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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
401K/Long Positions: No
Short Positions: No, but with last Friday’s trigger, I’d be looking at some
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!
The new All Time High we have been consistently calling for was put in today. What’s Next?
If you like posts like this, you can sign up for a FREE login at the end of my blog post to read posts like these on a daily basis.
Future of this site…
In the future, I will be offering live real-time trade signals based on an upgraded Technicals Model for 3 types of traders (Daytraders, Active Traders, and Swing Traders/401(k)). Obviously the big difference is going to be the time-frame of the data being analyzed.
I am showing a mock up of the Daytrader Platform below. Note the Active Trader and Swing Trader Platforms will be identical, only utilizing different data time-frames for the Model.
While I don’t have enough data yet to run even the actual Daytrader’s Technicals Model, I substituted in the 1-minute timeframe of the Technicals Model (blue on top) vs. SPX (black on bottom). The graph is created by using a program called Highcharts, and you can sample the data as well as select what period of time you want to zoom to. Note all times are GMT and I have a GMT clock in the upper right.
In the upper left, I have proposed links that jump you to the portion of the portal you are looking for (Model, Live Price Data of Many major averages, futures and commodities, and Model Trade Ledger to calculate Model gains/losses in real-time). I also plan to offer a chat room for each of the 3 portals that allow traders to exchange ideas in real-time for the trading strategy time-frame of interest. Finally there is a link to the blog which I will continue to write daily.
What do you think?
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: 5.0 [4.5 single day]
New Volatility Model (expanded from 10 inputs to 50): 6.3 [6.1 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 3rd positive day in the past 10. 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 16th day in negative territory. It triggered a -200% Short Signal last Friday!
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 193 points lower on the SPX from today, folks! With the new SPX high today, a huge negative divergence in the Technicals Model as was talked about yesterday.
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 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 Jan 6, 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: Bearish, trading
RSI: Upper quartile
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: Bullish at a positive value, histogram ticked lower for the 2nd week of the last 9 weeks
I have been saying “Just looking at the Daily chart, the trend higher should not be done as negative divergences have not been put in at the top.” for quite a while. And today, it happened!
ADX: Bullish, trending
RSI: Upper Quartile
Candle: Doji, indecision, off both highs and lows
Volume: At the steady 20 period moving average.
Moving Averages: Close>20>50>100>200 period moving averages
% Bollinger Band: Upper quartile
Bollinger Band Width: Narrowing to near historical levels
MACD: Bearish at a positive value, histogram ticked higher for 4th day in a row
Yesterday I said “Prices are consolidating at the 2270 pivot, likely to see new highs shortly. The market slumped quickly this morning, but was getting the most oversold since the 1/3/17 lows. Now the market has room to run and break the 2270 pivot.”
Today we broke the resistance of the pivot and have formed steep enough negative divergences compared to the high on the afternoon of 1/4/2017 to call this run over. But I wont do so with any conviction. There is a possibility, that we may be destined to be rejected by the thin yellow extension line of the Sept-Oct triangle once last time! If thats the case, we could be well into the 2280s early next week. Let’s look further.
Thursday I said “Only saw a negative divergence for ADX -DI and positive divergence with MACD histogram at today’s lows. The ADX +DI had a neutral divergence with the prior $VIX low. In my perfect world, a lower $VIX would be needed to complete the positive divergences before a reversal higher takes place.”
Today we saw $VIX hit a new low, making most of these positive divergences. MACD is curling up close to a BUY signal. If early trading Monday doesn’t reverse hard, I expect $VIX will be starting a new uptrend.
High-Low was +29 today. The McClellan Oscillator was only slightly positive. The summation index is in positive range, but may have topped. With today’s new all time highs, negative divergences are shown during the past month.
SPX %above MA
The stochastic indicators have signaled a SELL for 4 of the 5 indicators.
With today’s all time highs, most all of these indicators have put in negative divergences during the past month.
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 barely higher today. Technicals look quite poor for bulls even if a marginal new high were to be put in. Perhaps it will lead the market lower.
HYG:IEF ratio is a way of looking at Greed vs. Fear in the more sophisticated bond market.
I have been saying “Oil hit an uptrend high of $55.21 Tuesday before reversing hard. Technicals look poor here for bulls, but I won’t rule out one final high coming before a large reversal lower develops. That said, the new high sought after has occurred. Oil may lag the market here.”
And oil was idle today. If the market is turning lower, oil certainly looks ready for losses.
Summary: Bulls vs. Bears
I believe we had a good week. I have been warning bulls that a downtrend is about to start, even before losses early yesterday. And to Bears I have been warning to wait for a better price to short. These views are consistent with my legacy signals which have been saying to be neutral for the past couple of weeks. The SHORT signal went to YES last Friday, but has since backed off. Still have this in the back of my mind while looking at the charts.
The charts make complete sense now that SPX hit that ATH I have been saying we need based on technicals on the Daily chart. With today’s new high, I also see negative divergences vs. the highs on Wednesday afternoon. This could very well be it for the uptrend. But I also opine that perhaps we make 1 more run to the yellow extension line of the Sept-Oct triangle that currently sits well into the 2280s. $VIX for sure looks ready to reverse higher with positive divergences put in at today’s lows along with a potential MACD BUY on the hourly chart early next week.
Market Breath and Internals, with today’s new all time high, show steep negative divergences across the board compared to the early December high. Everything looks ripe for the bears. The 2 things that make me a little less sure that the high is in, is the yellow line discussed earlier, and the fact that my proprietary Technicals Model improved today. I would like to see it weaken with the final high. Finally, I show how with today’s new high, a steep negative divergence has been put in vs. the Technicals Model.
- SPX Daily above the 20, 50, 100, 200 dma
- HYG:IEF just off 2017 highs
- Oil near 2017 highs
- Technical Model (cumulative) is above its 200 dma
- SPX 20 dma above the 50 dma for the 30th day, and above the 100 dma for the 38th day
- SPX 50 dma above the 100 dma for 17th day
- Weekly MACD is a BUY
- Technical Model positive
- HYG:IEF Daily below the 20 dma and technicals are a mess
- Oil’s technicals are a mess
- McClellan Oscillator has been negatively diverging for a month
- New Highs have been negatively diverging for 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
- $VIX about to start a new uptrend
- Cumulative Technicals Model has not made a new high in 2016
- SPX weekly has been negatively diverging since 2013/2014
- Monthly technicals very favorable for a stalling market
Levels to watch…
- 2287 Thin Yellow extension line of Sept-Oct triangle
- 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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