Friday February 2nd, 2018

Thank You for your donations to cover server/software costs during 2017! I’m hoping to delay going to a subscription model as long as possible! Thank You.

Stormchaser80, L.L.C.
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I continue to post regularly at least on Wednesday and Weekend Posting, but still track my signal daily. I e-mail my FREE Subscription members on change of trends no matter what day of the week. 

=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
My Best Signal:
BEARISH since 1/29/2018 @ SPX 2853.53

Signal Based on Technicals Model:
BEARISH since 1/29/2018 @ SPX 2853.53

This chart represents BUY and SELL signals using my favorite signal since late 2016. I will attempt to add tests to filter out a few flip-flops such as early in 2017, and the early exit call in October.

=====================MODELING=====================

The Modeling Feature is down as my data source pulled the plug. I found a work around but will need to find the time to do the coding.

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)!!

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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!

First Thoughts…

Both signals are BEARISH!

S&P500 Volatility (proprietary)

I developed the S&P500 Volatility Index to help characterize the volatility of the S&P500 market. 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.

Recent trading has been more volatile than 64.4% of all trading periods since 1990.

Technicals Model (proprietary)

The first chart below is the cumulative Technicals Model dating back to 2006. The Model was lower today for the 3rd day in a row! 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 1/30/2018. 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 4th day in a row and now is below -200% for the 1st time since the summer of 2017.

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.

There is negative divergence in the Model vs. SPX between late April and mid October 2017, as well 1 in September and 3 since October. Almost a Technicals Thrust on 11/30 but it took more than 5 days to achieve so not quite fitting the definition. A strong negative divergence of the model from SPX is occurring in December and January 2018. By the end of January 2018, a negative divergence has formed between the previous low in December.

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.

HYG:IEF Daily

HYG:IEF ratio is a way of looking at Greed vs. Fear in the more sophisticated bond market. This ratio has eclipsed its previous major high on March 1st, 2017. But in doing so significant negative divergences have formed, and its seeing resistance here. Possible double top?

SPX Monthly from January 31st, 2018

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 and MACD histogram. January 2018 made a new All Time High.

ADX: Bullish, trending

RSI: Overbought

Candle: Bullish, but off the highs

Volume: Just above the declining 20 period moving average.

Moving Averages: Close>12>36>72>120 period moving averages

% Bollinger Band: Above the top of Bollinger Band

Bollinger Band Width: Widening

MACD: Bullish at a positive value, histogram ticked higher for the 4th month in a row.

SPX Weekly from February 2nd, 2018

There are negative divergences back to 2013 on the ADX +DI, and MACD histogram in 2016.

ADX: Bullish, trending

RSI: Upper range

Candle: Very Bearish

Volume: Above the gradually increasing 20 period moving average.

Moving Averages: Close>20>50>100>200 period moving averages

% Bollinger Band: Upper Band

Bollinger Band Width: Narrowing

MACD: Bullish at a positive value, histogram lower for the 1st week in a row

SPX Daily

With 1/29’s All Time High, negative divergences have formed on ADX +DI and MACD histogram, but broken on ADX -DI. 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, trending

RSI: Mid range

Candle: Very Bearish

Volume: Well above the increasing 20 period moving average.

Moving Averages20>Close>50>100>200 period moving averages

% Bollinger Band: Lower band

Bollinger Band Width: Narrowing

MACD: Bearish at a positive value, histogram lower for the 5th day in a row

SPX Hourly

At All Time Highs, negative divergences strengthened, some as far back as early December or late November, so it looks like the trend lower has begun, as expected.

VIX Hourly

VIX was much higher today with hourly MACD on a BUY signal. I stated after the previous high “No negative divergences at recent highs, so after this retrace is complete VIX should continue to rise.” And of course it did. But no negative divergences have formed on all but MACD histogram, meaning that a reversal lower is more likely than not to occur soon.

VIX 15-min Intraday

15-min VIX chart shows negative divergences with the previous high for most indicators. A few more developed intraday on Friday, so a turn lower is more likely than not to occur shortly.

VIX 442-hr Which Side of Trade? From 2/02/2018

Traders who prefer to trade one side, should be trading with the BULLS.

This chart attempts to use a long term average for VIX to identify Bull markets. I use a 442 hour EMA of VIX as that is approximately how many trading hours there are in a quarter of a year. When this value is below 17.5, those who like to trade one side at a time should make sure to be trading the long side. This chart makes no comment about the other times, meaning the inverse is not necessarily true.

SPX Breadth

High-Low was +6 today. The SPX McClellan Oscillator was negative for the 5th day in a row with a low Friday not seen since early 2016. The SPX A-D line is below its falling 20 EMA, with its ATH made on 1/26/2018. The summation index is in positive range, but topped in July 2016, with a negative divergence shown going back to 2016. The negative divergence for New Highs was broken on 1/12/18.

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 2/1/2018.

Swenlin Trading Oscillator: A SELL signal was triggered 1/29/2018.

Bullish Percent Indicator: A SELL signal was triggered 2/2/2018.

Percent with PMO above Zero: A SELL signal was given on 2/2/18.

Percent with PMO giving BUY signal: A SELL signal was given on 1/29/18.

SPX %above MA

The stochastic indicators have signaled a SELL for 5 of the 5 indicators. 

Participation was mostly significantly lower today across the board. First time many of these are below 50% for many months!

SPX:VIX (Daily)

This should peak when SPX is high and VIX is low. 1/5/18 was a new high for the ratio, which only strengthened negative divergence across the board since September and October. You can see the huge divergence between SPX and this ratio, noting some fear in the market.

