So I guess on Friday the ES breakout system went long - the problem with TS being a Friday it didn't show up until I rebooted on weekend

Currently price is basically at the same price it went long

I'm not super in love with it here, if a deeper 4th wave pullback occurs it may take some heat or get stopped out (remember the breakout uses Stops. But is what it is and that's the thing about systems, you can second guess every trade, so I'll go ahead and issue it 

The breakout can have a maximum only of 2 entries before it stops out

my writeup for the weekend

Market Comments: Last spring we made a predication that the market would likely hold up and rally throughout the summer into late July, then experience a correction in Aug/Sep (per seasonality) and that's exactly what has unfolded. 

Currently on the markets as you know we were focused on coil patterns on the indexes and those all broke to the downside last week (did any of you act on those?). The options we were discussing were: 1. either a shallower wave 4 consolidation (least favored), 2. a standard 4th wave zig zag deeper pullback to the low 4300's to mid 4200's (which I have been favoring), or 3. a major top was put into place in late July. Given the fundamental backdrop, the unfathomable amount of debt, Interest rates at 5.5% now, 8% mortgage rates, also the market is not cheap evaluations are very high, and this has been the narrowest rally we've seen in our lifetimes - it's passible that we could have put in a major top in July and not push back to new highs. 

For a 4th wave scenario 'Bulls' need to keep the SPX above the point of recognition gap from early June at 4220), below that price would seriously start the favor that the highs are in and the next major rally will ultimately form a lower high.

With all that said - make sure you have an exit strategy that fits your risk tolerance and trading style. If that's the daily KISS systems, the major indexes (SPY, QQQ etc have been flat as their STS smart trailing stops were all hit). Also the big cap tech names that dominate the market (AAPL, GOOGL, AMZN, NVDA, MSFT, META, TSLA) - the KISS systems are also flat. The weekly SPX KISS has a wide STS stop at 4250 if that's what you are following. The point is, make sure you have some sort of exit strategy and plan in place. 

The market is quite oversold here in the short-term and could bounce from here, but oversold is not a buy signal, so anything can happen. The market ultimately is going to need some sort of catalyst to put in a good bottom, such as the US Dollar and the 10-Year Yield coming in. 

Mean reversion systems: While the KISS Trend Following systems are flat, Two of the sub systems out of 22 systems have 1st and 2nd entries on SPY and ES (Trend/Pullback and QE BTS). That's the natural of these mean reversion systems, they scale into pullbacks and are early at times. Should the market go lower we may see 3rd entries for these and possibly other sub systems start to trigger. 

Key Events for This Week:

1.Tuesday: Various housing data (FHFA housing price index, Case-Shiller home price index, new home sales, consumer confidence
2. Wednesday: Durable Orders/Goods ( POWELL SPEAKS at 4 pm EST the market close!!! )
3. Thursday: GDP 3rd Estimate, Initial Jobless Claims, Pending Home Sales, Natural Gas Inventories
4. Friday: Adv Goods, Inventories, Personal Spending, PCE prices, Chicago PMI 

This is an alert about BPT Mechanical Systems:

Regarding the mean reversion: new trades are triggering:

- QE momo is triggering a 2nd entry on SPY and ES. 

- A new sub system may also trigger a 1st entry long on ES, the Strap long. ES doesn't close until 5 pm, but in all likelihood that system should trigger (unless there's a large movement in after hrs to negate it). 

As far as these mean reversion systems, remember there is no initial stop like the KISS systems have, keep that in mind if you worry about a larger market drawdown. If one wished to limit risk, one could buy options instead or not be as aggressive on 2nd entries, that's up to you. I will be updating the SPY and ES trade tables this evening, I have to run out a few min after the market for an appointment. 

