With a market type approach to trading, you don’t have to worry or speculate about which way the market is heading next.
#901 August 1, 2018
  • Feature: July 2018 Market Update: Neutral Quiet Market Type, by RJ Hixson for Van K. Tharp, PhD
  • Workshops: 5 London Events, October
  • Tips: July 2018 System Quality Number® Report, by RJ Hixson for Van K. Tharp, Ph.D.
  • FREE BOOK!: Trading Beyond the Matrix
  • GDPR: Read Our GDPR Statement
Save $700 On Our August Workshops!
Our Early Bird Discount EXPIRES TODAY!
(There's still time to get your discount for Forex in London this October)
Discount Expires Today
There are several benefits to attending our Forex Workshop that we'd like you know about.

1- You can purchase the Forex Busted Breakout System taught at the workshop in e-learning format and get a head start on the class. Purchase it now for $995 (still at our introductory price offering) and take $600 off the price of the workshop. In this case you get to walk through the door understanding this system so you can further your understanding during the live class, plus it will lay a groundwork of understanding for the other two systems as well.

Not only that, but Gabriel offers monthly coaching calls to his e-learning students. Act soon and this will allow you several months of immersion into this first system before you walk through the door in August or October.

2- Our clients have consistently told us that Gabriel is an excellent teacher who ensures each student is grasping the three systems fully. He offers his undivided attention and is generous with his time during the three days. Students rank his class high on a scale of 1-10.

3- You keep learning. Gabriel will offer follow-up calls once a month for three months after the live workshops to ensure students have the opportunity to ask questions as they trade the systems and run into new situations. You don't need to purchase the home study first to get this on-going coaching.

If you've ever had an interest in Forex Trading you now have two opportunities this year to take both Forex workshops (Forex Trading and Forex Live) and learn from an expert in this field. Not only are we offering these workshops at our facility in Cary, NC this August, but we will also offer them this October in London, England along with a host of Van's other groundbreaking workshops! Be sure to use a combo discount if attending more than one workshop to pay less for each event!

If you have any questions please email [email protected] or give us a call, 1+ 919-466-0043. We are always happy to speak with you to help make a decision about attending this or any other workshop.

When attending Forex, Forex Live, and or Sideways Market Strategies this August, you will also get larger combo discounts for each course you attend back-to-back. Learn More.

Feature Article

July 2018 Market Update:
Neutral Quiet Market Type
by RJ Hixson for Van K. Tharp, Ph.D.
DR's Photo
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, 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

Van is traveling this week so in his absence, we’ll take a look at the markets just the same.

The major equity indices were up for the month of July and are up for the year. In the last two days of June, the market type direction had shifted from Bear to Neutral — and then it stayed parked in Neutral for July. Volatility remained very low as well. In fact, the market was in Neutral Quiet every single trading day of July.

MU Chart 1
For a table like the one above, the numbers may not really get your attention if you see them month after month. Updating the table several times now for Van in the last year has helped me start to notice more. As I was compiling the numbers for the table this month, the low volatility and the strength of the trends struck me. It’s quite a different character than the capital markets. My second thought was, “How do I trade this?” It’s not as simple as a long term put on USD but that could be part of the strategy — possibly filled by holding cryptoassets? Also, one number has been going down over many months now — the number of people who are receiving food stamps.

Part II: The Current Stock Market Type Is Neutral Quiet

It’s an interesting month in the directional component for Van’s market type. The Market SQN scores for the periods we monitor look like this —
  • 200 days - Bull
  • 100 days - Neutral
  • 50 days - Bull
  • 25 days - Bull

Van designates the market type direction by the 100 day period score so we are Neutral at the end of July but there’s a noticeable bias in the other periods.

Van’s Excel spreadsheet wasn’t producing a pretty price chart so we’ll lean on barchart.com for some help this month showing weekly bars for the S&P 500 index over the last year —
MU Chart 2
100 trading days back from July 31 is March 9 — a peak in the recovery from the drop in late Jan/early Feb. If the market continues upwards or even stays sideways for the next few weeks, the Market SQN score (see below) is likely to eke back into bull territory by the end of August. That’s not a prediction, just a statement about one possible path. Neutral markets can just as easily head in the bearish direction.
MU Chart 3
Meanwhile, volatility remains low and in the Quiet range —
MU Chart 4
Here are the weekly changes in the three major stock indices over the last month.
MU Chart 5
The NASDAQ continues to lead the indices with the largest gain outpacing the other averages by a factor of well more than 2 to 1. Adjusting gains for volatility, however, yields similar Market SQN scores for the three indices (see the SQN Report below).

Part III: Our Four-Star Inflation-Deflation Model

Van’s inflation/deflation model has a lot of cross currents in component prices two months back and six months back. At the end of July, gold is the only component that’s directional (lower) in both timeframes.
MU Chart 6
Those cross currents net a mildly deflationary score for July at -0.5. In the last year, we have seen only one other slightly deflationary month while we have seen some very strong inflationary scores. The model indicates that prices for “stuff” overall are not heading up as much recently and may be stabilizing or decreasing slightly now. How do the results of this model relate to the relative value of the US Dollar? See the next section of this article and the SQN Report below.