SPXEW (Daily)

A chart that study’s the stocks in the SPX as if they all had equal weighting. Negative divergences are in place for MACD histogram since early December and RSI and ADX +DI more recently, showing momentum is waning for the bulk of individual stock members of the SPX. No significant difference in slope between SPXEW and SPX so nothing earth shattering here.

UST10Y-2Y from February 2nd, 2018

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). Despite long and strong positive divergences since last summer, this measure of the yield curve is well below the level of the Trump election. In fact, I had to go back to October of 2007 to match levels that are this low!

What’s interesting here, the spread is at 0.62, 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.

BUT WAIT…THERE’S MORE ON THE YIELD CURVE

I downloaded US Treasury data (all maturity periods) for every day since 1990. Then I preformed a linear regression on the yields for every maturity period each day and calculated the slope of the linear regression line. This is more robust than merely just subtracting 10Y-2Y as many (including me) do. The resulting graph shows the periods slope were negative in light red. See how nicely they line up with the SPX top in 2000 and just before the 2007 top? Now look from 2009 to present day. The yield slope is quite stable and actually rising! Remember, there are lies, damn lies, and statistics!!

TLT:TIP Daily from February 2nd, 2018

Deflation risk which steadily climbed in spring 2017, jumped in early summer 2017 before going sideways. Significant reduction in deflation risk is shown this past week.

The bond market Deflation vs. Inflation metric (iShares Barclays 20+ Year Treasury Bond Fund vs. iShares Barclays TIPS Bond Fund). Values early in 2015 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.

Summary: Bulls vs. Bears

Let me start by stating this. Some times portions of my daily conclusions are repetitive. However I only leave in important information. The Hindenburg Omens were such as example as I have been consistently reporting since the Summer and my conclusion that the next top would be SIGNIFICANT.

A Friday massacre in the markets! As of Monday Jan 29th both of my swing trade signals are BEARISH. Those on my e-mail list were immediately notified, and my other subscribers saw on my Wednesday post. Subscribers who want to be put back on my e-mail list should let me know by sending me one! If you don’t have a login yet, sign up for a FREE subscription, you will be able to track all of my previous posts to see that I am being accurate in my statements.

First week lower for SPX since the end of December 2017, and the worst week since the first week of 2016. At the top there are a couple of negative divergences remaining from up to several years back. SPX Daily is below its 20 dma for the first time meaningfully since mid November. A Hindenburg Omen occurred Friday. Countless Hindenburg Omens have occurred since this past summer. This could be the SIGNIFICANT TOP I have been warning about! SPX Hourly had many negative divergences from as far back as late November, to its All Time Highs. Now on a sharp downturn, I don’t currently see any positive divergences yet to indicate a reversal higher.

HYG:IEF has broken last major peak, on March 1st 2017. But it doing so has made significant negative divergences. If it can gain momentum, then it can break these divergences, but its a red flag as of right now. This is a very significant chart to follow!

My proprietary Technicals Model was lower for the 3rd day in a row, and has negative divergence vs. SPX 5 times since October 2017. The Cumulative version of the Technicals Model made a new All Time High 1/30. My statistically driven Volatility Model has increased significantly last week.

VIX finished MUCH higher, on a hourly MACD BUY signal, and like I have been saying “but with a lack of negative divergences at the recent top its more likely than not to continue to rise after this pullback”. Zooming into the 15-min chart, most indicators show strong negative divergences, so VIX should reverse lower soon.

Market Internals, participation and breadth indicators, were MUCH lower Friday. Many of these are in positive territory, yet are well off peaks from last year. SPX A-D line made a new All Time High on 1/26, below its 20 dma. SPX McClellan has been negative for the 5th day in a row.

Bullish

  • The SPX A-D line made an All Time High on 1/26/2018
  • SPX Daily above its 50, 100 and 200 dma
  • Cumulative Technicals Model made a new All Time High on 1/30/2018
  • Technical Model (cumulative) is above its 200 dma
  • SPX 20 dma above the 50 dma for the 96th day
  • SPX 20 dma above the 100 dma for the 304th day
  • SPX 50 dma above the 100 dma for 51st day
  • SPX Monthly continue in a upward run
  • Slope of full yield curve is stable and rising since 2009
  • HYG:IEF eclipsed March 1st, 2017 high, but is now negatively diverging significantly at resistance

Bearish

  • Big reversal in SPX Weekly
  • SPX Daily below its 20 dma
  • The SPX A-D line is below its falling 20 EMA
  • SPX McClellan Oscillator is negative for the 5th day in a row
  • SELL signals on 5 of 5 of other Breadth indicators
  • SELL signals on 5 of 5 of Number of stocks above their 20/50 dma
  • Technicals Model is negative for the 3rd day in a row
  • UST10Y-2Y at levels not seen since October 2007, major yield curve flattening
  • There is negative divergence in the Model vs. SPX between late April and mid September, as well as 5 since October
  • Summation Index has been negatively diverging since summer 2017
  • SPX weekly has been negatively diverging for years, but some of these divergences have since broken
  • SPX:VIX negatively diverging
  • SPXEW negatively diverging

Levels to watch

  • 2594 pivot
  • 2575 pivot
  • 2525 pivot
  • 2479 pivot
  • 2456 pivot
  • 2444 pivot
  • 2428 pivot
  • 2411 pivot
  • 2385 pivot
  • 2336 pivot
  • 2321 pivot
  • 2286 pivot
  • 2270 pivot
  • 2212 pivot
  • 2177 pivot
  • 2131 pivot
  • 2116 pivot
  • 2085 pivot
  • 2070 pivot

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Feb-March 2016 Posts: https://stormchaser80.wordpress.com/ 

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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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