The foundation of our work here at CakeTrades consists of what we call the Put Call Ratio Indicators (PCRI's). These indicators consist of custom tools that measure market positioning and sentiment, which work together to signal both minor and major market tops and bottoms.
These signals have a remarkably strong historical hit rate, but we'll cast that aside for now and focus instead of the most recent equities top, which occurred between the last week of December, 2021, and the first week of January, 2022.
As of the date of this post, the S&P has suffered a total max drawdown of 12.3% from the January 3rd high of 4818.62, making this the worst since month since March 2020.
The Jan 24th trading session was especially brutal, with the S&P 500 going as negative as -3% before recovering to close positive on the day.
This sell pressure has obviously been devastating to retail portfolios, and yet CakeTrade members were safe. Here's how it went down.
December 27, 2021
The market had been suffering back to back to back corrections since September of 2021, and our analysis suggested that breadth was not improving. In fact, it was getting worse. So we advised our members against making new stock purchases and instead begin moving into defensive mode.
December 28, 2021
We begin noticing that our indicators were setting up a sell signal. In general, our sell signals take weeks/months to setup, and result in corrections of greater than 5% over a period of at least 1-2 weeks.
We advise our members to begin building a long volatility position and hedge or liquidate longs.
December 29, 2021
Our sell signal continues to manifest and price action begins to confirm as ES_F resistance stood firm near 4800.
December 30, 2021
Price action continues to deteriorate, and our sell signal continues to develop.
December 31, 2021
Sell setup triggers, and we advise our members to finalize short equities & long volatility position/s. Also recommend bonds in the event we go extreme flight to safety mode.
Lastly, we make the recommendation to buy time to February, at a minimum, on any puts or short calls.
January 2, 2022
We remind members of our $SPX roadmap, posted several weeks earlier. The selling arrived right on time, and targets were explained.
Also, equities continue to flirt with ATH's, but our PCRI's confirm that the sell signal is still active. We advise our members to continue holding shorts & long vol positions.
January 4, 2022
The selling begins just a day after achieving new highs. At first it feels rather harmless, but 20 days later, equities are almost 10% off the highs of that week.
January 24, 2022
Equities opened the day with a massive gap down, but a late day surge brought them positive on the day. Our PCRI's show fear on the tape and increasing amounts of capitulation, but we continue to urge caution until a bottom is signaled.
Part 1 Recap
As you can see from this timeline, our analysis and signals spotted this event well in advance of the actual selling, and we were able to give our members a week to begin winding down long positions and building up short positions.
While other investors were buying the top on peak euphoria, our members were harvesting profits and preparing for the worst.
The result, thus far, has been the worst equities correction since the Covid crash of 2020, and thanks to our CakeTrades tools, our members are not only safe, but making money on the way down.
Stay tuned for part 2, which we'll release once this correction has completed, and our bottom signal has prepared our members for the turn back up.
CakeTrades Pays for Itself
How much money would you have saved if you trimmed all longs at the end of 2021 and bought a little bit of $VIX or hedged your portfolio with puts? How much could you make knowing exactly when to cover those shorts and go long?
Our membership is currently only $49/month. As you can imagine, these top and bottom signals pay for themselves many times over. Joining CakeTrades Pro is a no-brainer.
Click here to get started.