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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
My Best Signal:
BEARISH since 10/17/2017 @ SPX 2559.36
Signal Based on Technicals Model:
BEARISH since 10/9/2017 @ SPX 2544.73
The Modeling Feature is down as my data source pulled the plug. I found a work around but will need to find the time to do the coding.
Click the ‘Trader Platform’ Menu link for access to the Real-Time Technicals Model!
The new Technicals model (much more sophisticated than the original Daily version) is available in real-time for all subscribers to test it out. Green means bullish and Red is bearish. This is for the SPX at the 5-min, 10-min, 15-min, 30-min, 1hr, 2hr, 4hr time frames depending on your personal trading strategy. New models will be released in the future, working up to a composite model which would encompass several modeling techniques all in 1 chart (which should prove more profitable than using just a signal modeling technique)!!
As always, the Monthly, Weekly, Daily, Hourly and so on SPX charts I show are from all hours of the day, and therefore the prices and indicators will vary from charts which only show action during regular trading hours. I believe this method is more robust and encapsulates global sentiment, better capturing trends.
I mark negative divergences in red, and positive divergences in green. Please note that some indicators such as -DI are inverse, so a positive divergence is bearish and a negative divergence is bullish!
My volatility model correctly indicated that a big move was coming, not to be complacent. But is the move going higher or lower?
S&P500 Volatility (proprietary)
I developed the S&P500 Volatility Index to help characterize the volatility of the S&P500 market on a scale of 0 to 20. It has nothing to do with $VIX (which shows the market’s expectation of 30-day volatility, constructed using the implied volatilities of a wide range of S&P 500 index options). This indicator serves to rank the volatility of the current market period using market data from 1990 to 8/9/2016.
Why does this matter? In coming up with BUY and SELL signals in any system, you need to know when to flip quickly, vs. times you can wait and see if your signal is a fluke or not. This is a way to limit position flip-flopping.
Score>15 Market is volatile [flip quickly]
Score~10 Transition zone
Score<5 Market lacks volatility [wait out change in indicators
Recent trading has been more volatile than 2.1% of all trading periods since 1990.
Below I plot the momentum scores since 1990. You can see the Bear and Bull markets, but there were also times in Bull markets you needed to trade aggressively (May 2010, 2011, Aug 2015), and periods in Bear markets you could trade with a slower trigger.
Technicals Model (proprietary)
The first chart below is the cumulative Technicals Model dating back to 2006. The Model was higher today for the 38th day in a row. Here you can see the model performance (in blue vs. SPX in black) all the way back to 2006. I added the purple 200 day moving average to help discriminate between bull markets vs. bear markets (although fake-outs do occur such as 2011, and either 2015 or earlier in 2016). The cumulative Technicals Model made a new All Time High on 10/20/2017! The model is well above its 200 dma that it lost briefly October 2016.
I have noted that the model did not confirm the last high for the SPX in 2007 (as denoted by red down arrows on the model, vs. SPX green up arrows).
Below the Model and SPX chart on figure 1, I have the performance of the ratio of the two. I have noted extreme readings (green) as potential bargain buy (such as Brexit which was the last extreme reading in green), and extreme Red readings being bearish for the market. The ratio has been positive for the 1st day in a row.
This next chart shows the daily readings, not in cumulative mode as above. Here you can see which particular trading days are the strongest/weakest technically with the markets as portrayed by the model. Divergences also show up near market Tops/Bottoms.
There is negative divergence in the Model vs. SPX between late April and mid October, as well 1 in September and 1 in October.
I have added a 5 day EMA to the Model (pink), and a new indicator called a Technicals Thrust. Similar to the Zweig Breadth Thrust, it looks for hard reversals. I have preliminary called a 0.50 gain within 5 days (with a peak above 0.35) a Technicals Thrust. 5 have taken place during the past year (noted with orange circles at the top of the chart), all had gains, while 3 of them had a prolonged bullish run.
What is this model? It’s a comprehensive assessment of a good number of technical indicators on each S&P500 stock. This model does 2 things well. First, it shows divergences from SPX price. Most valuable of all, my model has a lot less volatility than SPX price but does a great job of capturing SPX trend, which should do well with forecasting SPX price movements in the future.
SPX Monthly from September 29, 2017
On the monthly scale, the market has been expanding since a 2015-2016 consolidation period. Its easy to see with negative divergences from the end of 2013 and 2014 on ADX DI, RSI, MACD and MACD histogram. September 2017 made a new All Time High.
ADX: Bullish, trading
Volume: Well below the declining 20 period moving average.
