Stock Market Forecast for Monday, 5/19/25

Daily Predictive SOFIS Signal, Equity Signals, Risk Levels, and Portfolios (since 2004)

The Previous Signal

******* For Friday, 05/16/2025 *******

Portfolio Status: Hedged for Friday

SOFIS Signal: CASH

SOFIS Allocation Level: 0%

SOFIS Critical Periods: (1) 0910-0920 CT, (2) 1245-1305 CT

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Commentary on the Previous Day’s Signal

For Friday, I had said: “the SPYPRED5 S&P Model 'Rule Chain' is:

051525 Core [ 3/**] -100 ( 47.74%)

The Core Rule remains in the SHORT state, and again there are no overriding LONG Rules, and so this gives us a 'raw' SHORT signal. Moreover, with the EZ value still negative (at -6), and the SURVEY.INP prediction data being strongly negative for all indexes, and the PredTablSigs pattern now showing a very weak 'SSSS/SS', this still suggests 'weakness'. The fact that our long-term signal remains in a 'hold' state, rather than a 'buy' state, also suggests the need for caution. On the positive side, the legacy S&P Model (SYSTEM6) has flipped back to a LONG, but we still have a dropping GSI value, and the CNNI is staying in the negative range at values not seen since November 2024, and so the Market appears to be steadily weakening.”

“The GSI represents the percentage of our 1000 stock/ETF Models that are in the BUY state, and the CNNI represents the average value of our 10 Primary neural networks.”

“So, we have a CASH/HEDGED signal for Friday.”

“Signal Corroboration: The 6-stock Tech Portfolio is now 33.4% Long, while the combined average Long allocation for all 3 stock portfolios (TECH6, SUPER08H, and SUPER15H) remains at a low 60.6%. The CASH/HEDGED stance for Friday is thus somewhat more conservative than the current/projected risk levels of the stock Portfolios.”

Over the past week we have seen what I call the “soufflé” pattern. In other words, the Market continues to stubbornly ‘inflate’ even as our fundamental indicators steadily worsen. And, it is frustrating to be wrong every day, obviously. But as the car drives steadily towards the edge of a cliff, eventually reality will take control :) Anyway, although all of the indexes rose on Friday, it is interesting that the techs (QQQ) gained the least. With the new downgrade of the US credit rating late Friday, techs will likely be hit the worst.

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The Current Stock Portfolio Strategy

The 3 stock portfolios that I maintain on Collective2, the Tech6, Prime6, and SUPER08F, are designed so that they allocate no more than 80% of available funds on selected stocks. These are always LONG positions. The other 20% is set aside for buying or selling MNQ or MES contracts (approximately 1 contract per $50K of stock holdings), with hedging accomplished in Tech6 and Prime6 by selling 1 MNQ contract, and in the SUPER08F this is accomplished by selling 1 MES contract. Hedging is especially important when the portfolios are maxed out on stock positions, and obviously less so if the portfolios have been reducing their holding size in the face of Market weakness ('cash hedging'), as they are designed to do. Now, the current strategy also calls for 'buying' 1 MNQ or MES contract if several conditions are met: (1) we have a LONG signal from the SPYPRED5 Model, (2) the legacy S&P Model (SYSTEM6) is also LONG, and (3) the EZ Indicator is at least > 0 (positive). This means that we obtain some extra benefit from setting aside 20% of equity, permitting the stock portfolios to exert a small amount of 'leverage' when the Market looks good.

The current Portfolio strategy can thus be summarized as follows:

(1) Tech6 Portfolio. A maximum of 6 high-performance Tech stocks that account for 80% of portfolio value. The remaining 20% will then either stay in Cash (if a weak LONG day is expected), or will be used to provide a hedge (selling an MNQ futures contract), or used to 'boost' performance by buying an MNQ futures contract -- all based upon the SPYPRED5 signal and its EZ Indicator and SYSTEM6 associated signals.

(2) PRIME6 Portfolio. A maximum of 6 stocks that are chosen from a far larger 'pool' (techs, S&P 500, and small-caps). Again, 80% of funds are used to buy a maximum of 6 stocks, and the remaining 20% is used to protect, or to boost gains for a given day, i.e., -MNQ (a hedge), +MNQ (a boost), and $$$ (neutral).

(3) SUPER08F Portfolio. A maximum of 8 stocks from carefully selected companies (that all have been in business since 2002 with only a few exceptions). Although the same 80%/20% strategy is employed, this time with buys or sells of MES (instead of MNQ), the stocks tend to turn over much more slowly so that the trading frequency is quite tolerable. The PORTSIM portfolio machinery is used to guide the trades, rather than using the higher-frequency signals that are output by the SPYPRED5 model. The predictive models, of course, 'are' used to determine how to handle the 20% equity reserve, i.e., +MES, -MES, or Cash.

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SOFIS Signal and SUPER 8/SUPER 15 Stock Portfolios

[The detailed Forecast for Monday is presented below]