Friday July 22nd, 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…

Up, down, up again, how to make sense of it all? Read about the Model below! And remember, sign up for a free login to view daily posts! Free!

Technicals Model (proprietary)

The first chart below is the cumulative Technicals Model dating back to 2006. The last day it even ticked lower was 6/29/2016! Here you can see the performance (in blue vs. SPX in black) all the way back to 2006!

Below the Model and SPX chart on figure 1, I have the ratio of the two. I have noted extreme readings (green and red background) as potential bargain buy (such as Brexit which was the last extreme reading in green).

index_all

This second chart is the same as the first, just zoomed into the last calendar year. Here it is very easy to see the difference between the model in blue and SPX in black for Brexit at the end of June.

index_1yr

Finally here are the daily readings, not in cumulative mode as above. Here you can see which particular trading days are the strongest.

index_not_cumulative

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.

I have started to apply technicals to this Technicals Model for BUY/SELL indicators. Give me a few more days until I have the scripting done to process the Model, then we will backtest it all the way to 2006!

SPX Weekly

D

ADX: Bullish, trading range

RSI: Upper quartile

Candle: Narrow but bullish

Volume: Very very low, well below the slackening 20 period moving average

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

% Bollinger Band: Closed above the top Bollinger Band 2nd week in a row!

Bollinger Band Width: Slight tick higher

MACD: Bullish at a positive value, histogram much lower than in April

SPX Daily

D

ADX: Bullish, trading range

RSI: Upper quartile

Candle: Bullish reversal

Volume: Very very low, well below the slackening 20 period moving average

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

% Bollinger Band: Upper quartile

Bollinger Band Width: Ticked lower slightly

MACD: Bullish at a positive value, histogram ticked lower 6th day in a row

SPX Hourly

H

Above the 2131 pivot

ADX: Bullish, trading range

RSI: Upper quartile

Volume: Bullish through the day

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

% Bollinger Band: Upper quartile

Bollinger Band Width: Fairly narrow

MACD: Bullish at a positive value

VIX Hourly

VIX

$VIX backtesting after large positive move yesterday. Positive divergence on the RSI and MACD has been in place during the past 3 weeks.

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 Breadth

Breadth

New Highs and McClellan Oscillator  have been negatively diverging with the market (blue arrows) since early July and March respectively. Now another negative divergence is taking place during the past 2 weeks.

SPX %above MA

SPX_MA

Percent of SPX stocks above their 20/50/200 have been negatively diverging with the market (blue arrows), though now most of these are negligible. Values look a bit toppy and are in the RED overbought zone. These indicators have been negatively diverging during the past week. Now we have rolled toward the bottom of the RED sell zone.

Huge negative divergence seen on the Full Stocastics (red arrows).

NOTE, that the market can stay in the BUY or SELL range (green or red) for quite some time.

TLT:TIP Daily

TLT_TIP

TLT:TIP has shown weakness after the record high for deflation fears occurred on 7/11/2016. Note we are still way above the 2008 crisis levels.

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

HYG:IEF ratio hit a new uptrend high, yet note just how far we are from the 2014 top!

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

Oil is toast, making its high on 6/8, over a month ago. Nothing favors oil here, not seasonality, nor technicals. Oil is at Summer lows.

It’s been a broken record, but correct. Now, I await a bounce higher based on positive divergences on ADX, MACD histogram and on the 100 day moving average. Today we slipped below that 100 day moving average.

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Summary

Bulls vs. Bears

Still Bullish or Not proven Bearish…

  • Technicals cumulative model though decelerating still has not had a negative day in July 2016, let alone any sniff of sustainable selling pressure!!
  • Most all trend indciators still positive
  • Daily SPX negative divergences had not previously materialized yet
  • HYF:IEF at uptrend highs
  • 2 weeks in a row closed above Top Weekly Bollinger Band!

Interesting things for the Bears…

  • Breadth and internals had previously negatively diverged and are not shifting more quickly lower, was Friday a 1 day wonder back higher or not?
  • $VIX broke the downward blue trendline significantly, with the first RSI reading above 50 since the end of the Brexit selloff, and may be backtesting
  • HYF:IEF could be putting in a Daily negative divergence, but its too soon to tell
  • If higher Oil was bullish market, lower Oil is bearish???

Putting any emotions to the side, you can clearly see there are 2 arguments to be made. However one must be prepared for the unexpected.

Monitor the 2131 pivot level in the coming trading days. A break below 2112 SHOULD stick the fork in this entire uptrend from February. Until then, we watch 1 day at a time. A break lower only to recover to new high will give us the negative divergences yearned for on the SPX daily chart.

I can’t wait to slap some BUY/SELL signals on my model, but patience is warranted as I want to do it right.  At the clip I am going with scripting, I should have the full compliment of technicals for this model complete early next week, and start backtesting to find the best way to signal BUY and SELL shortly thereafter. Don’t forget to register for a free account in order to track the model on a daily basis!

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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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