#840 June 1, 2017
Tharp's Thoughts
Weekly Newsletter
  • Feature: June 2017 Market Update: Bull Quiet Market Type by Van K. Tharp, Ph.D.
  • Workshops: Coming Soon, Workshop Dates for London, England this October!
  • Video: New Day Trading Video from Ken Long
  • Tips: June 2017 System Quality Number® Report by Van K. Tharp, Ph.D.
  • FREE BOOK!: Trading Beyond the Matrix
Announcing An Exclusive New Trading Workshop:
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Kim Andersson covers a few objectives of the new Sideways Market Strategies course in this short video above.

Feature Article

June 2017 Market Update:
Bull Quiet Market Type
by Van K. Tharp
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?

The markets have been quite strong since the Trump election. The Market SQN® score is bullish and has been pretty much since November.

In late April 2016, usdebtclock.org said our official debt went over the $19 trillion mark and at the end of last month we are only 70 billion away from $20 trillion. Nevertheless, our politicians are doing their usual “wonderful” job of spending our money plus money they don’t have. Donald Trump is nothing new. Trump wants to build a multibillion dollar wall that will basically be useless; reduce taxes and increase the worst form of spending — war spending (framed as Defense). Incidentally, when the USSR dissolved and the Cold War ended, if we had slashed our defense spending we would basically have no debt. Instead, the war machine needed to keep making money so they invented the War on Terror, homeland security, and took away a lot of our prior freedoms in the name of protecting Americans.

Incidentally, the website says there are 120.1 million U.S. taxpayers. I add together US Retirees (51.0 million) food stamp recipients (41.7 million) and disabled people drawing social security (10.6 million). I don’t think there is any overlap here. And lately those numbers are going down, just because food stamp recipients are going down each month. Those groups total 103.3 million and that’s why I say that they constitute a group that’s 86% of the number of taxpayers. I could also include all government employees (23.5 million) as among those supported by taxpayers — but they do pay taxes. Remember about 10% of the taxpayers (12 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 164.0 million people as receiving benefits. That’s over half the population.

Part II: The Current Stock Market Type Is Bull Quiet

The market type classification tells us what is happening today — not what is going to happen tomorrow.

Since the election, the S&P has been strong although we are going through a relatively flat period now. The Market SQN score for 100 days and the Market SQN for 200 days are both in the Bull range. The 25 day and 50 day Market SQN scores are both neutral. You’ll notice that the S&P 500 bar chart below was quite bullish, had a consolidation period and now is starting to rise again. While the last few bars may look like they are weaker than last month, the S&P 500 has had 20 all-time new highs in the last 100 days and 7 of them occurred in the last month.
Compare the price bar patterns to the 100 day Market SQN chart below. The market has actually been rising slightly since mid-April.
While volatility rose into the normal range in late September/early October for a few days, it has settled in the Quiet range since then. Right now, there remains little danger in terms of volatility. In fact, volatility is the lowest that it has been for some time. Bear markets do not start from this kind of volatility.
The table below reports the three major US Indices levels through May 31st. All three market indices are up nicely for the first five months of the year and over the last month. The S&P 500 is up 6.31% on the year, the Dow is up 7.73% and the NASDAQ 100 is up 19.02%. Are you up over 6% already for 2017? How about up 19% like the NASDAQ? This is a little like the 1990s. And the hot stocks are AMZN (over $1000), GOOG (nearly $1000), and AAPL (which would be over $1000 without the 7 for 1 split). All three of those companies, by the way, are the major players in Artificial Intelligence. Despite that, we are now only Bull Quiet. In my opinion, this is one of the best markets for the average person that I have seen in a long time. The volatility is quiet. This is a perfect buy and hold market (where buy and hold means have a 25% trailing stop). It’s were everyone looks like a genius. This is not about prediction. It’s about what the market is doing — the market is Bullish AND QUIET.
Part III: Our Four Star Inflation-Deflation Model

My model has generated mostly deflationary scores for the last few years. Deflation means that stuff generally becomes cheaper. In 2016, however, the model shifted results to the inflation side, which means that stuff tends to get more expensive. Markets move in correlation to inflation/deflation trends so it can be helpful to track these trends.

The tracking table below has historical and current year figures.
Here are the model components and how the prices looked at the end of May compared with two months back and six months back.
The score of 0.5 out of a possible 4.0 is slightly inflationary.

Part IV: Tracking the Dollar

The US Dollar Index is now looking much weaker and is again below 100 closing the month at 96.96. It been in a slow decline since December and I’m not sure if there is a good reason. Perhaps the world measures the value of the US Dollar by what they think of our president. We’ve had interest rate increases (although don’t expect any significant raises due to the size of our debt). We are going to present three workshops in London in mid-October so it wouldn’t surprise me if the dollar weakened at least against the British Pound until we return in late October. (Remember that the “Tharp Effect” has been a long running joke but all too often, it seems to be true).

