#867 December 6, 2017
  • Feature: December 2017 Market Update: Strong Bull Quiet Market Type, by Van K. Tharp, Ph.D.
  • Workshops: Save $200 on Peak Peformance 101
  • Tips: November 2017 System Quality Number® Report, by Van K. Tharp, Ph.D.
  • FREE BOOK!: Trading Beyond the Matrix
Package Sale
If you've been waiting for just the right moment to get serious about your trading education, this is it! Take the next step toward a brighter and more profitable future by investing now in yourself and your trading. If you act quickly, you can benefit from Van Tharp's years of knowledge and expertise at an incredible discount because all of our products, including our eLearning courses, are now on sale at a twenty percent discount! See the complete list of all products on sale at the link below.

Feature Article

December 2017 Market Update:
Strong Bull Quiet Market Type
by Van K. Tharp, Ph.D.
Van 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 changes may mean the SQN Report comes out more than once a month.

Part I: The Big Picture

The equity markets right now have moved into Strong Bull Quiet mode — where they were earlier this year. The markets’ nearly one year long run in Bull or Strong Bull mode has made average investors look like geniuses. Of course, the average person is still afraid of the market although more and more people have been entering.

MU Chart 1
The US National Debt surpassed $20 trillion in September and already has zoomed to nearly $20.6 trillion. Federal spending is now listed at over $4 trillion. Right now there are 23.3 million federal employees — pretty much the same as it’s always been.

Currently there are 120.8 million taxpayers supporting 102.6 other people. Here I count retirees (51.4M, disabled, 10.5 million, and Food stamp recipients, 40.7M), however, the US debt clock lists 165.7 million people receiving some sort of benefit. I had to start taking Social Security last year, so I guess I’m one of them. I figure, however, that I contribute back about a 1/3 of what I get each year and I pay another third of it back in taxes. And I’ve been paying the maximum into Social Security for some time.

Part II: The Current Stock Market Type Is Strong Bull Quiet

The market has been in a Bull mode for much of 2017. At the end of November, the Market SQN scores for all four periods that we monitor (25, 50, 100 and 200 days) were all in Strong Bull mode. It’s very unusual to have all four periods’ score in the same market type. Volatility is still Quiet and there isn’t much risk when the market is quiet.

This is the type of market in which almost anyone can make money, however, the irony is that most people are not in the market. Even if a lot of people say this market is overvalued, I believe that as long as the volatility remains quiet, the market is likely to continue up for a while. People should be fully invested using a modified buy and hold (i.e., 25% trailing stop on everything). This is about as good as it gets and if you are not up about 20% or more in your portfolio in 2017, then something is wrong.

The first graph below shows the S&P 500 in weekly bars over the last year so the bull market is easy to see – it has been a bull market type for a long time now. Does this mean it will continue? No, it’s pretty much like a trend in that you never know when it will stop. But it has continued for a long time and had you been invested appropriately, you would have reaped large rewards.
MU Chart 2
Furthermore, the S&P 500 hit seven more all-time high closes in November. This is not an atmosphere in which a bear market starting should concern you.

