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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
Based on Technicals Model:
BEARISH as of 7/31/2017
Based on Unrelated Signal:
BEARISH as of 7/28/2017
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!
Where does this sell-off stand?
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 51.1% 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 lower today, for the 10th day in the past 11. 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 8/3/2017! 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 negative for the 18th 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.
7 negative divergences since late April indicated a significant change in trend is near. Look how much weaker the model was compared to before the SPX top! But then the model formed 3 little positive divergences that developed vs. SPX in late June and early July.
This looks to predict perhaps a New All Time High [DONE]. Now 4 new negative divergences vs. SPX is in place, making 11 since mid-April. This negative divergence between early July and mid August is quite large!! Is a BULLISH positive divergence now forming?
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 July 31, 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. July made a new All Time High.
ADX: Bullish, trading
Volume: Well below the slipping 20 period moving average.
Moving Averages: Close>12>36>72>120 period moving averages
% Bollinger Band: Upper quartile
Bollinger Band Width: Gradually rising from very narrow levels
MACD: Bullish at a positive value, histogram ticked lower for the 2nd month in a row.
SPX Weekly from August 18, 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 August 8th’s All time High, new negative divergences have extended vs. the March 1st high.
ADX: Bullish, trending
RSI: Mid range
Candle: Bearish reversal, inverted hammer
Volume: At the steady 20 period moving average.
Moving Averages: Close>20>50>100>200 period moving averages
% Bollinger Band: Mid band
Bollinger Band Width: Narrowing
MACD: Bearish at a positive value, histogram ticked lower for the 2nd week in a row
With August 8th’s All Time High, negative divergences are in place for ADX DI, RSI, MACD and MACD histogram. 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: Bearish trading
RSI: Lower range
Candle: Long whiskered doji, both sides dueled to a draw
Volume: Well above the climbing 20 period moving average.
Moving Averages: 20>50>Close>100>200 period moving averages
% Bollinger Band: Below lower band
Bollinger Band Width: Expanding from just above historically narrow levels
MACD: Bearish at a positive value, histogram lower for the 2nd day in a row
Made the lower low I was looking for, setting up strong positive divergences across the board.
VIX pullback but remains in a MACD hourly BUY signal. At Thursday’s highs, no negative divergences were noted so a higher high is more likely.
High-Low was -21 today. The SPX McClellan Oscillator was negative for the 15th day out of the past 16, but not as low as a few days ago. The SPX A-D line is back below its descending 20 EMA, with its ATH made on 8/1/2017 (not confirming the 8/8/17 SPX ATH).
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. 5 of 5 of these signals are BEARISH.
Intermediate-Term Breadth Momentum Indicator: A SELL signal was given on 8/4/2017.
Swenlin Trading Oscillator: A SELL signal was triggered 7/27/2017, nearing a BUY.
Bullish Percent Indicator: A SELL signal was triggered 7/28/2017.
Percent with PMO above Zero: A SELL signal was given on 8/3/17.
Percent with PMO giving BUY signal: A SELL signal was given on 8/3/17?
SPX %above MA
The stochastic indicators have signaled a SELL for 5 of the 5 indicators.
Participation was slightly lower across the board, except small caps had slight improvements.
UST10Y-2Y from August 18, 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 topped in mid July after forming a couple of weak negative divergences. It now remains weak, below most all major moving averages. The only positive divergence I see is with MACD histogram.
What’s interesting here, the spread is at 0.90, 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 August 18, 2017
Deflation risk which steadily climbed in Spring, jumped in early summer. A reprieve lower then occurred and now it feels like deflation fears are building again.
The bond market Deflation vs. Inflation metric (iShares Barclays 20+ Year Treasury Bond Fund vs. iShares Barclays TIPS Bond Fund). Values late in 2014 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 was slightly higher today. It remains below all major moving averages, but remains in its Bollinger Band. I used this chart as part of my WARNING for BULLS last Wednesday 8/9/2017. I expect lower lows ahead as there were no positive divergences at last Thursday’s bottom.
At the recent high on 3/2/2017, negative divergences have been strengthened since late 2016.
HYG:IEF ratio is a way of looking at Greed vs. Fear in the more sophisticated bond market.
Oil rocketed higher today, perhaps a in a hockey save effort for my prediction of a new recent high. Oil had not played out as expected, pulling back longer and deeper than expected this month. Without negative divergences at its recent peak, I would think a new high is coming.
