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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
My Best Signal:
BEARISH since 12/6/2017 @ SPX 2629.27
Signal Based on Technicals Model:
BULLISH since 11/21/2017 @ SPX 2599.03
This chart represents BUY and SELL signals using my favorite signal since late 2016. I will attempt to add tests to filter out a few flip-flops such as early in 2017, and the early exit call in October.
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!
Sorry for the missed post yesterday, sinus infection + night shifts not a good combo
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 7.8% 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 16th 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 12/07/2017! 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 8th day of the past 9 days 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 3 since October. One was wiped out on 11/30. Almost a Technicals Thrust on 11/30 but it took more than 5 days to achieve so not quite fitting the definition. A strong negative divergence of the model from SPX is occurring in December.
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.
The ratio hit a new uptrend high 10/25 above all major moving averages closing at its top Bollinger Band. In doing so, negative divergences formed across the board vs. the September high. A muted recovery ended with a brief gap higher above resistance last week of November. The past 4 trading days have taken this ratio lower to the support of all major moving averages.
HYG:IEF ratio is a way of looking at Greed vs. Fear in the more sophisticated bond market.
SPX Monthly from November 30th, 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. November 2017 made a new All Time High.
ADX: Bullish, trading
Volume: Just below the declining 20 period moving average.
Moving Averages: Close>12>36>72>120 period moving averages
% Bollinger Band: Top of Bollinger Band
Bollinger Band Width: Steady
MACD: Bullish at a positive value, histogram ticked higher for the 2nd month in a row.
SPX Weekly from December 8th, 2017
There are negative divergences back to 2013 on the ADX DI, RSI, and MACD histogram. Some of these divergences are close to breaking. With 12/4’s All time High, new negative divergences have extended vs. at least as far as the March 1st high.
ADX: Bullish, trending
Candle: Doji, indecision
Volume: Above the climbing 20 period moving average.
Moving Averages: Close>20>50>100>200 period moving averages
% Bollinger Band: Upper Band
Bollinger Band Width: Increasing from near historically low levels this past summer
MACD: Bullish at a positive value, histogram higher for the 2nd week in a row
With 12/4’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: At the steadying 20 period moving average.
Moving Averages: Close>20>50>100>200 period moving averages
% Bollinger Band: Upper quartile
Bollinger Band Width: Widening from historic levels
MACD: Bullish at a positive value, histogram lower for the 5th day in a row
New All Time Highs hit pre-market Monday 12/4. Negative divergences formed across the board forecasting a pullback. Positive divergences formed on ADX -DI and MACD histogram at Wednesday’s lows forecasting a reversal higher. At Friday’s peak only a couple of weak negative divergences have developed, so any pullback will likely be short and muted.
VIX was lower today, with hourly MACD on a SELL signal. VIX remains well above the low it made in late July. At Friday’s lows the only positive divergence was MACD histogram and ADX -DI, a weak bullish signal for VIX.
VIX 15-min Intraday
15-min VIX chart shows at Friday’s lows only a couple of weak positive divergences have developed so any recovery in VIX should be weak.
VIX 442-hr Which Side of Trade? From 12/8/2017
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 +31 today. The SPX McClellan Oscillator was positive for the 2nd day in row. The SPX A-D line is above its rising 20 EMA, with its ATH made on 12/8/2017.
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. 4 of 5 of these signals are BULLISH.
Intermediate-Term Breadth Momentum Indicator: A BUY signal was given on 11/29/2017.
Swenlin Trading Oscillator: A SELL signal was triggered 12/8/2017.
Bullish Percent Indicator: A BUY signal was triggered 11/13/2017, topping?
Percent with PMO above Zero: A BUY signal was given on 11/28/17, topping?
Percent with PMO giving BUY signal: A BUY signal was given on 11/21/17, topping?
SPX %above MA
The stochastic indicators have signaled a BUY for 3 of the 5 indicators.
Participation was flat today for small and mid caps, higher for SPX.
A new chart which combines the SPX price with VIX. They should peak when SPX is high and VIX is low. There have been negative divergences across the board from early October into November signaling building worry/hedging in the market even as SPX continues to rise. Also note the negative divergence vs. SPX beginning during the month of November.