The chart below graphs the Market SQN score to provide the directional component of the market type.
MU Chart 3
The volatility is so quiet that I had to change the vertical axis last month to show less than 0.5 in order to see the line (now at 0.41) Again, this is not the climate out of which bear markets arrive.
MU Chart 5
The table below reports the three major US Indices levels through the end of October. The Dow and S&P 500 are both up over 15% on the year and the NASDAQ is up nearly 30% now. Contrast that with savings accounts returns for those sitting on the sidelines ready for the next bear market.
MU Chart 5
I have started tracking an extra market here, the price of several major crypto-currencies. I think Bitcoin and crypto-currencies in general have the potential to be significant in the future. And, of course, Bitcoin went up about 250% in the last two months. Everyone says “Bubble” and stay away from crypto-currencies. But look at the NASDAQ bubble in 1999 – we had a 50% decline. Now look at bitcoin – which has gone up nearly 10 fold in 2017. It has had 20% declines in a single day and several 40% declines on its way up. If you want to talk about bitcoin falling to $5,000, it could do that next month. But the longer term potential gain in bitcoin is huge.
MU Chart 6
Futures contracts are opening up on bitcoin this month and early next year. This will make it possible for the creation of an ETF in bitcoin and that could take bitcoin to $25,000 or even $40,000 next year. And yes, it could drop to $5,000 or even $3,000 on the way there. Right now (this could change), bitcoin is the currency in which all other crypto-currencies and tokens are traded — it is not going to go away soon.
At the same time, a lot of other crypto-currencies are either fads or ponzi schemes and would be a disaster if you put any money in them. There are over 1,200 currencies listed in coinmarketcap.com and most of them are dangerous investments. Already, more than 400 coins have disappeared along with the dollars that went into them. VTI may create its own coin soon only to illustrate how easy it is for anyone to do.

Behind all of the headlines about bitcoin and other crypt-currencies, however, the technology enabling them is the bigger story. Blockchain technology is an even bigger development than the Internet was in the 1990s. Everything is going to change with blockchain technology. One example, which has started already but could happen in the future every day, is how new companies may be funded by crypto-coins or tokens instead of shares.

Part III: Our Four-Star Inflation-Deflation Model

Commodities, basic materials, and gold are up over the last six months which helped produce an inflationary model score for last month. See the historical numbers for previous years and the monthly figures for the last year below.
MU Chart 7
The score continues the inflationary trend for the last few months. I took a look at the shadowstat.com data and noticed that the CPI inflation rate, using the method from 1980, is still close to 10%.
MU Chart 8
Part IV: Tracking the Dollar

The dollar has formed something of a base with a slight recovery since September. That’s amazing considering I was presenting workshops in the UK in October. The Tharp Effect says that the dollar goes down (especially against the foreign currency concerned) whenever Van goes overseas. USD is down considerably from its highs when Donald Trump took office.

The USD Index looks like it would probably be a Bear Quiet market type that is turning into a Sideways market type. As I have said, if all of your assets are in the US Dollar, you have lost about 10% in the last year.
MU Chart 9

Today, equities are in a Strong Bull Quiet market type. The market type has been either Bull Quiet or Strong Bull Quiet for many months. It could stay this way for a while. I continue to read headlines about reasons for a pending market crash but look at what the market is doing right now. It’s bullish and quiet. PERIOD. You could basically be long the strongest stocks and use a trailing stop (25% if nothing else) to manage your risk. As long as the market type is in a bullish and quiet mode, this approach will make money.

The stock market has gone up between 20-30% this year. Bitcoin has gone up 250% in just a few months and almost ten-fold in 2017. The average bank account pays about 0.1% interest. What are you doing with your money?

And none of this is a recommendation to invest in anything in particular. Instead, it’s an observation about what’s happening – and a suggestion to look inside yourself about what you’ve been doing with your money and why. Our purpose is transformation through a trading metaphor. We’d like to offer some of that to you.

Until next month, this is Van Tharp.
20% OFF!

Peak Performance Home Study
The ultimate home study course for traders. Learn how you think when you make and lose money, stress reduction; how to reduce your mistakes, and how to trade unemotionally. Understand fully what Van Tharp means when he says: you don't trade the markets, you trade your beliefs about the markets. ...more info

Also recommended: The Psychology Profile Inventory, $75 when purchased with the Peak Home Study and enhances your self-study.

$795 On Sale $636.00
Who should study this program? Anyone who wants to develop their own trading system or anyone who wants a better understanding of how to make more profits trading any market under any conditions. Not market or time frame specific this course is to help you develop any kind of system for any market type. And you'll better understand how to customize other's systems to fit your own style....more info

$795 On Sale $636.00
Buy Peak and Systems Combo
$1,200 Combo Peak/Systems

Buy Peak and Systems Combo
Power of Position Sizing

Includes a FREE copy of the Definitive Guide to Postion Sizing Strategies.