Also make sure to check the KISS trend systems shortly after the close: AAPL obviously tagged its STS early this morning and closed out of a very nice winning trade of over 35%. You will be able to check other ETF's and stocks from the STS tables

KISS STS Tables for Indexes, ETF's, Stocks - check your stocks and ETF's to see where they are suggesting smart trailing stops if long.

reversion to mean? SPY trend/pullback is still long but why would any reversion to mean be going long here? nothing would go short, all the reversion to mean systems short bounces after a downtrend, not picking tops in an uptrend - the only short that can trigger in an uptrend is the exhaustion short and let me tell you, the market is no where close to meeting those conditions - only occurs after parabolic moves

KISS long trend systems doing great, I'm sure there's many that are raising stops today and others going long

Vicky- I really need to do a video and discussion about the STS tables etc, it's on my agenda to do

that said for me personally I like to use the STS as hard stops (I may give more wiggle room to them personally depending on what I see in the market, or I may use it as a mental stop and watch the market action if that stop gets hit to see if I wish to exit or not.  Quite often the stops can be hit intra day for a short time then price reverses back up, so I am cognizant of that and try to avoid it.  I've also stopped out before and simply went back long if price happened to close back above the STS that day - I know some don't like that for tax reasons, but for something like my IRA tax free account where I hold those market ETF's, tax is not an issue obviously, so that does not weigh my decision. 

When the systems first go long: sometimes price is VERY far away above the ATR's, which is why we display the % away from the ATR in the columns. If price is too far, and what is too far is also subjective -in my observations >10% or 15% away, I will wait and try to buy a pullback instead, and I'll use intra day charts such as 2hr, 60 min, 30 min to look for some sort of 3 wave abc like pullback

not all 1st entries start off far from the ATR: The system has built in where it looks for ABC 3 wave like pullbacks and for those it will go long well before price even breaks the ATR, those are my favorite entries. There's also a washout reversion to mean entry  - but those are very very rarely triggered, on the SPX only occurred like 5 times over 25 years

Updated Stops on the SPY and ES breakout systems

- SPY stop moving up new stop 403.5, moved up from 402.4 yesterday, 401.3 from Monday

still a ways to go to get it above entry but nice seeing it move some every day to reduce risk

I'll report the MES stop later and the SPY stop will move around some today so I'll report the final number later as well

As far as the market, what I'm concerned with is a larger 4th wave correction soon, but I'm hoping we can still get another pop first, we'll see

the reversion to mean systems are basically hedged with both SPY and ES in a breakout long and DVDS short

as Steve replied already formulate a plan and strategy that fits your style. As far as me showing some bigger picture charts a week ago such as the monthly and yearly charts, that's my opinion for now that those eventually play out over time. It doesn't mean they will or have to just an opinion and showing what those charts look like. And when I state things like overall bear market, that should not preclude you from following your plan or executing on a long that meets your trigger conditions etc.  Under a longer bear market conditions, you can have rallies that lasts for many months, 3, 5, 6 months longs and huge moves - when you get valid long triggers there's no reason to ignore them. The October low had 5th waves down and as we always say, anytime you complete 5 waves you are going to have a longer trending move in the other direction. And as far as pundits calling for the bear market being over in Oct maybe they are right and maybe they are not, it doesn't matter. I guess the only way it would matter is if you are someone who went long everything in Oct/Nov and you only plan to look at the market a year later - that that's no one here, everyone here is active and dynamic. 

again our opinion longer term is our opinion, but we will adapt to whatever the market does. Also, and as I've stated - if we go back into a bull market cycle, the KISS index systems will catch that, and if we go back into a strong decline later this year, the KISS systems will avoid that - so one option is to just follow those - they will catch whatever occurs

My opinions/concerns longer term:

1. Debt, debt, and more debt - the whole system is a Ponzi scheme and will eventually implode, when that is who knows
2. Inflation is a real concern and for now appears to be embedded - that's why you don't want to let the cat out of the bag, once out it's hard to get the thing back in
3. The move away from the US Dollar as the world reserve currency is starting to unfold slowly. Having the reserve currency of the word is what has allowed us to print money to no ends have our cake and eat it too - eventually that's going to come to and end and we'll have to pay the piper
4. Gold may eventually have its day when all this comes home to roost
5. The Fed is not going to able to easily go back on a cutting cycle and nor should they
6. The market being in a bear market: Clearly that was the case in 2022.  What type of bear market is this remains to be seen, was it over in less than a year? or could this unfold over 2 or close to 3 years like the bear market from 2000 - late 2002?
7. This AI stuff is probably an area to focus on stocks in that area and new IPO's and players that come into the space - there will likely be stocks that could go up 10, 20, 50 fold over time

