016 Market Update: Bull/Neutral Quiet Market Type, by Van K. Tharp, Ph.D.
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  • Trading Tip: August 2016 System Quality NumberTM Report , by Van K. Tharp, Ph.D.
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Participating in the Oneness Awakening Course is an extraordinary opportunity to benefit from some of the important journeys Dr. Tharp has taken to transform his life.




This course has become a fundamental tool in VTI's mission to help his clients succeed. Attend to learn how you can become more aware, positive, calm, centered, and successful.


Many years ago, after using a number of various psychological and coaching techniques, I decided that I was only going to use those that made a significant impact and had lasting changes. My experience was that only psychological techniques that included some sort of spiritual resource seemed to make this level of change possible. The concept of “spiritual resource” was independent of any particular faith. All that was important to me was that the technique allowed you to join with some spiritual resources. Once I discovered the Oneness Awakening material I knew this was the significant breakthrough material I wanted to share with others.


At the Oneness Awakening Workshops, two things have caught my attention. First, the visible and incredible transformations of some of the attendees inspire me deeply. Second, it really allows me to see how willing people are to stretch themselves out of their self-defined box and really examine the conscious and subconscious beliefs that run their lives. For this reason, I use this workshop, in addition to the Peak Performance 101 workshop, to assess people who are interested in joining the Super Trader program. The first part of the Super Trader program is psychology work and the highest level of psychological work is that of spiritual awakening.


So while this is not a trading workshop, it has a great impact on trading because it opens a path for traders to become "one" with the market and accurately sense what the market is doing in the present moment. This allows traders to trade with more clarity and assurance.


I hope you will join me in September for this event. Priced at $495 it is a true value. —Van K. Tharp


   Feature Article

August 2016 Market Update:
Bull/Neutral Quiet Market Type


by Van K. Tharp, Ph.D.


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. 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. If your beliefs are not similar to mine, however, then this information may not be useful to you. Thus, if you are inclined to go through 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. 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 which allows us to get the closing data from the previous month. These updates cover 1) the market type (first mentioned in the April 30, 2008 edition of Tharp's Thoughts), 2) the debt statistics for the US, 3) the five-week status on each of the major US stock market indices, 4) our four-star inflation-deflation model, and 5) tracking the US dollar. I also write a report on the strongest and weakest areas of the overall market as a separate SQN™ Report. Significant market charges may mean the SQN Report comes out more than once a month.


Part I: The Big Picture


So what are the markets telling us now?


Over the last 100 days, the S&P 500 is up 6.32 % at the end of August - and that dropped to 4.67% by September 2nd. The Market SQN score for the last 100 days shows a Bull market on August 31 but that dropped to Neutral by September 2nd. We are calling the market type by the August 31st reading. The other three market type readings (Market SQN scores for 25 days; 50 days and 200 days) score were all Neutral on both Aug 31st and Sept 2nd.


US Debt Clock

van tharp

In late April 2016, said our official debt went over the $19 trillion mark and now we are at $19.5 trillion. So our politicians are doing their usual “wonderful” job of spending our money.


Incidentally, the website says there are 119.7 million U.S. taxpayers. I add together US Retirees (50.0 million) food stamp recipients (42.9 million) and disabled people drawing social security (10.7 million). I don’t think there is any overlap here. Those groups total 103.7 million and that’s why I say that they constitute a group that’s 86.5% of the number of taxpayers. I could also include all government employees (23.7 million) as among those supported by taxpayers - but they do pay taxes. Remember about 10% of the taxpayers (11.97 million) pay most of the tax revenue. By the way, the debt clock lists Medicaid, Medicare, and several other sources of benefits that I don’t include because I assume they are overlaps and thus lists 162.3 million people as receiving benefits.


Part II: The Current Stock Market Type Is Bull/Neutral Quiet


My market type classification is not predictive but descriptive — rather than telling us what’s going to happen, it simply tells us what’s going on now. When you see a trend, you might say, well, right now it’s going down, however, you also know that in a few days the direction could change.


The market has been going up since February but it’s rather flat right now so we are calling it a neutral to bull market.