A must for anyone interested in improving their trading though Van Tharp's Position Sizing Strategies!

Students in this course learn a process of developing position sizing strategies customized for each trading system that helps you meet your objectives. You will learn what good objectives look like, how the SQN score is calculated and applied to trading systems, and what kind of position sizing strategies will work for your objectives and for your systems. You will learn how to use several Microsoft Excel based tools including a Monte Carlo simulator in order to decrease the uncertainties for the strategies you select. ...more info

$1,295 On Sale $1,036

Streaming — Instant Delivery

Gabriel will discuss a number of Forex trading ideas in this course and teach one specific trading system. This system is trend-based; you can see the price action patterns in the price charts. His system can be traded in various timeframes and can be traded across a wide range of currency pairs. People that view this course can enjoy swing trading the system using primarily 5-min ,15-min, 60-min and Daily candle charts. The trades usually tend to evolve over a timeframe of anywhere from several hours to a couple of days (or even weeks, in the case of strong trends). ...more info

$1,295 On Sale $995

Trading Tip

November 2017 System Quality Number® Report
The SQN® Report
by Van K. Tharp, Ph.D.
Van 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.

For the seventh month in a row, the US Dollar has been either the weakest currency or one of the weakest currencies in the model. In August, it was the weakest symbol overall and it has had a pretty low since then. Because the whole world market model is valued in the US Dollar, everything outside the US should look better as a result of the weak Dollar.

Overall, the US market segments looks much better than last month. All are green and most of them are dark green. The large cap stocks are all dark green and as you move toward smaller cap stocks it tends to be light green. Market SQN scores for the Americas geography countries are all positive except Mexico. Canada is dark green. Brazil, Chile, and Latin America are all yellow and Mexico is red. Canada and Chile are both dark green.

Asia is also all green except for Taiwan which is yellow. Japan is starting to really take off. Singapore and Thailand are also dark green. Everything else is light green.
SQN Chart 1
Europe has mostly green countries with two yellow while Sweden is brown. Two ETFs (Emerging Europe and the Mid East Africa) are both at 0.0 – which probably indicates a data problem. Austria and France are the strongest countries in Europe.

In currencies, the only red one is the Japanese Yen vs the US Dollar. The Aussie Dollar, the Swiss Franc, and the US Dollar are all brown. The stronger currencies are the British Pound, the Euro, and the Yuan. The Indian Rupee ETF (symbol ICN) is no longer listed so we will have to move to the new one (symbol INR – which has a slightly negative score right now). We are updating our database and the new version will come into play next month. Hopefully, the updated list of ETFs will get rid of a few problem areas.

In the US stock market sectors, the strongest sectors are dark green – Basic Materials, Consumer Discretionary, Homebuilders, Semiconductors, Technology, Utilities, Aerospace, Broker Dealers (showing the strong market), and Gaming.

The weakest areas are Pharmaceuticals, Media, Telecom, and of course Volatility. Neutral areas include Biotech, Consumer Staples, Metals and Mining, Oil & Gas Exploration, REITS, Biotech and Genome, Networking, and Regional Banks.

Commodities, Real Estate, Debt, and the Top and Bottom Lists
SQN Chart 2
Commodities continue to be a mixed category. We have several dark green areas, including Commodities, Oil, Global Water, Timber, and Global Agribusiness. Light green ETFs here include Gold, Base Metals, and Coal. Neutral areas include Silver and Steel. There are two brown areas – Natural Gas, and Livestock. Agriculture is the only red area.

Real estate ETFs are very strong being either green or dark green. US real estate is light green and so is Chinese real estate but I don’t understand how Real Estate outside of the US can be dark green.

All of the interest rate products are weak ranging from yellow to red (short term bonds). The shorter the term, the worse the performance of the various interest rate section symbols.

