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Trading Account: 7/1/2016, bought SDS SEP 16 2016 17.00 C for $1.19
401K: Turining Bearish?
Long Term: World is in a Bear Market, SPX targeting <666 by 2022
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.
Time for another login free post. If you like what you read, consider signing up for a free login to view daily posts.
Technicals Model (proprietary)
The first chart below is the cumulative Technicals Model dating back to 2006. The last day it ticked lower was Thursday. 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 market vs. bear markets (although fake-outs do occur such as 2011, and either 2015 or currently). I also want to point out that the cumulative Technicals Model has not made a new All Time High in 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 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. Today is the 10th day in the row that the ratio of the two is below zero. If it continues on like this, the market may be in the process of putting in a significant top!
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. Note that this current negative divergence is very steep, and was in negative territory for the 3 days in a row before Friday.
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 (for example, take a look at the Brexit SPX reaction at the end of June (black) vs. the non-reaction in my model (blue)). 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.
I have the scripting done to process the Model! During the next month or two I will be playing with potential BUY/SELL indicators using the model.
ADX: Bearish, trading range
RSI: Upper quartile
Candle: Doji, indecision
Volume: Low volume, well below the slackening 20 period moving average
Moving Averages: Close>20>100>50>200 period moving averages
% Bollinger Band: Top, though below the top Bollinger Band after closing 3 weeks above
Bollinger Band Width: Ticked higher, still quite narrow
MACD: Bullish at a positive value, histogram ticked higher for 6th straight week
ADX: Bullish, trending, negative divergence
RSI: Upper quartile, negative divergence
Volume: Low volume, at the leveling 20 period moving average
Moving Averages: Close>20>50>100>200 period moving averages
% Bollinger Band: Upper quartile
Bollinger Band Width: Ticked lower, the narrowest since August 2015
MACD: Bearish at a positive value, histogram ticked higher for 1st day
Above the 2131 pivot
ADX: Bullish, trending
Volume: Bullish, during the morning
Moving Averages: Close>20>200>50>100 period moving averages
% Bollinger Band: Upper quartile
Bollinger Band Width: blown out
MACD: Bullish at a positive value
Did not expect $VIX to make this lower low. While RSI is at similar levels of prior lows, the MACD has been positively diverging since the beginning of July. Think we need to make another low, but with new positive divergences on the MACD and RSI, before the next $VIX uptrend.
New Highs and McClellan Oscillator have been negatively diverging with the market (blue arrows) since early July and March respectively. New Highs dropped significantly after they have been diminishing over the last few trading days. What should be alarming to Bulls is the negative McClellan Oscillator for 8th day in a row, although off the recent lows.
SPX %above MA
Percent of SPX stocks above their 20/50/200 have been negatively diverging with the market (blue arrows), though now most of these are negligible. Alarm bells should be going off for Bulls as the Percent of Stocks above their 20/50 dma has fallen to near 50% for 3 of the five indicators, now negatively diverging with the SPX higher high. The stochastic indicators are close to a SELL signal but have yet to trigger.
Huge negative divergence seen on the Full Stochastics (red arrows).
NOTE, that the market can stay in the BUY or SELL range (green or red) for quite some time.
TLT:TIP has shown weakness after the record high for deflation fears occurred on 7/11/2016. Note we are still way above the 2008 crisis levels. This does not even consider that SPX is near All Time Highs, nowhere near 900 when the first peak occurred!!!
The bond market Deflation vs. Inflation metric (iShares Barclays 20+ Year Treasury Bond Fund vs. iShares Barclays TIPS Bond Fund). The previous peak was 10 Feb 2016. 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 ratio had its 4th day higher in a row after 6 trading days of significant losses. Since it had several recent negative divergences before the past 2 weeks, HYG:IEF could be in a new downturn.
HYG:IEF ratio is a way of looking at Greed vs. Fear in the more sophisticated bond market.
Oil is toast, making its high on 6/8, 2 months ago. Nothing favors new 2016 highs for oil here, not seasonality, nor technicals. Oil is at Summer lows. It’s been a broken record, but correct.
“Perhaps we cross the 200 dma below $40 before a tradeable bounce occurs.” This could indeed be playing out as Oil recovered significantly during the past 3 trading days and is now above its 200 day moving average.
Oil sure seems destined to make new 2016 lows by the end of the year.
Summary: Bulls vs. Bears
To me it looks like we need a higher high either Sunday night or Monday to finalize negative divergences on the SPX hourly and daily indicators.
It was an interesting week, with the SPX Weekly failing to close above the top Bollinger Band for the first time in 4 weeks. On the daily chart, the Bollinger Bands are as narrow as August 2015. SPX breadth and internals look much weaker than previous price peaks.
Friday though did a lot to erase rapidly declining technical indicators as shown by the Technicals Model. Though not time for celebration yet by the bulls as the ratio of the Technicals Model to SPX price is still negative, meaning the underlying support for continued bullish price action is waning.
Still Bullish or Not proven Bearish…
- $VIX short term downtrend has not reversed yet, though may do so shortly
- Number of New Lows near zero
- McClellan Oscillator made a higher low
- Short bounce due in HYG:IEF and Oil
- Cumulative Technical Model made a higher tick Friday
Interesting things for the Bears…
- Cumulative Technical Model made a lower tick 3 days this week
- The cumulative Technical Model:SPX ratio has been negative for 10 straight days!
- Daily scores from the Technical Model after negatively diverging through the month of July and early August
- Number of new highs nearing zero
- HYG:IEF and Oil close to accelerating into a plunge
- McClellan Oscillator closed negative for the 8th straight trading day
- Number of stocks above their 20/50 dma negatively diverging again from recent SPX peaks
- After 3 weeks in a row closing above Top Weekly Bollinger Band, now has failed to do so!
- Significant Daily SPX negative divergences look to be developing
- Lower high on SPX Weekly MACD Histogram
Levels to watch…
- 2131 pivot level
- A break below 2112 SHOULD stick the fork in this entire uptrend from February
- Until then, we watch 1 day at a time. A break lower only to recover to new high will give us the negative divergences yearned for on the SPX daily chart
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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