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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
Based on Technicals Model:
BULLISH since 8/25/2017
Based on Unrelated Signal:
BEARISH since 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!
Is the sell-off over?
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 6.7% 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 15th day in the past 16. 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 23rd 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? NOPE, the positive divergence was nullified on 8/21/2017!!
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 25, 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: Upper range
Candle: Higher but closed off highs
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 3rd 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: Mid range
Candle: Doji, indecision
Volume: At the steady 20 period moving average.
Moving Averages: 20>50>Close>100>200 period moving averages
% Bollinger Band: Lower band
Bollinger Band Width: Steady
MACD: Bearish at a positive value, histogram higher for the 4th day in a row
The market rose through the 2444 pivot and was halted by the 2456 pivot last Tuesday, before oscillating near the 2444 through the remainder of the week. No negative divergences seen at Tuesday’s peak so another high is more likely.
VIX was lower today, still on an hourly MACD BUY signal. Positive divergences at today’s lows on all indicators. VIX should trend higher next week.
High-Low was +31 today. The SPX McClellan Oscillator was negative for the 20th day out of the past 21, but not as low as a few days ago. The SPX A-D line above 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. 4 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 BUY signal was triggered 8/25/2017.
Bullish Percent Indicator: A SELL signal was triggered 7/28/2017, now bottoming?
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, now bottoming?
SPX %above MA
The stochastic indicators have signaled a SELL for 5 of the 5 indicators.
Participation was higher Friday for all indicies especially small and mid caps.
UST10Y-2Y from August 25, 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. This week weak positive divergences were put in for all indicators, perhaps bottoming?
What’s interesting here, the spread is at 0.85, 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 25, 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 little changed Friday. It remains below all major moving averages, but firmly reclaimed its Bollinger Band. I used this chart as part of my WARNING for BULLS on 8/9/2017. I expect lower lows ahead as there were no positive divergences at the bottom from 8/10.
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 was slightly higher Friday, breaking above its 100 dma. 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
The Market is in a very interesting spot for many reasons at this week’s close. Market bulls are going to point to the Technicals Model although negative is barely so, and is diverging higher than SPX. Also SPX remains above its 20 week ma, however did not have a strong close since July. Breadth and Internals have in many cases neared a bottom with a few even climbing for BUY signals. Participation has been improving with Small and Mid caps leading the way! SPX A-D above its 20 dma. My swing trading indicator based on my model went BULLISH Friday.
Bears are going to hold to the long downtrend in both McClellan (which however is positively diverging) and my Model. SPX Daily closed below its 50 dma 4 of 5 days this past week. My Volatility Model has crashed which means an important move could be on the horizon. SPX Hourly has been struggling all week with the 2444 pivot. VIX put in a new low Friday, but with that low comes significant positive divergences across the board, and if a MACD BUY signal occurs early next week, its much more likely going to work out for VIX Bulls than this past one. SPX A-D 20 dma is sloping downward. And if a hurricane can’t inject excitement to Oil bulls, what will? My favorite swing trading signal remains BEARISH, however came as close to possible to not flip BULLISH.
Tuesday I decided to go short via SPX Oct Puts near the close. Looks like I got in too early, but suspect that this larger downturn is not complete. All my 401k remains in interest cash accounts.
All Summer I have been 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. I also wrote 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.
Zero Hindenburg Omens on the SPX last week, but many have occurred since June. 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.
Did you get to enjoy the total solar eclipse on August 21st? Well there was also a Black Moon on 8/21 (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.
- 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 195th day
- SPX 50 dma above the 100 dma for 174th day
- SPX 20 dma above the 50 dma for the 80th day
- Monthly continue in a small upward run
- Oil rising????
- The SPX A-D line is above its 20 EMA, but it is sloping downward!
- SPX Daily below its 20 and 50 dma
- Technicals Model is negative for 15 of the past 16 days
- McClellan Oscillator negative 20 of last 21 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 4 of 5 of other Breadth indicators, though 1 is near 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 was negated 8/21.
- Summation Index has been negatively diverging since last summer
- All Breadth indicators negative but some bottoming
- SPX weekly has been negatively diverging since 2013/2014 and finished off its highs again 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/
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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