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 complete blog post today is open to the public to read. If you like the post, you can sign up for a FREE subscription to view this analysis daily at the bottom my blog post! Plus those who subscribe to this FREE service will have full access to the entire website including real-time models!
NavigateTheMarketStorm has I believe done a great job of warning on the lead-up to the new SPX All Time High that a major top was coming. This was based on my proprietary Technicals Model which had been negatively diverging at times since mid April, and about 10 pre-top Hindenburg Omens. Also spoken about the historically narrow SPX Daily Bollinger Bands (going back to 1970) and very low readings coming from my statistically driven Volatility Model. Low volatility like this can proceed large moves. Then came a sweet SPX reversal candle on August 8th.
I am neither BEAR nor BULL. Just trying to do some detective work to lead us to the next move. I have been showing for months the deterioration in internals, breadth, and participation at both the SPX Weekly and Daily scales. Yes there were more gains to be made, but we were ready mentally that a turn was going to come.
Today was a breather day for the markets, allowing VIX to decline. SPX daily made a large whiskered doji, but the thing I found most interesting was the positive divergences across the board on SPX hourly.
3 Hindenburg Omens on the SPX this week but none Friday. Read more about it under the Techniques menu at the top of my website. But just as a refresher, they mainly come before major tops, can occur during significant downdrafts and rarely do trigger at important bottoms. I am classifying the 5 that came after SPX ATH as the second category, the 5th such type since the All Time High.
There is a total solar eclipse on August 21st (Monday) as well as a Black Moon: Aug 21 (third New Moon in a season with four New Moons), read about Puetz Crash Windows under the Techniques menu at the top of my website. It doesn’t say a crash must occur in these conditions, just that the more significant ones tend to across all markets. The previous FULL moon was on 8/7 which was 1 day before the SPX ATH, and the next one is Sept 6th.
Both my swing trading signals remain BEARISH (since 7/28 and 7/31). Some slight improvement in internals today, but remember they are maintaining a downward trend yet yes, some are coming off their bottoms. Participation was slightly lower for all but small caps. SPX A-D line remains below its descending 20 dma, remember it did not confirm the last SPX All Time High. The SPX McClellan made its 15th negative reading in the past 16. Looks like VIX needs a new high due to lack of negative divergences at Thursday’s highs.
Noteworthy for my BULL friends, the SPX McClellan and my proprietary Technicals Model are currently positively diverging with SPX. These will have to be watched carefully, but to be clear, both of my swing trading indicators remain solidly BEARISH.
- The SPX A-D line made an All Time High on 8/1/2017
- SPX Daily above its 100 and 200 dma
- Cumulative Technicals Model made a new All Time High on 8/3/2017
- Technical Model (cumulative) is above its 200 dma
- SPX 20 dma above the 100 dma for the 190th day
- SPX 50 dma above the 100 dma for 169th day
- SPX 20 dma above the 50 dma for the 75th day
- Monthly continue in a small upward run
- Oil rising????
- SPX Daily below its 20, 50 dma
- The SPX A-D line is below its 20 EMA, which is slopping downward!
- Technicals Model is negative for 10 of the past 11 days, but may now be positively diverging with SPX
- McClellan Oscillator negative 14 of last 15 days, but did not make a new low, positively diverging with SPX
- SELL signals on 5 of 5 of Number of stocks above their 20/50 dma
- SELL signals on 5 of 5 of other Breadth indicators, though 1 is nearing a BUY
- UST10Y-2Y (Yield curve flattening and needs a backstop soon)
- Technicals Model is diverging negatively 7 times since mid April, but then had 3 minor positive divergences since 7/2/2017. Since 7/19/20117 4 more negative divergence appeared, making 11 total. 1 New positive divergence may be showing up.
- Summation Index has been negatively diverging since last summer
- All Breadth indicators negative and some may be bottoming
- SPX weekly has been negatively diverging since 2013/2014 and made a reversal candle this week
Levels to watch…
- 2479 pivot
- 2456 pivot
- 2444 pivot
- 2428 pivot
- 2411 pivot
- 2385 pivot
- 2336 pivot
- 2321 pivot
- 2286 pivot
- 2270 pivot
- 2212 pivot
- 2177 pivot
- 2148 near 50/100 dma
- 2131 pivot level
- 2128 20 dma
- 2116 pivot level
- 2089 SPX 200 dma
- 2085 pivot
- 2070 pivot
Feb-March 2016 Posts: https://stormchaser80.wordpress.com/
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