Friday July 1, 2016

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Stormchaser80, L.L.C.
Disclaimer: http://navigatethemarketstorm.com/disclaimer/ 
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Trading Account: At 1041 AM Eastern 7/1/2016, bought SDS SEP 16 2016 17.00 C for $1.19 
401K: Bearish
Long Term: Bear Market, targeting SPX <666 by 2022

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.

First Thoughts…

You may have noticed above, I made a move today. Let’s discuss!

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SPX Monthly (posted yesterday)

Hard to believe the first month of summer is behind us.

M

ADX: Bearish trading, negative divergence

RSI: Middle of the range

Candle: Doji, reversal pattern from the Feb 2016 uptrend?

Volume: Much lower, markedly lower than increasing 20 period moving average

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

% Bollinger Band: Near upper quartile

Bollinger Band Width: Contracting since early 2014

MACD: Bearish at a positive value, histogram ticked higher, been negatively diverging since late 2014

SPX Weekly

W

ADX: Bearish trading

RSI: Middle of the range

Candle: Strongly Bullish

Volume: Very low, well below slumping 20 period moving average

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

% Bollinger Band: Middle of the band

Bollinger Band Width: Narrowing

MACD: Bullish at a positive value, histogram ticked lower for 9 of 10 past weeks

SPX Daily

D

ADX: Bullish trading

RSI: Middle of the range

Candle: Bullish but some indecision

Volume: Very low, well below slumping 20 period moving average

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

% Bollinger Band: Upper quartile

Bollinger Band Width: Steady

MACD: Bullish at a negative value, histogram ticked higher for 3rd straight day

SPX Hourly

H

Above the 2085 pivot, most powerful rally since 5-24

ADX: Bullish, trending, but negative divergence

RSI: Falling from overbought, negative divergence

Volume: Mostly bullish and at the open

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

% Bollinger Band: Top

Bollinger Band Width: Narrowing since the Brexit low

MACD: Bearish at positive value, negative divergence

SPX 15-Min

15

The Fib analysis of the Brexit crash puts the 0.764 retrace at 2095.1 which we traded along overnight before releasing higher during the trading day

VIX Hourly

VIX-H

Another losing day for $VIX. Huge bull flag in the making, seeing with downward slopped blue line? That could be disastrous for the markets! Hourly MACD rounding back to signal a BUY, has been a good trading indicator at least with short term trends as shown with vertical green lines.

Positively diverging MACD since late March which is good for VIX Bulls in the medium term, with a relatively narrow Bollinger Band width supportive of an upcoming large move.

SPX Advance-Decline

SPX_AD

While SPX has traded relatively flat going on 2 years now, there has been an upsloping A-D line, yet the volume A-D has shown negative divergence.

SPX Breadth

Breadth

McClellan Oscillator, and number of new highs shot out of their recent channel yesterday, both now negatively diverging today.

SPX %above MA

Percent_MA

Percent of SPX stocks above their 20/50 dma rose back to the middle of the range, though the Full Stochastics is mainly still first rolling over to a SELL. NOTE, that the market can stay in the BUY or SELL range (green or red) for quite some time.

What I find particularly interesting is how much lower the Full Stochastic indicator will be topping. That negative divergence is very bad news for the market in the medium term.

TLT:TIP Daily

TLT-TIP

Long tail today on deflation fears, are we headed for another All Time High next week?

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 Daily

HYG-IEF-D

The MACD histogram positive divergence remains in tact. However, today was a lower close.

The bond market signals a sideways move in greed vs. fear since mid March, while MACD/RSI/ADX is negatively diverging indicating a large bearish move is expected in the medium term.

Oil Daily

OIL-D

Technicals mainly RSI and MACD histogram support a potential last leg higher. Today’s price action erased most of yesterday’s losses.

Pretty sure between the longer term technicals and seasonality that we have seen the top for some time.

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Summary

I have shown significant negative divergences which have been hanging over the market since March. Now factor in the rally straight higher (on very low volume) off the Brexit low. Hourly chart indicates substantial negative divergences since Thursday, further developing today. This is why I pulled the trigger today on those SDS calls (not an endorsement, just demonstrating my technique for educational purposes).

Also shown was weakness in the percent of stocks above 20/50 dma (Stochastics) with a rebound into the mid range where one would expect. Note again the huge negative divergence on Full Stocastics since March. Breadth was still good but negatively divergent from Thursday.

Deflation fears (shown using TLT:TIP) are right near the all time record, well above anything seen in 2008.

The scariest thing to anyone holding long here has to be the hourly $VIX chart, showing a MACD BUY signal at the lowest levels seeing since October 2015. This signal alone has done quite well for showing at least short term trends.

Finally, if that is a bull flag on hourly $VIX, holy crap, bears will be dancing soon!

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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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3 Comments on "Friday July 1, 2016"


  1. Hey good luck on the SDS calls! I’ve got my shorts strung out on a wire (a play on words here…). I don’t pay enough attention to the VIX. I need to watch it more.

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  2. Great post Storm! I also went short with SPXS. wish you would have shoot an email out to us. I might have tried some sds calls too! are you exiting if there’s a pullback to 2090 and then reload above 2110? or is this a 15-20 day swing trade? thanks.

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  3. i like the trade. personally i think it should work but i have been wrong for the past 6 months but i still have a bearish inclination. i think the only way to have a really asymmetric R/R is to be able to lose a little bit of money on a daily basis although that is easier said than done. probably comes down to sizing, implementation and unwind which is for only seasoned investors or people who have lost a lot in the past.

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