The Top Ranking List:

The top ranking list has only one ETF above 3.0 but all 15 on the list have scores above 2.0. The strongest one is the Dow Industrials ETF which has a score of 3.16. Several Japanese ETFs are now in the dark green area on the list. Some of the best scoring ETFs are very specialized … like Rare Earth / Strategic Metals, and Lithium. These are ETFs that we have added to our database in the last year but I’m not seeing any significant trends or commonalities in the top list.

The Bottom Ranking List:

This month’s bottom list is similar to the top list in that many of the ETFs there are newer ones in the database such as Alerian MLP and local shares Nashville area. Only the weakest ETF (WEAT) has a score below -2 while there are six that are stronger than a -1.


Let’s look at the summary table which measures the percentage of ETFs in each of the strength categories. You can see the distribution of the database by Market SQN score in bullish, neutral and bearish categories below -
SQN Chart 3
I don’t see any particular trends here except for the obviously stronger very bullish category which increased from 18% to 28% in the last month. The bullish category decreased from 39.8% to 29.2% while the other categories were relatively the same as last month.

Until next month this is Van Tharp.

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.

Workshop Schedule

January 2018 - US
Van shares years of knowledge about wealth concepts, wealth creation modeling, being wealthy inside, and the infinite wealth processes. Attend this workshop and completely reshape your attitudes toward money, work, paychecks, income, wealth, scarcity, and abundance. Your paradigm shifts in just three days will amaze you and release you from your current beliefs about wealth that have been running in your unconscious and holding you back.
Immense success is possible for most traders and investors. But the secret to that success has little to do with some magical trading system. Instead, it has everything to do with you. You are the secret ingredient to your success. And when you transform yourself, you transform everything. Peak Performance 202 is a major leap forward for those of you who are willing to step out of your comfort zone.
February 2018 - US
Enroll in Peak Performance 101 during this 20% off sale and take an additional
$200* off the price of the workshop.
Use coupon code SALE.
*Good for both US and AU locations. Cannot be combined with workshop packages or other discounts. Can be used with early enrollment discount.

Peak Performance 101 is Dr. Tharp's core psychological workshop, and his most transformative course for over 25 years. If you want to know how great traders think, behave and act so you can achieve consistent and profitable results, without stress, then this workshop is for you. Plus, this is a qualifying workshop for traders to apply for the Super Trader Program.
In just three days you’ll see how all of Van Tharp ’s strategic trading concepts fit into one seamless design for more predictable trading results. Your trading will never be the same.
This course illustrates the relationships among the steps so that the process is logical and reasonable. Moreover, you will learn how to take each step experientially, so you really get it. Dr. Tharp is an expert in delivering elicitation questions to bring forth each person’s most important issues.
March 2018 - Sydney, Australia
Enroll in Peak Performance 101 during this 20% off sale and take an additional
$200* off the price of the workshop.
Use coupon code SALE.
*Good for both US and AU locations. Cannot be combined with workshop packages or other discounts. Can be used with early enrollment discount.
April 2018 - US
May 2018 - US

The Super Trader Summit is in December.

Learn More About This Course...or Buy Now!

Free Book

FREE Book!
We pay for the book, you just pay for shipping.
When you add the free book to an item already being shipped there is generally no extra shipping charge (of course, depending on your location).

Read Van’s Latest Book —
The Red Pill for Traders and Investors

Eleven traders tell their stories about transforming
their trading results and lives, in this 400 plus page book.

Below is a brief video on how powerful this book is to traders.

Cary, NC Workshop Information
For a list of nearby hotels for our Cary, North Carolina locations, click here.

Book your flight arriving to the Raleigh-Durham International Airport (RDU).

When traveling to a three-day course, it's best to arrive the evening before.
To help determine your arrival and departure times, see:

Questions? Click Here to Ask Van...


This is a supplement to our subscription based newsletter, Tharp's Thoughts.

800-385-4486 * 919-466-0043 * Fax 919-466-0408
Share this email with your network on LinkedIn