Friday February 3rd, 2017

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Stormchaser80, L.L.C.
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401K/Long Positions: NO
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.

==============FUTURE WEBSITE=============

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!

First Thoughts…

TGIF. Time for another Log-in free post! If you don’t already have a log-in, look for the registration form at the end of this post. It’s fast and free.

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: 2.3 [2.8 single day]
Today was more volatile than 6.9% of all trading days since 1990.

New Volatility Model (expanded from 10 inputs to 50):  4.3 [4.1 single day]
Today was more volatile than 6.0% 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 17th day out of the last 29. 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 5th day back in the negative 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. 

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 3, 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: Doji, indecision, but well off the lows

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

MACD: Bullish at a positive value, histogram ticked  lower for the 6th week in a row

SPX Daily

We have extended the negative divergences needed for a top.

ADX: Bullish, trading

RSI: Upper Quartile

Candle: Bullish but off the lows and highs

Volume: Low, 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: Bearish at a positive value, histogram higher for 1st day in a row

SPX Hourly

Negative divergences talked about yesterday were blown through. At today’s highs, there were negative divergences on most indicators. Think we will see 1 more high, a pullback then higher again.

VIX Hourly

$VIX made a new downtrend low (there was a misprint on 2/1). $VIX needs to make positive divergences with a new low before heading higher for any length of time.

SPX Breadth

High-Low was +24 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 5 of the 5 indicators. 

These indicators still have a SELL signal, but did show improvement today.

UST10Y-2Y [from Feb 3, 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 1.26, 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. If a higher high is put in, it will solidify stronger negative divergences. Otherwise we will roll-over. Hard to imagine a scenario where the uptrend continues.


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 finished higher today. Negative divergences seen on ADX DI, RSI, MACD and MACD histogram at the top last Thursday. Weakness is building.

HYG:IEF ratio is a way of looking at Greed vs. Fear in the more sophisticated bond market.

Oil Daily

Oil had gains today, but a higher high was not formed as prices stayed below yesterday’s highs. Slight negative divergences seen on ADX +DI, RSI, MACD and MACD histogram. Oil is trading sideways, best not to make a move until you see it. Drilling down to the 1-hr chart, clearly a higher high is needed shortly.

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Summary: Bulls vs. Bears

Final Thought:

If you were watching CNBC or other programs today, you saw a lot of cheerleaders as the DOW recaptured 20,000. Today was a good day for the market and had broad gains despite low volume. Both the McClellan Oscillator and my proprietary Technicals model were positive on the day. SPX hourly suggests another high needs to be put in place (could come in the pre-market). $VIX shows a need for a lower low.

Various methods show strong negative divergences leading into the last All Time High. Odds still favor a top being put in place with waning technicals. If a new All Time High were to occur, negative divergences would likely be strengthened, favoring the Bears. To overcome this, Bulls not only need a new ATH, but need to blowout all the previous negative divergences which are currently valid.


  • UST10Y-2Y is in an uptrend?
  • SPX Daily above the 20, 50, 100, 200 dma
  • HYG:IEF new 2016/2017 high (though beginning to weaken)
  • Technical Model (cumulative) is above its 200 dma
  • SPX 20 dma above the 50 dma for the 49th day, and above the 100 dma for the 57th day
  • SPX 50 dma above the 100 dma for 36th day
  • Weekly MACD is a BUY
  • $VIX downtrend, could be nearing end of downtrend though
  • Technical Model is positive
  • McClellan Oscillator is positive


  • HYG:IEF Daily technicals are a mess
  • Oil’s looking to break down here
  • 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 5 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: 


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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