This market is strong. On top of that the average person is not involved in the market. In fact, they are scared. They don’t buy investment books and they don’t go to trading conferences.

Chances are you may not make huge money at it now but just buying the NASDAQ 100 at the start of the year and holding it until today would have returned 19.2%. My guess (not a prediction) is that the S&P 500 will at least double its current gains for 2017 by the end of the year — it returned nearly 10% last year. The NASDAQ 100 is reminding me a lot of the 1990s and who knows, it could be up over 50% this year.

Last month I finished a newsletter article with the conclusion that a market downturn is not close. To summarize that here — interest rate spikes, oil price spikes, and other traditional causes of recessions are not close at all. The only foreseeable danger to the market is if Donald Trump manages to get himself impeached or starts a war. Harry Dent (a MAJOR bear) says that Trump will resign and we will have a major crash. But don’t pay attention to major bears. Pay attention to what the market is saying. The S&P is a bull market type with a flat consolidation and very low volatility right now. The possibility exists for a strong breakout this summer. And a 4% return per month in the NDX 100 is pretty good too.

Until next month, this is Van Tharp.
Qualify to Apply To The Super Trader Program
by attending Oneness Awakening this July!
The Role of This Course and The Super Trader Program

If you are interested in applying for admittance to the Super Trader Program, this workshop is a qualifying event. The first stage of the Super Trader program is very much about working on the self, rather than working on systems or trades. Since this course focuses on your inner-growth and self-work, Dr. Tharp is willing to allow candidates to use the course in a similar manner to those that attend the Peak Performance 101 workshop, and motivated traders are able to apply to the program after attending either one. At $495, this course is also the most cost effective way to take a qualifying workshop to apply to the Super Trader Program. The price of the Super Trader Program will increase July 31, 2017. This is the last qualifying workshop before the price increase.

Reach A Higher Level of Consciousness: A Special Event With Van Tharp
How could a higher level of consciousness help a trader? Most people have had the experience of watching someone who is really great at what they do. Whether it's a sports star in the game or a masterful craftsman, there is an element of effortlessness that comes from their ability to be "in the moment." Many people have had this experience themselves, in some aspect of their lives — for a few seconds or even a few minutes. The moments may be fleeting, but you know when you've had one. It's at these times when we can recognize these people are in a high state of awareness. Participating in the Oneness Awakening Course is an extraordinary opportunity to benefit from some of the most important journeys Dr. Tharp has taken to transform his life, and to cultivate this awareness in your day to day life.

The Oneness Awakening Weekend course has become a fundamental tool in helping Dr. Tharp accomplish his mission of transformation and ultimately help each of his clients succeed. Students who attend this two-day intensive workshop will walk away with tools to help them cultivate awareness in their life, and they will also experience an immediate and tangible shift in perception. As a result of this experience, traders can expect to naturally become more aware, positive, calm, and centered. By extension, they will also experience a shift in how they perceive the market. When a trader sees the market as it really is, rather than what they want to see, the act of trading becomes more relaxed and they become more confident and successful. Does this sound like the type of experience you want trading to be? While this two-day course is not a technical course about trading, we have seen amazing results in the traders who experience the benefits of being more 'awake' and aware, calmer and more centered. Why? Because the person themselves are always the primary instrument, even before the technical skills of trading are engaged. Just like the athlete with impressive skills, traders can also utilize the phenomenon of tapping into their awareness to achieve premium results. Keen awareness, in turn, opens up new possibilities. Another great thing about the concepts and experiences in this course is that they have benefits that apply throughout students' lives, not just in their trading endeavors. Time and time again, traders tell us that their trading improved after taking this course, but also their personal lives as well!

If you would like to know more about this workshop, or talk with someone to see if this workshop is right for you, we invite you to call or email Rebecca Price. Rebecca is a certified Oneness Trainer. She has been teaching with Dr. Tharp for 3 years, and is enthusiastic about helping others to dive into their own transformation. Call 919-466-0043 or email [email protected].

Workshop Schedule

July 2017
August 2017

We are very close to announcing workshop dates for London, England this October!

We expect to offer two more Peak Performance 101 workshops (September and October), Forex Trading Systems (November), plus three more Sept/Oct events. The Super Trader Summit is in December.