Moving Averages: Close>12>36>72>120 period moving averages
% Bollinger Band: Upper range
Bollinger Band Width: Steady
MACD: Bullish at a positive value, histogram ticked lower for the 4th month in a row.
SPX Weekly from October 20, 2017
There are negative divergences back to 2013 on the ADX DI, RSI, and MACD histogram. These divergences have only steepened in the past year. The MACD divergence has been reformed in June. With 10/20’s All time High, new negative divergences have extended vs. at least as far as the March 1st high.
ADX: Bullish, trending
Volume: Well below the slackening 20 period moving average.
Moving Averages: Close>20>50>100>200 period moving averages
% Bollinger Band: Above the Upper Band
Bollinger Band Width: Increasing from near historically low levels
MACD: Bullish at a positive value, histogram higher for the 6th week in a row
With 10/20’s All Time High, negative divergences are strengthened for ADX DI, RSI, MACD and MACD histogram, most peaked in March. HO’s mean Hindenburg Omens. Orange ones mean that the McClellan was positive (likely just a strong rotation), Red is the real deal, the McClellan was negative (Likely pre-drop selling).
ADX: Bullish, trending
Volume: Well below the slackening 20 period moving average.
Moving Averages: Close>20>50>100>200 period moving averages
% Bollinger Band: Upper quartile
Bollinger Band Width: Steady
MACD: Bullish at a positive value, histogram higher for the 1st day in a row
SPX hit its 2575 pivot to make new All Time Highs today. At today’s highs, negative divergences were extended for all indicators, many for the past 12 trading days! SPX should turn south soon.
VIX had a slight loss today, with hourly MACD on a SELL signal. Notice that VIX is well off its All Time Lows set in late July?
VIX 15-min Intraday
15-min VIX chart shows a positive divergences formed across the board at today’s lows. This is bullish for VIX at least in the short term.
VIX 442-hr Which Side of Trade? From 10/20/2017
Traders who prefer to trade one side, should be trading with the BULLS.
This chart attempts to use a long term average for VIX to identify Bull markets. I use a 442 hour EMA of VIX as that is approximately how many trading hours there are in a quarter of a year. When this value is below 17.5, those who like to trade one side at a time should make sure to be trading the long side. This chart makes no comment about the other times, meaning the inverse is not necessarily true.
High-Low was +97 today. The SPX McClellan Oscillator was positive for the 2nd day in a row. The SPX A-D line is above its ascending 20 EMA, with its ATH made on 10/20/2017.
The summation index is in positive range, but topped in July 2016. Negative divergences are shown going back to 2016.
More SPX Breadth
More breadth indicators, note the negative divergences since early 2016 on many of these. 3 of 5 of these signals are BULLISH.
Intermediate-Term Breadth Momentum Indicator: A BUY signal was given on 9/1/2017, topping?
Swenlin Trading Oscillator: A SELL signal was triggered 10/11/2017.
Bullish Percent Indicator: A BUY signal was triggered 8/30/2017, topping?
Percent with PMO above Zero: A BUY signal was given on 9/8/17.
Percent with PMO giving BUY signal: A SELL signal was given on 10/16/17.
SPX %above MA
The stochastic indicators have signaled a SELL for 4 of the 5 indicators.
Participation was higher today, but off recent highs set at the beginning of October.
UST10Y-2Y from October 20, 2017
Each week I will take a look at the UST10Y-UST2Y, though it will be the daily chart. This chart symbolizes whether the yield curve is supporting economic expansion (by increasing the spread), or providing additional head winds (decreasing). The chart made a lower low in October, formulating significant positive divergences vs. the June low. The yield curve should steepen here which is bullish for the economy.
What’s interesting here, the spread is at 0.76, while recessions since the 1970’s started when the spread was near zero or negative (shown below). If that trend is right, we are a while away from that taking place. You can see the trend is lower over the past several years, but we are currently at a top or consolidating. The bull leg started before the election, as the tide was turning positive for Trump support. Looking at the short term, there has not been a new high or low put in recently, so no divergences to compare to make a prediction.
TLT:TIP Daily from October 20, 2017
Deflation risk which steadily climbed in Spring, jumped in early summer before going sideways.
The bond market Deflation vs. Inflation metric (iShares Barclays 20+ Year Treasury Bond Fund vs. iShares Barclays TIPS Bond Fund). Values early in 2015 and pretty much all of 2016 are showing higher Deflation fears than even 2008-2009.
From this chart you can clearly see when the FED stepped in (when this ratio was nearing 1, except things got out of control at the peak of the 2008 downturn until the FED figured some things out). Clearly things changed since late 2014 and the FED has stepped aside leading to the Deflation fears building beyond the 2008 crisis.