I nor you can control any of these things, what I focus on is my plan for my trading and longer term position trading. If I see a stock coming out of a long term base etc and I like the company, I will still look to buy a position into it regardless. Basically I still play setups regardless of the backdrop and I use money management and stops

I feel that I'm just rambling now, but again I want to stress that just because we might show a monthly or weekly chart and make comments about it, don't let that distract you from your plan and executing on your triggers.  I would also suggest not listening to CNBC pundits - it's fine to listen but don't so locked into one opinion or article that you read that it affects your trading and execution of your plan

I'll look for your email: Systems:  KISS systems, reversion to mean systems - they are mutually exclusive to whatever our subjective technical analysis say - they do what they do on their own. 

Reversion to mean system trades are emailed out and sent out via SMS text message.
- KISS systems are shown nightly and lately I've been posting when they go long or flat as well - these systems are not time sensitive like the reversion to mean, it doesn't matter if one doesn't see those trades until after hrs as they tend to stay in positions for weeks to months. Also, most of the changes are adding  a new higher low stop, which is something one can adjust for the next day as they would already have a stop in place from the previous STS. you can also use this URL to see tons of ETF's and stocks, it's updated once a day after the market
https://breakpointtrades.com/ts/sts.php?chart_group=BPT_basket 

fred you ask the same thing every time and every time I post the same repies,  do blog search reversion to mean systems stops by matt - you will pull up dozens of posts. Again, the systems will exit on a bounce, not on a hard stop at lows. That said I can post the max historical draw down for these sub systems and that can be a guide such as setting a stop WIDER than the max historical draw down, here's a post from the past, once again I suggest reading the link to the past post below

https://breakpointtrades.com/blog/post/377890/ 

and here's a search result showing all results, look through this to see other past posts regarding stops and the mean reversion systems

https://breakpointtrades.com/blog/search/?search_terms=reversion+to+mean+systems+stops&member_name=matt&start_date=&end_date= 

that said remember what I said before: typically when we get a lot of posts worrying about or crying about the systems taking heat, generally some sort of price reversal is getting close. We don't have too much of that yet, but if we get another sell off we'll probably see a lot more posts - think of like the VIX or a contrarian indicator, when emotion gets every high and you can't stand it anymore, the market is probably due for a bounce 

systems:
- daily SPX KISS and QQQ's and other indexes obviously held their stops
reversion to mean:
- bear long SPY will continue to hold
- Strap long for SPY and ES will close out
- 60 Stoch short is not closing - I may close out with a stop or just add a stop - we already locked in strong gains on this previously

remember those CCI setups are closely related to the SPY and ES reversion to mean setups. The CCI Doji setups are manual reversion to mean setups with set triggers, stops, and targets

they give you some system-like trades outside of the systems

Regarding some questions about the reversion to mean systems and stops yesterday there were some questions from new guys regarding stops etc. I wrote this in response and I also discuss a lot of other things such as emotion and how to think about the systems

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First off the KISS trend following long only systems use stops - i.e. the DVT's higher low stops. The Breakout system also uses traditional hard stops and trailing stops

The 21 reversion to mean systems do not use 'INITIAL' traditional hard stops, where you set a hard stop after you enter the trade. An example of these type of systems to think about would be let's say you observe that in the past 30 years when price fell 10 days in a row on the SPX, it always put in a bounce on day 11. Well let's say that condition occurs again and you go long, but instead of price rallying on day 12, it falls again, and now you have a new statistical record.  What you have now is an even more statistically stretched scenario where prices are even more prone to a reversion back to the mean bounce. You could sell and stop out, or you can scale in more assuming that prices will eventually revert back as you now have a statistically more stretched scenario.  Instead of hard stops, the systems whenever they get into a bad trade, they will exit instead after an oversold bounce, vs stopping at at the lows. 