The graphs below include a chart of weekly price bars for the S&P 500 over the last year, the Market SQN score for 100 days, and the ATR percent volatility.

van tharp

The chart below shows that main 2016 rise lifted the Market SQN score out of bear territory where it spent most of the last year. 2016 is a presidential campaign year and the market usually does well in such years (no matter how bad the candidates seem).

van tharp

The third chart shows how the market volatility was right on the borderline between quiet and normal for April, May and much of June. The Brexit vote gave volatility a bump but it finished July well within the quiet range. In August, volatility has been very quiet. Not much concern from these charts.

van tharp

Below is a chart of the recent weekly changes in the three major US Indices. All three market indices are up for the year, but not by a lot. The Dow is up 6.12%, the S&P 500 is up 6.66%, and the NASDAQ is up 4.47%. We now have all three of our major indices for the US up slightly for the year. Clearly, you are missing profits if you are not long in this market.

van tharp

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 behavior so understanding inflation and deflation can help traders understand some important big-picture processes.

See the tracking table below.

van tharp

Here are the model components and how the prices looked at the end of February compared with two months back and six months back.

van tharp

So we have had five straight inflationary months now through August. This indicates a clear new trend and indicates that the value of your money is going down while things like gold and commodities are going up. We are clearly seeing a major change in the economy from what we’ve had over the last several years. My guess is that this year will be an exciting time for making money especially since the average person is afraid of the market, is no longer buying trading books, and is generally sitting on the sideline. Being well prepared and attentive can make traders the most money as they are ready to act while others remain fearful.


Part IV: Tracking the Dollar


The US Dollar Index was falling throughout most of March and April and went as low as 92 at the end of May. Then it began to rise but it has been volatile. The Brexit vote caused a huge up day and then USD continued to rise until the end of July when it fell sharply until August 18th. Since that time it has recovered a little bit. So we have Brexit in Europe and we have Clinton vs Trump in the US. While the US Dollar is known as a safe haven currency, its current 100 day Market SQN score is bearish at -0.33.

van tharp

Click here for a larger image



The stock market has flattened out but we are still up on the year and we are up over the last 100 days. We do have, however, a lose/lose situation (in my opinion) with both presidential candidates even if the market behavior shows an election year surge with the current party in the lead. Hillary Clinton won’t be indicted but she still has very big problems. In my opinion, she is probably the most corrupt presidential candidate we have ever had (and my opinion that she’s corrupt goes back to when her husband was running for president).


On the Republican side, we have a wildcard. My guess is that Trump started running for president primarily for publicity but then he found that he could actually win votes by making outlandish statements. He is a former democrat and a good friend of the Clintons so he could be running to ensure that Hillary Clinton gets elected. I no longer think he’ll win especially since Hillary has a large lead and she’s practicing how to set Trump off. Trump doesn’t appear to be doing anything similar. We have a choice between the most corrupt candidate ever and someone who sounds like the stupidest candidate ever (or a friend of Hillary who wants to make sure she wins).


Even with these two candidates, however, the markets are going up so you can be long until the markets stop going up. It’s not that difficult unless your mind gets in the way and tells you to do the opposite of what the market is doing. The markets are still going up and the volatility is still very quiet so there is little danger right now.


Trading books are not selling at all (that’s why I haven’t published another one in a while) and people are staying away from the market in droves. This market has been driven by corporate buybacks and by the Fed putting cash into the market. The individual investor is not in this market at all. He/she is scared … and at a time when some of the best money can be made, but isn’t that typical?


My Road Trip Adventure


On July 19, I started a road trip of the US in my Tesla and I returned on September 2nd. I estimated that it would be 9,000 miles and it was just under 9,050. I went to 24 different states and hit about 70 different superchargers around the country. I documented much of the trip on Facebook so that I could remember it well enough to write a couple of articles.


Here was our planned route in the map below. We followed the plan except that I avoided Seattle because they have no superchargers (but they do have a Tesla dealership). Seattle hotels with charging units cost about $450 per night - which didn’t make any sense to me. Avoiding Seattle allowed me to travel along the Columbia River Gorge which was absolutely beautiful. More on the trip in a week or two.


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

van tharp


About the Author: Trading coach, and author, Dr. Van K. Tharp is widely recognized for his best-selling books and his 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




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  Trading Tip

August 2016 System Quality Number™ Report  

The SQN™ Report


by Van K. Tharp, Ph.D.



There are numerous ETFs that now track everything from countries, commodities, currencies and stock market indices to individual market sectors. ETFs provide a wonderfully easy way to discover what’s happening in the world markets. Consequently, I now apply a version of my System Quality Number™ (SQN™) score to measure the relative performance of numerous markets in a world model.