New Day Trading Video From Ken Long
Ken's pinch 1
Ken's pinch 2
In this seven minute video, Dr. Ken Long, our Day Trading Systems Workshop Instructor, explains the diagram and the unique chart pattern above — where all of the regression lines are within the 1 standard deviation of the price (as defined by Bollinger Bands and which Ken calls “the river”). When this happens, the Bollinger Bands at 3 standard deviations (Z3) tend to form a “superpinch.” Ken describes the balance that the traders of all the various time lengths have reached at this point and how price is likely to move after such a moment — because this situation tends to last for a relatively short time.
Ken's pinch video

Trading Tip

June 2017 System Quality Number® Report
The SQN® Report
by Van K. Tharp
There are numerous ETFs that 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. I 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 Market SQN scores > 1.47.
  • Light Green: ETFs with strong Market SQN 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 a cross section of 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 the US Dollar is the weakest currency being in the red with a Market SQN® score of minus 1.05. Because the weaker value of the dollar influences everything in the model, both European and Asian markets look strong right now.

The US equity market segments are no longer all dark green. In fact, we now have brown and yellow segments showing up and in various market sectors, we even have some red — especially in Energy. The three major indices (large caps) are still strong. Technology (QQQ) is off the charts with a Market SQN score of over 3.0, however, three areas are yellow now and another three areas are brown so we’ve lost some of the strength we have seen in recent months. In the other countries in the Americas, Mexico and Chile are light green, Brazil and Latin America are yellow, and Canada is brown. Emerging markets (which also appear in this section), however, are dark green as are global equities without the US.

As a region, Asia has become stronger. Australia and India are yellow but everything else there is either green or dark green. We have eight dark green ETFs with seven of them having Market SQN scores over 2.0. Ranked by strength, they are: Hong Kong, China, China/India (though India alone is yellow) South Korea, S&P China, Singapore, and Malaysia. Japan and Thailand are both light green.

On the right hand side of the chart, everything in Europe is dark green, except for Russia (not really Europe) and Emerging Europe. Three countries have scores over 2.0: the Netherlands, Switzerland, and Austria. South Africa is light green and the rest of Africa and the Middle East is yellow.
In currencies, the US Dollar has moved from light green to brown and now it has now turned red. We have four light green currencies: the Euro, the Yen/Dollar, the Chinese Yuan, and the Swiss Franc. The Canadian Dollar is now brown.

In the US, we have eight sectors that are dark green. These are ranked in terms of the strongest first: Software, Technology, Semiconductors, Consumer Discretionary, Consumer Staples, Utilities, and Homebuilders. We have three light green sectors: Health Care, Industrials, and Aerospace/Defense. The only yellows are Biotech, Basic Materials, Pharmaceuticals, Genome, Insurance, Media, Networking and the Dow Transports.
On the downside we have Financials, Metals and Mining, Retail, REITs, Broker Dealers, Food and Beverage, and Regional Banks. Lastly, we also have some reds including Energy, Oil and Gas Equipment, Oil and Gas Exploration, Telecom, and Volatility.

The Market SQN score for Broker Dealers confirms what I’ve been saying about what’s going on in the markets. The markets are strong but the Broker Dealers segment weak. People are not participating in this market.

Commodities, Real Estate, Debt, and the Top and Bottom Lists

Commodities have had an interesting month. Commodities, Oil, and Natural Gas are all red. Steel and Agriculture are brown. Silver, Base Metals, and Coal are yellow. Timber, Gold, Livestock, Timber and Global Agribusiness are all light green. And Global Water is dark green. I’ve noticed that Global Water has stood apart from the rest of the commodities for some time.

With the Fed raising interest rates twice now and possibly again sometime soon, all of the real estate ETFs are now green. Debt instruments are all yellow with the exception of short-term bonds which are green. Junk bonds are yellow now but they were dark green last month.
The Top Ranking List:

The first 11 ETFs on the top 15 list all have a Market SQN score over 3.0 while the last four range from 2.79 to 2.99. Growth stocks are the kings of the markets and while we’ve been talking about QQQ at 3.16, it is the fifth strongest in our database. Also on the top list, we see Consumer Staples, Medical Devices, etc. as well as a few country ETFs — Switzerland and Germany.

The Bottom Ranking List:

This month’s bottom list is entirely red but only two ETFs show a lower negative than a -2 score — which is the best we’ve seen in a while and the same as last month. Volatility (VXX) is really low but the Market SQN score has become less weak now at -2.43. Last month most of the weak ETFs were debt instruments with their low yields but this month, energy dominates the group.


Let’s look at the summary table which measures the percentage of ETFs in each of the strength categories. You can see the monthly figures for the distribution of the database by Market SQN score in bullish, neutral and bearish categories just below.

This table has the database distribution for nearly the last four years —
At the end of April, the split for bullish/neutral/bearish ETFs was 68%/ 21%/ 9%. This month isn’t as strong having a split of 55%/ 24%/ 13%.

Donald Trump is president and plays the buffoon. He’s now under investigation so it’s not likely that he’ll be able to get much done in office. I can’t imagine that he’ll serve more than one term. The media hates Trump and the markets love him.

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