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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
401K/Long Positions: No
Short Positions: YES
I have found that when the Technicals Model to SPX performance is at or below -200%, this is the only good time to SHORT the market.
==============My Website To-Do List (Vision)=============
This site which only premiered on April 1st, 2016 has already come a long way. But there is so much more that I want to do, so I thought I would demonstrate my goals below! If you have any suggestions, feel free to shoot me an e-mail or comment
- Build a real-time display for worldwide indicies, currencies and commodities, this is the first step in transitioning the site to a real-time tool for more active traders
- Replicate the Technicals Model at the Weekly, Hourly, 15-min scales to give a real-time view of Market Trends expanding from the Daily view that I already provide
- Custom charting code so I can display multiple models in best possible way
- Real-time charting of Hindenburg Omens
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!
Welcome to this weeks log-in free post, where anyone can see what subscribers get to see on a daily basis. If you like posts like these, take a couple seconds to sign up for a FREE login at the bottom of this post. And if you already have a subscription, and like what I provide, please pass my site on to friends, relatives and co-workers. The readership numbers are good motivation!
This is a huuuuge post. I have the new Monthly and Weekly charts, along with actionable opinions on what will happen next week. Plus I have a new signal triggered today!
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]
3-day average S&P500 volatility is scored at: 3.2 [4.1 single day]
New Volatility Model (expanded from 10 inputs to 50): 4.8 [6.3 single day]
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 has had its 5th negative day in the past 6! 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). I also want to point out that the cumulative Technicals Model has not made a new All Time High in 2016. The model has regained the 200 dma that it lost in October.
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. Today is the 12th day back in negative territory. It triggered a -200% Short Signal today!
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.
The model is confirming the downward trend seen in SPX prices, and is in fact at levels seen closer to early November. That’s 155 points lower on the SPX from today, folks!
Comparing the slope of the Technicals Model vs. SPX today, the Model is more bearish. These 1-day signals are not very reliable, but better than 50-50.
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.
SPX Monthly [from Dec 30, 2016]
On the monthly scale, the market continues to be either forming a top, or consolidating during the past several years. Its easy to see with negative divergences from the end of 2013 and 2014 on ADX DI, RSI, MACD and MACD histogram.
ADX: Bearish, trading
RSI: Upper quartile
Candle: Bullish but off the highs
Volume: Meager, well below the steady 20 period moving average.
Moving Averages: Close>12>36>72>120 period moving averages
% Bollinger Band: Upper Quartile
Bollinger Band Width: Slowly widening but at very narrow levels
MACD: Bullish at a positive value, histogram ticked higher for the 9th month in the past 10.
SPX Weekly [from Dec 30, 2016]
No new high this week (closing below the top Bollinger Band for the second week in a row after closing above for the 2 prior weeks). There are negative divergences back to 2013 on the ADX DI, RSI, MACD and MACD histogram. These divergences have only steepened this year.
ADX: Bearish, trending
RSI: Upper quartile
Volume: Very low, well below the steady 20 period moving average.
Moving Averages: Close>20>50>100>200 period moving averages
% Bollinger Band: Upper quartile
Bollinger Band Width: Expanding from very narrow levels
MACD: Bullish at a positive value, histogram ticked lower for the 1st week of the last 8 weeks
Just looking at the Daily chart, the trend higher should not be done as negative divergences have not been put in at the top.
ADX: Bullish, trending
RSI: Mid range
Candle: Bearish, but some indecision off highs and lows
Volume: Higher, at the slumping 20 period moving average.
Moving Averages: 20>Close>50>100>200 period moving averages
% Bollinger Band: Mid band
Bollinger Band Width: Slowly narrowing
MACD: Bearish at a positive value, histogram ticked lower for 12th day in a row
Thursday I wrote “ADX DI, RSI, MACD and MACD histogram have made lower lows, confirming the downward trend in place since mid December. At the end of the day positive divergences can be seen developing, which supports higher prices in the very short term at least. Still would like to see another low with higher technicals to pass for more stable footing before another leg up starts.”
And that is what happened, a slow crawl higher followed by a lower low, with improved technicals. These positive divergences should lead to buying early on in the week.
Thursday I wrote “$VIX remains in an uptrend as was called for last Wednesday. While no negative divergences were seen at today’s highs, note that RSI spiked to around 80. I would prefer to see a higher high with negative divergences setting up before a turn lower starts.”
We got those higher highs today. However, there were no negative divergences on RSI nor MACD. ADX DI were both marginally close to being negative divergent while the MACD histogram is. This leads me to conclude that while a pull back in the short term is expected, it should be followed up by new $VIX highs while building the negative divergences on the technicals.
High-Low was +3 today. The McClellan Oscillator was significantly more negative. The summation index is in positive range, but may have topped. Negative divergences foretold of this change in trend earlier in December.
SPX %above MA
The stochastic indicators have signaled a SELL for 5 of the 5 indicators.
These indicators are crashing low at a faster clip. Very much like a wave 3 lower or the middle of a C wave.
Are we nearing the end of this flush or is this the new trend lower (meaning Trump saved America from Deflation)? If TLT:TIP can get and stay below 1.00, the economy may be starting to expand faster (without the FED?).
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 was lower again today (losing the 20 dma) on better volume, after reaching 2016 peaks Tuesday.
HYG:IEF ratio is a way of looking at Greed vs. Fear in the more sophisticated bond market.
Oil showed indecision today with a doji candle. A higher high is expected eventually as the only divergences were RSI and the MACD histogram at recent highs.
Summary: Bulls vs. Bears
Those who have been following along know I put all my 401K into cash last Friday Dec 23rd, after having it in small/mid caps from 2 days after the election. I am liking this move even more now.
Today we saw a huge deterioration in my proprietary Technicals Model, Market Breadth and Internals. SPX Daily and HYG:IEF Daily also both lost their 20 dma. Today also triggered the SHORT the market signal which was close to triggering several times in the past week or so.
Now, that doesn’t mean RIGHT NOW. Just something to have in the back of your mind as you search for an entry point. The fact that there are pretty solid positive divergences on the SPX Hourly chart with a $VIX that needs to settle down before making new highs, suggests there will be a better spot to short at a higher price early-mid week.
- SPX Daily above the 50, 100, 200 dma
- HYG:IEF just off 2016 highs
- Oil near 2016 highs
- Technical Model (cumulative) is above its 200 dma
- SPX 20 dma above the 50 dma for the 26th day, and above the 100 dma for the 234th day
- SPX 50 dma above the 100 dma for 13th day
- Weekly MACD is a BUY
- SPX and HYG:IEF Daily below 20 dma
- Technical Model more negative
- McClellan Oscillator more negative
- $VIX in an uptrend, needs a breather before new highs?
- Cumulative Technicals Model has not made a new high in 2016
- Negative divergence on New Highs
- Negative divergence on McClellan
- Monthly technicals very favorable for a stalling market
- SELL signals on 5 of 5 of Number of stocks above their 20/50 dma
- Closed deeper within Weekly Bollinger Band
Levels to watch…
- 2270 Bottom of Sept-Oct triangle and 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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