The Market SQN score uses the daily percent change for input over a 100-day period. Typically, a Market SQN score over 1.47 is strongly bullish and a score below -0.7 is very weak. The following color codes help communicate the strengths and weaknesses of the ETFs in this report:


  • Dark Green: ETFs with very strong SQN™ 100 scores > 1.47

  • Light Green: ETFs with strong SQN 100 scores (0.70 to 1.47).

  • Yellow: ETFs with slightly positive Market SQN scores (0 to 0.70). These are Neutral/Sideways

  • Brown: ETFs with slightly negative Market SQN scores (0 to -0.7).

  • Red: Very weak ETFs that earn negative Market SQN scores (< -0.7).


This is basically the same rating scale that we use for the Market SQN™ Score in the Market Update. The world market model spreadsheet report below contains most currently available ETFs; excluding inverse funds and leveraged funds. In short, it covers equity markets around the globe, major asset classes, equity market segments, industrial sectors, and major currencies.


World Market Summary — Equities & Currencies


Each month we look at the equities markets across the globe by segment, region, and sector. This month everything across the board is mostly green and yellow. The one exception is the currencies section.  Most currencies are brown (one is even red) right now but two months ago everything in that section was dark green.


In our far left Asia region section of the model, most items are either yellow or light green. Malaysia and Singapore, however, have turned to brown. India and Thailand, although light green, have the highest SQNs at 1.23 and 1.18 respectively.


Europe is very easy to report on (and I’ve never seen this before) but the whole column is yellow. Thus, everything is flat. South Africa and Africa/Middle East are also both light green.


The US segments are almost entirely light green with two yellow — the Dow and the QQQs. In the other American continent countries, Mexico is brown while Brazil is light green. Everything else is yellow.


The US market sectors are mostly yellow with a few light green areas and two browns. Retail is brown as is Biotech and Genome. Building Materials, Financial, Metals and Mining, REITs, Semiconductors, Technology, Aerospace, Broker Dealers, Networking, and Software are light green. Everything else is yellow with the except of Volatility which is red because the market is very quiet.


In currencies, there are three light green areas - the Brazilian Real, the Japanese Yen (vs the US Dollar) and the Currency Harvest. There are several yellow currencies: the Euro, the Yen, the Indian Rupee, and the US Dollar. The rest are brown except for the Swedish Krona which is red.

van tharp

Commodities, Real Estate, Debt, Top and Bottom Lists


The next chart shows real estate, debt instruments, commodities and the top and bottom ETFs for the past 100 days.

van tharp

The commodities section has become totally mixed. Coal is dark green. Silver, Base Metals, Natural Gas, Global Water and Global Agribusiness are all light green. Commodities (blended), Gold, Steel, Timber, and Agriculture are all yellow. Oil is brown and Livestock is red.


Debt instruments were all green last month, but now we see all yellow in medium term bonds (1 year through 10 years). Long term bonds are green as are short term bonds and inflation protected bonds. People are not afraid of this market because corporate bonds and junk bonds are dark green.


The top ranking ETFs in the entire database are now all dark green but this month only the top three ETFs are over 2.0. Last month all were over 2.0. High yield municipal bonds are still the king, but some commodity ETFs are in the top 15 plus a few sectors (medical, sugar, coal).


In the bottom ranking list in last month there were only four red ETFs. This month there are eleven with five of them being worse that minus 1.0. These include Volatility, Singapore Small Cap, Wheat, Corn, Uranium, Gasoline, Malaysia, etc. So even though our inflation deflation model has suggested a return to inflation, some of the commodities are in the worst performing ETFs group.



Now let’s look at the summary table which measures the percentage of ETFs in each of the strength categories.

van tharp

Two months ago, 43.5% of the ETFs we track were strong bull and 79% were bullish. Now only 3.3% are strong bull and only 42.7% are bullish. Two months ago 5.1% of our ETFs were bearish and now it’s 10.3%.


Be careful to base your actions upon what is happening, not what you think might happen.


Until next month, this is Van Tharp.


The markets always offer opportunities, but to capture those opportunities, you MUST know what you are doing. If you want to trade these markets, you need to approach them as a trader, not a long-term investor. We’d like to help you learn how to trade professionally because trying to navigate the markets without an education is hazardous to your wealth. All the beliefs given in this update are my own. Though I find them useful, you may not. You can only trade your own beliefs about the markets.

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