HYG:IEF made a new uptrend high above all major moving averages closing near its top Bollinger Band. In doing so, negative divergences formed across the board vs. the September high for all but ADX +DI.
HYG:IEF ratio is a way of looking at Greed vs. Fear in the more sophisticated bond market.
Oil may have ended its lengthy consolidation with big gains a couple weeks ago, remaining above all major moving averages. However, negative divergences were set with the recent high, so a new high is not a certainty.
While I do not think this move will sustain itself, momentum riders should continue with positions as ADX is well above 20, until new negative divergences strengthen and are put in place. Too late for new bulls as RSI has already been overbought.
It’s performance during the seasonably strong Spring and Summer has been very poor. Perhaps a major leg down in oil is due in the coming months?
Summary: Bulls vs. Bears
My best swing trade signal went Bearish on Tuesday, joining the other one based on my Technicals Model. As a result, I exited my stock position in my 401k Wednesday and have been building up my position in SPY 29 Dec 256P. Recall, earlier this month I sold my SPY calls for a 100% profit.
My proprietary Technicals Model was higher for the 38th day in a row, with a positive divergence at 9/1’s peak vs. SPX, foretelling of this bullish run. The Model made a nominal new high in early October which could be counted as a double top. The Cumulative version of the Technicals Model made a new All Time High 10/20. My statistically driven Volatility Model was historically low, broadcasting a big move developing which has certainly occurred both Thursday and Friday.
SPX daily is above all major moving averages, though negative divergences are set from the March 1st high. At the hourly scale, at today’s highs, negative divergences were strengthened across the board (for the past 12 days), so SPX is likely setting up to head lower in the not too distant future.
VIX finished slightly lower today, on a hourly MACD SELL signal. Drilling down to its 15-min chart, positive divergences formed across the board at today’s lows, setting the stage for higher VIX at least in the very short term. Notice that recent VIX lows are higher than those made in the summer despite the markets being at All Time Highs.
Market Internals, participation and breadth indicators were mainly higher today. Many of these are in positive territory, yet are well off peaks from earlier in the year. SPX A-D line made a new All Time High on 10/20, obviously above its 20 dma which is ascending. SPX McClellan made its 2nd positive reading in a row.
Oil may have ended its extended consolidation with a large gain Monday, though negative divergences at the recent top mean a new high is not for certain.
HYG:IEF made new uptrend highs, but is diverging negatively with most indicators which may end up being bearish.
- The SPX A-D line made an All Time High on 10/20/2017
- The SPX A-D line is above its 20 EMA, and it is sloping upward
- SPX Daily above its 20, 50, 100 and 200 dma
- Cumulative Technicals Model made a new All Time High on 10/20/2017
- Technical Model (cumulative) is above its 200 dma
- SPX 20 dma above the 50 dma for the 26th day
- SPX 20 dma above the 100 dma for the 234th day
- SPX 50 dma above the 100 dma for 213th day
- SPX Monthly continue in a upward run
- Strong run in SPX Weekly
- Technicals Model is positive for 38th day in a row
- McClellan Oscillator positive for the 2nd day in a row
- BUY signals on 3 of 5 of other Breadth indicators
- Technicals Model had diverged positively with the previous peak vs. SPX at 9/1’s peak.
- HYG:IEF still strong
- Oil resuming its run higher?
- SELL signals on 4 of 5 of Number of stocks above their 20/50 dma
- UST10Y-2Y (Yield curve flattening may be improving again though)
- There is negative divergence in the Model vs. SPX between late April and mid September, as well as 1 in October
- Summation Index has been negatively diverging since last summer
- SPX weekly has been negatively
Levels to watch…
- 2575 pivot
- 2525 pivot
- 2479 pivot
- 2456 pivot
- 2444 pivot
- 2428 pivot
- 2411 pivot
- 2385 pivot
- 2336 pivot
- 2321 pivot
- 2286 pivot
- 2270 pivot
- 2212 pivot
- 2177 pivot
- 2131 pivot
- 2116 pivot
- 2085 pivot
- 2070 pivot
Feb-March 2016 Posts: https://stormchaser80.wordpress.com/
Note: I want you to know that although I have taken the steps to start the subscription business, I will continue to offer the free service through May 2016. I want there to be a good record of (hopefully) accomplishment. Plus I don’t want to spring anything on anyone unfairly. I thought 3 months was enough lead time. I also want to present something nice, and well worth your visit (and subscription).
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