A new chart that study’s the stocks in the SPX as if they all had equal weighting. Negative divergence have formed since early October, showing momentum is waning for many individual stock members of the SPX. The ADX +DI, MACD and MACD histogram negative divergences have since been broken.
UST10Y-2Y from December 8th, 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). Despite long and strong positive divergences since summer, this measure of the yield curve is well below the level of the Trump election. In fact, I had to go back to October of 2007 to match levels that are this low!
What’s interesting here, the spread is at 0.55, 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.
BUT WAIT…THERE’S MORE ON THE YIELD CURVE
I downloaded US Treasury data (all maturity periods) for every day since 1990. Then I preformed a linear regression on the yields for every maturity period each day and calculated the slope of the linear regression line. This is more robust than merely just subtracting 10Y-2Y as many (including me) do. The resulting graph shows the periods slope was negative in red. See how nicely they line up with the SPX top in 2000 and just before the 2007 top? Now look from 2009 to present day. The yield slope is quite stable and actually rising! Remember, there are lies, damn lies, and statistics!!
TLT:TIP Daily from December 8th, 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.
Summary: Bulls vs. Bears
The market has definitely been weakening of late. Wednesday my best swing trading signal went BEARISH, while the other one is inching closer to doing so as well.
HYG:IEF formed negative divergences across the board with its peak on 10/25. It has already rolled over losing all major moving averages along at the bottom Bollinger Band. After another go at a run higher, this ratio is just below support again. Keep a close eye on this chart!!
Pre-Market 12/4 SPX daily hit and reversed hard from new All Time Highs. Negative divergences remain across the board since at least March 2017, and countless Hindenburg Omens have occurred since this summer. Still feel its likely that the next top will be a MAJOR TOP. SPX hourly shows a couple of negative divergences at Friday’s highs, so lower prices are likely in the very short term.
My proprietary Technicals Model was higher for the 16th day in a row, with a positive divergence at 9/1’s peak vs. SPX, foretelling of this bullish run. On 11/30 it fell just short of making a Technicals Thrust. The Cumulative version of the Technicals Model made a new All Time High 12/8. My statistically driven Volatility Model has recoiled back to low levels awaiting another run to occur.
VIX finished lower today, on a MACD SELL signal. VIX 15 minute chart shows a couple of weak positive divergences at Friday’s lows so VIX may have a muted relief higher shortly.
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 12/8, obviously above its 20 dma which is rising. SPX McClellan has been positive for the 2nd day in a row.
SPX:VIX (which should peak at high SPX price and low VIX), and SPXEW (which asks the question what if each SPX stock had equal weighting) both support my past claims a big vacuum is developing, with quite a few negative divergences since October.
- The SPX A-D line made an All Time High on 12/8/2017
- The SPX A-D line is above its rising 20 EMA
- SPX Daily above its 20, 50, 100 and 200 dma
- Cumulative Technicals Model made a new All Time High on 12/8/2017
- Technical Model (cumulative) is above its 200 dma
- SPX 20 dma above the 50 dma for the 59th day
- SPX 20 dma above the 100 dma for the 267th day
- SPX 50 dma above the 100 dma for 246th day
- SPX Monthly continue in a upward run
- Strong run in SPX Weekly
- Technicals Model is positive for the 16th day in a row
- BUY signals on 4 of 5 of other Breadth indicators
- BUY signals on 3 of 5 of Number of stocks above their 20/50 dma
- SPX McClellan Oscillator was positive for the 2nd day in a row
- Slope of full yield curve is stable and rising since 2009
- HYG:IEF likely topped in October with negative divergences and now lost support of all major moving averages
- UST10Y-2Y at levels not seen since October 2007, major yield curve flattening
- There is negative divergence in the Model vs. SPX between late April and mid September, as well as 4 since October
- Summation Index has been negatively diverging since last summer
- SPX weekly has been negatively diverging for years
- SPX:VIX negatively diverging
- SPXEW negatively diverging
Levels to watch…
- 2594 pivot
- 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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