Part IV: Tracking the Dollar

Trump continues to make headlines almost daily with tariff talk but is that causing a pause in the recent two month rally for USD? Tariffs and other factors aside, the chart shows consolidation in the June/July price range —
MU Chart 7

The S&P peaked on January 26 closing at 2872.87. On July 31, the index closed at 2816.29 — which is just 2% away from the all-time high 129 trading days back. Posting a new high just 2% away may seem easy from a perspective of advances. On the other hand, I wonder if I have been noticing more articles, advertisements, and Tweets about a pending market crash. Various fundamental or technical reasons are cited. Some have quant models or analogs or they apply various theories which allows them to think they know what the market is about to do. Many market participants listen to people who have one of those approaches and then they think they know too.

Good and wonderful theories or models can be very useful. At best, however, all that they can generate are probabilities. How high are those probabilities? Well, that depends . . . What were the assumptions? How good was the sample? What kind of biases were built into the theory/model? How rigorous was the testing protocol? The questions are legion. And yet, with little understanding about how truly useful the advice is that they are getting, people put their money at risk in the markets every day. This is not a casual observation. I speak from my own personal experience and that of our clients. There is a substantial industry built on this approach.

I had a finance professor who was adamant about not allowing us to believe our spreadsheets too much. At some point in nearly every class, he would ask a few questions in rapid succession, shrug his shoulders, and say, “You pay your money, you take your chances.” In trading and investing, that’s not a nice little saying, that’s literally what you do — pay your money and take your chances. So improve your chances in your approach to the markets.

With a market type approach to trading, you don’t have to worry or speculate about which way the market is heading next. Instead, you simply 1) need to pay attention to the market right now and 2) consider alternatives for the upcoming period.

1) Right now, the market type is Neutral Quiet. Trade systems that work well in a market moving sideways with little volatility. If you don’t have any of those kinds of systems (this can be the hardest market type in which to make money trading), you can sit on the sidelines until the market type changes. Not much is happening anyway from a broad market perspective.

2) Possible alternatives for the upcoming period include —

  • the market continuing sideways for a while (weeks? months?),
  • the market turns bullish,
  • the market turns bearish,
  • the market stays in a low volatility mode,
  • volatility comes back into the market.

Which combination of these is going to happen? We don’t know.

What do we know? More precisely, what can we observe from market history? The following -

  • Volatility tends to have been cyclical — after periods of low volatility, the market becomes more volatile. The length of these periods, however, has not been cyclical.
  • The markets have not tended to go from a sideways direction straight into a very bearish (crash) or a very bullish direction in a single step. There has been a shift from sideways into a directional mode which can gain strength in time. That amount of time can be short (weeks) but double digit market moves have started as single digit market moves.

When could or would these shifts happen? Again, we don’t know. If you follow your trading rules about trading the proper systems in the appropriate market types, you don’t have to try and position yourself ahead of the market, you just have to trade systems for the current market type and be ready for the change in market type when it comes.
Attend Forex and Sideways Trading Strategies workshops
back-to-back in August to save up to $1,000!
Instructor Kim Andersson discusses some of the objectives of her upcoming workshop "Sideways Market Strategies" in the video below.

Sideways markets are the most common market type. Having a strategy on hand to take advantage of this market type is one of the best edges you can have. Very few traders seem to know how to make this kind of market type profitable.

This workshop is only held once this year, so don't miss the fast approaching August event, 17th-19th.
video - sideways

Trading Tip

July 2018 System Quality Number® Report
The SQN® Report
by RJ Hixson for Van K. Tharp, Ph.D.
RJ's Photo
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.

The US Dollar continued its strength in July and again was one of the top ETFs in the database by Market SQN score. That strength affects all of the symbols holding foreign assets in some way.

In the US market segments, the Dow went from brown to yellow but overall, the segments weakened slightly in their July scores. Every segment is positive now but we only have two green scores compared to last month’s four.

Elsewhere in the Americas, Mexico turned positive but Latin and South America were red in last month's report and weakened further in July. Canada remains slightly positive and yellow.

Asia remains mostly brown again this month though Australia, India, and Taiwan turned yellow. China switched from a barely positive score (0.08) in June to red in July.

Europe strengthened overall having only one red country (Belgium) this month while several others turned positive. There were eight red ETFs in that part of the world last month but only two in July.
SQN Chart 1
In currencies, the ETF for the USD (UUP) is the only green symbol while most of the other symbols are in the red. In fact, only one other currency is even positive — JPY/USD (JYN). The other yellow issue is the currency harvest strategy ETF, DBV — not actually a currency. The Bitcoin trust symbol (GBTC) is slightly less weak but still negative for the month.

For a few months now, there have been no dark green US sectors and that continues in July. Oil & Gas Exploration has the highest score for the group. All of the issues are mildly positive or negative — none of them are red.