I tested using initial hard stops on these systems every which way but Sunday and the results were always worse by using initial hard stops rather than letting the systems exit on an oversold bounce instead. Too often your stop would hit at -8% or -10%, 12%, and even bottom tick where you sold the exact low. I found that if you simply let the system exit on its own after a bounce, you might get out with only a -1% or -2% loss or even a winner.  The long systems exit on a bounce, the short systems exit on a pullback. The exceptions are after reversion to mean moves occur if the systems decide to hold for longer, trailing stops may be used or by indicators like the momo changing slope - but realize that's after you got your reversion to mean bounce or pullback already.

Reversion to the means systems are NOT feel good systems - they can be counter trend trades that are buying into sharp weakness when everything feels the worst, and they also exit or sell when everyone else is buying and it feels the best. This really plays on ones psychology and is hard to get used to.

I suggest strongly that anyone trading the systems first start off with extremely small position sizes be conservative, don't swing for the fences, because your emotions will get to you if the systems go through what I call an 'ass pucker' trade where they go through some good draw down and multiple entries before they finally get a bounce (for longs) or pullback (for shorts). Do them small until you get a handful of trades under your belt with some profits that can 'buffer' your account and your emotions, before you increase position size. The guys that start off and swing for the fences with too large of a percentage of their account end up failing if their first experience with the systems takes some draw down and they have too much at stake. 

I'm not an investment adviser and so I cannot give advice, I'm giving you general information to consider in order to make your own decisions. 

If you really want to set hard stops - you can ask me what the max historical drawdown was for a particular system and one idea would be to set a stop a bit wider than the historical draw down - realize that odds could have the max historical draw down exceeded slightly to stop you out only to reverse and that be the new max historical draw down where you got stopped out at the lows. 

another thing - the reversion to mean systems usually about once or twice a year go through some of these tough trades. Most of the time 90% it's ho hum and no big deal.  When you first start to trade the systems, you might start at a good time when you get 10 or 20 easy trades before the 'pucker' trade, or as odds have it, you might get stuck with the pucker trade as your first one. 

regarding the KISS stuff - it's a trend like following system (opposite to the reversion to mean systems), The DVT's are an idea for a higher low stop like in a 401K that someone has a long position in the market to the SPX and QQQ and want's to mostly stay invested during bull market uptrends but with a adjusting protective stop that gives you an exit plan and prevents you from holding during 10%, 20%, 30% corrections.  The two daily versions there's a tigher one and a wider one - the wider one in bull markets maybe only gets hit once or twice a year. It keeps you invested in most of the uptrends and avoids the big crashes because of the stop. 

that said the big question now is, are we still in a bear market, if so then the KISS trend charts as I've stated 1000 times will give mostly sideways trades or small winners.  The daily systems went back long in July and have been able to raise their stops multiple times so that the DVT is higher than entries.  But again if this is simply a bear market rally within a bear market then we are not going to see a big trending trade here from them.

The KISS stuff is a nice trending type tool for bull market uptrends. That said I don't send out trade notifications for it as I don't consider it as complete of a system as the reversion to mean systems. To me it's more of a methodology and tool set that you can use some subjective discretion with. 

there's a video on the website that goes over some of it, however that needs updated and is old and a bit outdated but gives you an idea

https://bpt-videos.s3.amazonaws.com/webinars/401K%20Kiss%20system%20website%20description.mp4 

there will obvious be a 2nd entry today

as far as hard stops at lows do not work well for reversion to mean strategies, I've tested that 1000 ways from Sunday, almost always you stopped out at worse prices than exiting after an oversold bounce - reversion to mean systems best to exit on bounce. One could of course use stops based on smaller time frames based on their own triggers - so do what's right for you, but otherwise the reversion to mean systems from the website do not stop out at lows. The systems stop out of bad trades after a bounce, or hard stops come into place after a rally

it's kind of like if you found a stat on some ETF that showed over 30 years if that ETF had never fallen 13 days in a row - so #12 occurs and you go long because of stat history, do you stop out on day 13 if it's down? Probably not because now you are at an even more extreme stat.

