Premium members received the following text alert this morning:
I’ll be honest. After tweaking the algorithm last week to rely more on short-term signals and to give clearer Buy, Cash, and Sell ratings, I really sat on the SOFI AI alert as I contemplated whether I would push out the alert or not.
I’m a bit apprehensive about the SOFI AI now because I want it to undergo more testing as the market swings back and forth now that some major inputs to the algorithm have been changed.
One of the issues that bothers me is that the SOFI AI has semantic processing as one of its inputs. President Trump told reporters at the White House on Tuesday the 25th, “We have companies, the greatest in the world, and they’re doing really well. They have record kinds of numbers. So I think it’s a tremendous opportunity to buy. Really a great opportunity to buy.” All the left-leaning media outlets like CNBC ran the story because they wanted to let everyone know he said this so that when the market goes down, it will discredit the President. How should the SOFI AI handle that? It can’t just take the sentiment of “buy this market” in all these major media outlets as everyone getting more bullish about stocks because it was really just the President who said this and the proliferation of what the President said was more to discredit him than it was true bullish sentiment by an increasing number of traders. Therefore, I have to manually adjust the algorithm and take points for the Bulls away from the semantic processing input of the algorithm.
When the market started to take off to the upside, about 2 hours from when SOFI first gave the Buy rating, I went ahead and released the rating via text message to Premium members.
Market breadth went bull crazy today! On the S&P 500, 478 stocks advanced and only 1 stock declined! There was 2.5 billion advancing volume with just 5 million declining volume! On the NYSE, 2031 stocks advanced while 199 stocks fell. Advancing volume on the NYSE was 3.4 billion and declining volume was just 152 million.
The S&P 500 1-hour chart has not yet given a buy signal when the 13-hour MA crosses above the 30-hour MA.
The other REALLY BIG problem is that the stock market hasn’t been able to hold on to gains. For months now, each big up day is followed by a stronger down day. This market has to be viewed as nothing more than a bounce within a larger downtrend until proven otherwise.
There is little reason to think that a new uptrend has started. The goal with the SOFI AI is to try and time this oversold bounce and then get out quick with profits before the market rolls over and heads back down.
What we are going to be looking for over the next week is “follow through” to signal that buying conviction is growing and that the trend has changed. The next technical indicator we want to see is a Buy signal on the S&P 500 1-hour chart as mentioned above.