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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
401K/Long Positions: YES
Short Positions: NO
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.
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.
Here is a sneak peak of my 1-minute Technicals Model. This model is much more robust than the Daily one I started with. The Model is on top (Green is bullish, Red is Bearish) and SPX price is on the bottom. This chart updates in real-time. I will also be running real-time models for the 5, 10, 15, 30 minute timeframes, as well as 1hr, 2hr, 4hr, Daily and Weekly.
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 this a rally we can believe in?
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]
Today was more volatile than 42.4% of all trading days 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 22nd day out of the last 34. 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 or 2017. 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 1st day back in the positive category.
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 showing a downtrend trend in Technical Health of the stock market. A huge negative divergence in the Technicals Model is now in place.
Comparing the slope of the Technicals Model vs. SPX today, the Model is slightly more bullish. These 1-day signals are not very reliable, but better than 50-50.
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 preliminarily called a 0.50 gain within 5 days (with a peak above 0.35) a Technicals Thrust. 4 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 (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 Jan 31, 2017]
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 10th month in the past 11.
SPX Weekly [from Feb 10, 2017]
There are negative divergences back to 2013 on the ADX DI, RSI, MACD and MACD histogram. These divergences have only steepened in the past year.
ADX: Bullish, trading
RSI: Upper quartile
Candle: Bullish, new ATH
Volume: 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
MACD: Bullish at a positive value, histogram ticked lower for the 7th week in a row
We have extended the negative divergences needed for a top set on 2/9.
ADX: Bullish, trading
RSI: Upper quartile
Candle: Bullish, but off the highs
Volume: Low, at the steady 20 period moving average.
Moving Averages: Close>20>50>100>200 period moving averages
% Bollinger Band: Top
Bollinger Band Width: Expanding near historically narrow levels
MACD: Bullish at a positive value, histogram higher for 4th day in a row
At today’s highs, negative divergences were put in on ADX DI, RSI, MACD and MACD histogram. This suggests weakness pre-market and perhaps into early Monday.
At today’s lows negative divergences were spotted on ADX DI, and positive divergences on MACD and MACD histogram. Would expect a lower low to come in and support additional positive divergences before a new uptrend is formed.
High-Low was +52 today. The McClellan Oscillator was positive. The summation index is in positive range, but may have topped. Negative divergences are shown for much of December into January, and longer term negative divergences go back to 2014.
SPX %above MA
The stochastic indicators have signaled a SELL for 4 of the 5 indicators.
Most of these indicators have a SELL signal, and all had a bounce today.
UST10Y-2Y [from Feb 10, 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).
What’s interesting here, is at 1.20, 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 in a short term uptrend. This started before the election, as the tide was turning positive for Trump support. Looking at the short term, there was negative divergence with the highs in mid December, which lead to a selloff in the SPX. Positive divergences took place in mid January, with no indication of a top yet due to a lack of negative divergences at the recent high.
TLT:TIP Daily [from Feb 10, 2017]
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 gapped higher but fell intraday, falling back to the 20 dma. No positive divergences are seen yet, so lower lows are expected.
HYG:IEF ratio is a way of looking at Greed vs. Fear in the more sophisticated bond market.
Oil had nice gains again today, but is nearing the top end of the trading range since the end of last year, as well as the top Bollinger Band. Technicals continue to weaken though. Hourly chart suggests one more high being put in here.
Summary: Bulls vs. Bears
Today’s post is open to the public. If you would like to read my posts daily, all you need to do is sign up for a FREE subscription at the end of today’s post.
SPX made a new All Time High today, further strengthening negative divergences on its technical indicators. The hourly chart did not put a negative divergence in at today’s high, so a higher his is expected. $VIX is in a downtrend, and with only a few positive divergences at today’s low, a lower low is expected.
Oil and HYG:IEF had gains today. Believe this bounce in oil will be short lived before the downtrend continues.
McClellan and my proprietary Technicals Model were both positive. Due to my model, I suspect we are not yet done with stabs higher.
My legacy LONG signal remains ‘YES’. It is not uncommon for any technical indicator to go positive after a prolonged negative period at the end of a long run higher.
I am again long in my 401k. I went to cash just before Christmas and was on the sideline during this consolidation period. Now I have seen ample evidence that a new longer term bullish run has begun this week.
- UST10Y-2Y is in an uptrend?
- SPX Daily above the 20, 50, 100, 200 dma
- Technical Model (cumulative) is above its 200 dma
- SPX 20 dma above the 50 dma for the 54th day, and above the 100 dma for the 62nd day
- SPX 50 dma above the 100 dma for 41st day
- Weekly MACD is a BUY
- Technical Model is positive
- McClellan Oscillator is positive
- $VIX in downtrend, coming to an end soon?
- HYG:IEF Daily technicals are a mess
- Oil’s looking to break down here after it completes a small bounce
- McClellan Oscillator has been negatively diverging for more than a month
- New Highs have been negatively diverging for more than a month
- Summation Index has been negatively diverging since summer
- SELL signals on 4 of 5 of Number of stocks above their 20/50 dma and these have been negatively diverging for a month
- Cumulative Technicals Model has not made a new high in 2016-2017
- SPX weekly has been negatively diverging since 2013/2014
- Monthly technicals very favorable for a stalling market
Levels to watch…
- 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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