I received a question about the reversion to mean systems do they have hard initial stops so let me post my answer here for others: The systems have stops but not initial hard stops (except for the breakout system which isn't reversion to mean)

• Understand how reversion to mean works: initial hard stops do not make sense for them. I've tested that 100 ways from Sunday and in every example if was BEST to stop out of a bad long trade on a bounce vs at a hard stop - you almost always got out better at the higher low bounce stop.

  Just think about this: let's make a reversion to mean system, you run some statistics on the SPX and you find that 99% of the time over the last 50 years if the SPX had closed down 11 days in a row that it rallied 100% of the time. So if that condition were to occur  again and you had 11 days down and you went  long, but instead you now had a 12th day down, i.e. price didn't bounce, would it really make sense to stop out on that 12th day?  NO because not you are at an even more extreme technical situation even higher odds for a bounce - best to add to that position or hold for the bounce.  that said - could one employ some sort of hard stop based on the max draw down of the history, yes but again you are still prone to exit if that max draw down hits and ends up being a low then a bounce

  Think of reversion to mean systems as rubber band trades, you are playing statistics - rubber band gets stretched, due for the snap back - and it always inevitably occurs. This is true of Indexes that can't go to zero of course - this may not always hold true for individual stocks - I generally don't like reversion to mean on individual stocks, best on indexes and sectors can't can't fall to zero and are an average of a large collection of stocks - therefore ETF's and indexes will eventually bounce/rally from an oversold condition to allow the reversion to mean strategies to exit a previous long trade on that bounce.

  What I've found on reversion to mean systems you can use stops but in 2 ways. If the market shows that this is not behaving right, you stop out of the trade on a bounce - not at the lows - you always get a bounce - hell look at the 1929 crash, after that crash was over the market rallied over 50%, best to not to stop out at the lows. So my systems exit on a bounce.

  that said, my systems also have a traditional stop that will kick in if the trade is positive - so like on this SPY Trend/Pullback - the non aggressive one that will not be exiting today - I can now place a stop at entry since that system is profitable. 

umm...I mean I would still keep the other SPY reversion to mean systems. You would just have more systems trades.  The ones built off this KISS format would have stops based off the DVT's, however I would not throw out all the other deeper reversion to mean trades that don't have stops. You would have more system trades basically. So if folks are still confused by the other reversion to mean trades they still will be confused

also regarding that Trend/Pullback system, as you know I made some changed after that March sell off earlier this year to really tighten up the systems, adding additional exit opportunities etc, I went over each sub system and I think they've been doing great since summer when the systems started to trade again. 

On this Trend/Pullback, here's a few images that show you the difference between the old Trend/Pullback and the updated one I made after that March sell of.

The first image, the modified one is at top, the original one is at bottom. You can see how the original one get stuck in that late Feb trade and held through that sell off finally closing out in late April. You can also see that that it tends to hold trades longer, compare the two and you can see that.  The newer one at top you can see exits on the bounce in late Feb thus avoiding that sell off, but doesn't catch those nice 2 and 3 week or month long trades, it closes out after a simple reversion to mean move back above the 8 SMA.  