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

The July commodities sections looks very similar to June. Oil (USO) continues to be the only strong commodity while Gold, Base Metals, and Agriculture are red. The rest of the commodities are yellow or brown, or red.

The categories for interest rate products and real estate look very similar this month compared to last month. Last month’s red color for corporate bonds turned to brown this month but every other Market SQN score in the two categories remained close to last month’s.
SQN Chart 2
On the top list, no ETF scored higher than 2.0 again this month (Note: After looking at a price chart for GML, we are discounting its stellar Market SQN score as some kind of price data anomaly). Other than the possibility of small caps, it’s hard to find much in the way of themes in the top list.

The weakest ETF list is all red again this month though only the two weakest ETFs in the database have scores lower than -2.0. Emerging markets continue to be the weakest area — partly due to the strong USD. The rest of the list seems to cover a broad range of various markets.


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
In July, the center of gravity for the model shifted to neutral/bearish from its strong bearish/bearish center last month. The Bullish/Neutral/Bearish breakdown for the model this month is 12% / 36% / 52 % from last month’s 13% / 28% / 59%. That’s weak still compared to earlier in the year but it did shift positively in July.

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.
Both August workshops, Forex and Sideways Market Strategies, offer follow-up coaching after the workshop. You can start trading the systems and then rely on your follow-up program to get new questions answered!


August 2018 - US
$700 Discount Ends TODAY
Enroll now!
The Theory: All You Need to Know About Forex

Gabriel will spend most of the workshop teaching his trend-following systems. The first half day is spent to go over the specifics of trading the Forex market and cover such topics as:

  • Why trade Forex?
  • What are the advantages and drawbacks of trading Forex versus other instruments?
  • What are the main market characteristics, and who are the Forex market participants?
  • What methods work best in the Forex market?
  • All you need to know about Forex trading sessions and the currency pairs.
  • How are Forex chart characteristics different than stocks or futures?
  • What do you look for in a Forex broker? What do you avoid?
  • Why Forex may actually be the best market for new traders to learn trading.
  • What are the trading edges that work in Forex?
  • The Method

Gabriel will discuss a number of Forex trading ideas at his workshop and teach three specific trading systems. All three are trend-based; you can see the price action patterns in the price charts. His systems can be traded in various timeframes and can be traded across a wide range of currency pairs. Attendees of Gabriel’s workshops enjoy swing trading the systems using primarily 5-min ,15-min, 60-min and daily candle charts. The trades 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).
$700 Discount Ends TODAY for our Sideways Workshop!
No matter what time frame you trade or what method you use to measure them, Sideways markets happen between 59% and 65% of the time! And even though they appear a majority of the time, Sideways markets are rarely discussed, even in professional trading circles. Until now....

Kim is a 2015 Super Trader Graduate from VTI. Before she completed her studies with us, she had earned a Masters in Systems Engineering - which is no small feat! She has also served as an IT Security Consultant to the Pentagon, while also performing her duties with the Canadian Air Force.

She currently works as a Cyber Security Engineer at Lockheed Martin/Leidos and trades her systems part-time, finding a work/life balance that works for her and her family.

With over 1,850 trades completed, Kim has the solutions AND THE EXPERIENCE to lead you in a Sideways Market.

She has put in a tremendous amount of work and effort in to bringing this unique training out into the open. Originally designed with our Super Traders in mind, Kim and I decided to develop this material so that all traders or investors could come to the workshop and take home this critical information on this underappreciated market type.

This means that enrollment is limited as many seats will be filled with students from our elite Super Trader program.

If you think you are ready for a fast-paced, hands-on event hosted by an instructor, 100% dedicated to teaching you how to effectively trade Sideways markets, make plans to join us this August 17th-19th.
September 2018 - US
The How to Develop Winning Systems Workshop teaches you what you need to know to develop your own system. The material you will learn is not market or time-frame specific. So whether you trade stocks, futures, currencies, gold, etc., or whether you place 50 trades per day or 50 trades per year, you will learn all of the components that work in any system. With this knowledge you can both modify existing systems to fit you or the market type better, or master your own system development. Two locations to choose from, Cary, NC in September and London, England in October!
Peak Performance 202 is SOLD OUT! Look for the next event first or second quarter 2019.

October 2018 - US
November 2018 - US

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.
Watch our Trading Beyond the Matrix Video


The European Union General Data Protection Regulation (GDPR) went into effect on May 25, 2018 and is designed to allow individuals to more effectively control their personal data. At The Van Tharp Institute (IITM, INC) , client information is private and confidential; we do not share, trade, or sell to anyone. We never have. You may ask us at any time to unsubscribe. We keep your information safe. If you’d like access to your information just ask. You receive this information from us because you opted into the Van Tharp newsletter either through direct registration or registration through our Tharp Trader Test.

You may opt out below.

This email was sent to [email protected] by Van Tharp Institute
102A Commonwealth Court | Cary | NC | 27511

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