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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
Based on Technicals Model:
401K/Long Positions: YES
Short Positions: NO
Based on Unrelated Signal:
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.
Click the ‘Trader Platform’ Menu link for access to the Real-Time Technicals Model! Data flow has been restored. Thanks for your patience.
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)!!
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!
Lots of charts today with new weekly and monthly analysis!
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]
Today was more volatile than 21.5% 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 2nd day out of the past 9. 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 2/14/2017, after lagging the market for more than a year! The model has regained the 200 dma that it lost in 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. Today is the 20th day 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.
Wednesday 2/15 was the highest daily reading since the end of June 2016! Since then you can see a new negative divergence forming between a slumping Technicals Model and the rising SPX. There is also another negative divergence between the early February low and the early March low. The Model then shot higher through mid March, but its value was much lower than in February. At the last low a positive divergence was noted with the Model compared to SPX, which was bullish for the markets.
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.
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 preliminarily called a 0.50 gain within 5 days (with a peak above 0.35) a Technicals Thrust. 4 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 (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 Mar 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. March made a new All Time High.
ADX: Bullish, trading
Candle: Doji, indecision
Volume: Slightly better, well below the steady 20 period moving average.
Moving Averages: Close>12>36>72>120 period moving averages
% Bollinger Band: At the top Bollinger Band
Bollinger Band Width: Slowly widening but at very narrow levels
MACD: Bullish at a positive value, histogram ticked higher for the 5th month in a row.
SPX Weekly from March 31, 2017
There are negative divergences back to 2013 on the ADX DI, RSI, and MACD histogram. These divergences have only steepened in the past year. The MACD divergence has been erased, and ADX +DI and RSI are very close to also being erased. Early in the week there was a test of the 20 week ma.
ADX: Bullish, trending
RSI: Upper quartile
Candle: Slightly bullish, well off the lows
Volume: Higher, above the declining 20 period moving average.
Moving Averages: Close>20>50>100>200 period moving averages
% Bollinger Band: Upper quartile
Bollinger Band Width: Narrowing
MACD: Bullish at a positive value, histogram ticked lower for the 4th week in a row
At recent highs, the only negative divergence in place was the MACD histogram.
ADX: Bullish, trading
RSI: Mid range
Candle: Bullish but off highs
Volume: Lower, well below the steady 20 period moving average.
Moving Averages: 20>Close>50>100>200 period moving averages
% Bollinger Band: Mid range
Bollinger Band Width: Slowly narrowing
MACD: Bearish at a positive value, histogram higher for the 4th day in a row
Another set of negative divergences at this afternoon’s new uptrend high. This is bearish. The market has not been able to surpass the resistance zone of 2371.
VIX is bullish right now with a MACD cross on Thursday. No notable divergences at the highs, so a new high is likely.
High-Low was +20 today. The McClellan Oscillator was negative. Positive divergences noted with Monday’s lower low with New Lows and also the McClellan Oscillator.
The summation index is in positive range, but topped in July 2016. Negative divergences are shown for much of December into January, and longer term negative divergences go back to 2014. 3/1 marked the most number of new highs since late November 2014 (but that was not far from a relative top!).
SPX %above MA
These indicators were mixed today with small caps higher.
UST10Y-2Y from Mar 31, 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, the spread is at 1.11, 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.
TLT:TIP Daily from Mar 31, 2017
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 pulled back today, risk off, closing between its 50 and 20 dma.
At the recent high on 3/2/2017, negative divergences have been strengthened since late 2016.
HYG:IEF ratio is a way of looking at Greed vs. Fear in the more sophisticated bond market.
Oil continued its rebound as expected and is nearing its 100 dma. Getting to $52 is a huge challenge considering the resistence line there and oil must also cross its 100 and 50 dma.
Oil has gone nowhere in 2 months and continues in a sideways consolidation or topping pattern. The Bollinger Band Width is very low, at a level often seen with tops.
Summary: Bulls vs. Bears
My proprietary Technicals Model improved again today but remains negative. The same can be said about the McClellan Oscillator. The signals based on my model are bullish for the second day in a row. However my favorite indicator remains bearish (slightly). With negative divergences forming on the SPX hourly chart this is a good place for shorts to see what the bulls are made of. Do the bulls push past the 2371 resistance line and 2375 0.784 retrace? That would likely be the end of any possible bearish count right now.
Once again I demonstrated how hard of a time I have selling these options trades. I am setting a self imposed sell on any PUTS I buy at a 50% profit. No profit limit for CALLS which are easier to get out of unless in a bear market, then my strategy would reverse.
No post for Thursday as I will be having a neck procedure. Friday’s post will either be at my normal time or on Saturday.
- SPX Daily above the 50, 100, 200 dma
- Cumulative Technicals Model finally made a new high on 2/14/2017
- Technical Model (cumulative) is above its 200 dma
- SPX 20 dma above the 50 dma for the 85th day, and above the 100 dma for the 93rd day
- SPX 50 dma above the 100 dma for 72nd day
- Weekly MACD is a BUY
- SPX weekly broke MACD negative divergence and is close to doing to same with RSI and ADX +DI
- $VIX downtrend, but for how much longer?
- Positive divergences on many breadth indicators and Technicals Model
- Technical Model is positive
- BUY signals on 3 of 5 of Number of stocks above their 20/50 dma
- UST10Y-2Y in downtrend
- SPX Daily below 20 dma
- McClellan Oscillator is negative
- HYG:IEF Daily technicals are bearish, but having a bounce
- Oil’s bearish, but bounce in a bounce
- Summation Index has been negatively diverging since summer
- SPX weekly has been negatively diverging since 2013/2014
- Monthly technicals very favorable for a stalling market
Levels to watch…
- 2385 pivot
- 2336 pivot
- 2321 pivot
- 2286 pivot
- 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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