So the newer one has less risk since it can exit easier, but it also makes less money, about 1/2 over the old version because it doesn't get to hold the nice winning trades, see the second image showing the statistics of the original vs the newer one.  

that said I've been meaning to go back to the new system and I think I can add some additional filters and stops to allow it to still catch the nice trending moves that the old one caught but still have the draw down protection of the newer one.  One option would be if the BPT MA is above the ribbons (like it is now) then allow the system to use the old exit, but also place a DVT stop at that low.  I could also do a combination such as selling 1/2 once the reversion to mean occurs where the newer one exits and then hold the rest with a stop, that would then exit by the old rules

anyway just sharing some things with you. that's why I sold 1/2 today and keeping the other 1/2.

someone wrote in with some confusion regarding the SPY reversion to mean systems and SPX 401K KISS stuff. He also had some comments about not being able to see the charts clearly or not as clean as he'd like. Here's my response in case anyone else has some questions:

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there should not be any confusion between the SPY systems and KISS 401K stuff.  

think of the SPY systems as reversion to mean systems as being most of the time in cash like a tiger waiting to pounce, they look for high statistical probabilities whenever the market gets too stretched to the downside or the upside. Price has sold off too much and it's too far below the 9 day EMA for example, one of the SPY systems may take a long trade and then look to close out after you get that mean reversion i.e. price back over the 9 EMA. That's all they are man. They are not trying to catch the trend and in fact when a lot of the long reversion to mean trades trigger the KISS 401K will be out because the DVT would have been hit on the pullback. Think of the SPY systems as short term - they are mostly in cash, they look to get in and get out, it's not complicated.  

KISS 401K should be clear what it tries to do, stay in uptrends as long as possible with tight ratcheted stops. Unlike the SPY reversion to mean systems, which are mostly in cash, the KISS stuff tries to stay invested as long as possible but with tight DVT stops.

I think the charts are pretty clear - obviously if you had them on your computer you would probably be just find with their look, we will be offering that through TS so you have the option to get them on your computer

Not sure what you mean by the DVT's hard to see them?  I have the prices listed RIGHT ON THE website, so even if you can't read the chart for some reason you can see the price listed in written dated text right in that section. Also did you realize the DVT price is listed in written text at the bottom of each newsletter email?  I think it's covered very well. Most people care more about the prices which we list vs looking at the indicators

see attached images, you can see the DVT prices listed at bottom of each newsletter, in the KISS section, and of course charts there as well and in each newsletter.  

For fun here's a couple examples of system building.  Some of you know, I don't code the systems and indicators, I'm a market technician. I visually observe things, then try to write that up and give to my programmer who then attempts to put into code.

Currently I'm working on this DVT market trend system, which is very complicated. The higher low stops are pretty easy for the most part, but having rules to re-enter is where it's difficult. Here's a couple images showing some things I've given to him to code up.  One of them is sort of a reversion to mean very oversold condition (Mar 24th, Dec 2018, Mar 2009 etc) but that entry needs a stop - so I found some conditions that appear to work well -  you can see how I write up the logic.

the second image is quite a bit more complicated. The DVT higher low stops are nice but what can happen many times is that you get stopped out by hitting the DVT and the market simply has a simple ABC or minor pullback - you need a way to get back long vs waiting for a higher confirmation that would get you in higher then where you got stopped out.  For this I'm attempting to use the color changes on the BPT MA Deluxe as a way to identify an ABC pullback and buy back in early vs waiting for price to confirm over the ATR which would be at much higher prices

anyway just showing for fun giving you an example of what I go through when trying to develop this stuff - it's tedious work

The DVTS is for trending up moves.  The QE BTS sub system is a reversion to mean type of system. Those are completely different things. Trend systems vs reversion to mean systems. Trend type system should be obvious. An example of a reversion to mean type system would over the last 30 years when the SPX was up 10 days in a row without a pullback that condition occurred only 15 times and 95% resulted in a winning short trade. So you play the statistical odds - but it's a counter trend short because the market is up. Also when you have crazy enough times like now the historical statistics can get blown out of the water.  A trend system -the market is going up, you buy into it.  Anyway both type systems have their benefits and draw backs.  Trend systems on average are lower winning % , 60 - 70% odds. Reversion to mean tend to be higher odd trades many tines 90% winning or better. Trend systems you can have tight stops, reversion to mean systems stops are not as easy because of their nature

I can't go into any more details than that intra day here managing trades