Friday May 13, 2016

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  VXX: Bought VXX 14C exp Jul 15 2016 on 4/28/2016 when VXX was near $15.18
  401K: Bearish  
  Long Term: Bear Market, targeting SPX <666 by 2022  

!ADLINETOT   -6.66%  
!CUMVOLTOT   -0.44%  

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Welcome to another weekly wrap-up. This one is log-in free. But to gain access to daily reports, I am asking you to take 30 seconds to sign up at the bottom of this post! Its FREE!

Weekly

W

ADX: Declining momentum (from Dec-Feb downturn), in a trading market, with bears narrowly on top

RSI: Middle of the road, neither overbought nor oversold. Near where we have been topping of late.

Candle: Bulls had their run but Bears ruled the beginning and end of the week

Volume: Very Weak, well below the 20 dma

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

% Bollinger Band: Upper portion of the band

Bollinger Band Width: Quite wide, no huge move expected here

MACD: Bullish at a positive value, histogram continuing to weaken

Daily

D

ADX: Potentially moving from a trading to (a negatively) trending environment, unless we stall here

RSI: Falling from middle of the road, neither overbought nor oversold.

Candle: Bears were out big Friday

Volume: Stronger, above the 20 dma

Moving Averages: 20>50>Close>200>100 period moving averages, close occurred below  the 50 dma first time since 29 Feb!

% Bollinger Band: Bottom of the band

Bollinger Band Width: Still quite narrow but a tick higher, a large move at this scale is still on the radar

MACD: Bearish but at a positive value, histogram ticked lower

Hourly

H

Tagged the 2043 pivot before the close

ADX: Negatively trending at the moment

RSI: Due for a bounce

Moving Averages: 100>50>200>20>Close period moving averages, becoming evermore bearish again

% Bollinger Band: Riding the bottom of the band

Bollinger Band Width: Starting to widen with the bearish move playing out

MACD: Bearish at a negative value, histogram ticked lower, but is at a higher level than 12 May.

VXX (Daily)

VXX

ADX: Weakening negative trend

RSI: Rising to mid range

Moving Averages: 100>200>50>20>Close

% Bollinger Band: Near the middle of the Bollinger Band

Bollinger Band Width: Still quite narrow (and narrowing again), suggesting a big move could be on the horizon

MACD: Bullish with a negative value, been basing since late March

TRIN (Hourly)

TRIN-H

Most oversold on an hourly basis since late March, but on a MA(20) hour basis since only early May.

HYG:IEF Weekly

HYG-IEF-W

HYG:IEF compares risk on vs. risk off in the bond world. High Yield vs. Treasuries of 7-10 yr maturity. Looking at the weekly chart, its clear that there was a double top in 2010 and 2011 and we are much lower, nearing the levels seen in early 2009 (!!!!). The bond world is regarded as much more astute that the stock world.

HYG:IEF Daily

HYG-IEF-D

Zooming in to the daily time frame, you can see the negative divergence of the MACD vs. the high in late April vs. mid March. It’s going back into a tradable range so we’ll have to keep an eye on future trends to see if negative momentum starts to build once again.

NYSE Internals

NY

Despite a higher low compared to early April, number of stocks making new highs is trending lower, while the number of stocks making new lows is accelerating. Stock-only $NYMO shows a negative divergence with a lower low vs. early April, just like at the mid April peak vs. early March. While the stocks only summation index recently made a higher high, the Full STO made a lower low and is rolling over lower rapidly at this point.

All bad signs for the $NYSE stocks.

%Stocks above 200dma

200

Full STO for %stocks above 200dma in 5 different market classes is rolling over from the highest level since late 2014 (!!!). Awful time to buy the dip.

%Stocks above 50dma

50

A bad sign for stocks is the huge rolling over signature of the Full STO, the last time we saw a signal like this was late last fall. Judging by Full STO levels only, we are about where we were around 10 Dec 2015, though percent of stocks above their 50 day MA is much much higher. This suggests we are in the early innings of a steep drop.

%Stocks above 20dma

20

The number of stocks above their 20 dma across 5 market classes made lower lows. Full STO has been on a sell since for the past several weeks. We are getting near the point within the next couple of weeks where we should expect a tradeable bounce.

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Summary

The market does not go up nor down in straight lines. Why? Because there are forces at many many degrees trending higher and lower at any one point. To try to filter out the noise we employ a top-down methodology to first pick out the big trends and then work down from there.

258 trading days / 360 days since the SPX 2137.2 May 19, 2015 All Time High.

The weekly chart doesn’t show imminent demise, but internally looking at stocks above the 200 dma, the trend is clearly down. Couple that with the numerous Hindenburg Omens I have observed since late 2014 through 2015 and the stat above, its obvious that we are in a Bear Market. Do me a favor, read my article on Hindenburg Omens, done my way, before commenting.

We lost the 50 dma, was it a 1 day shakeout or the start of a leg lower? Volume today was fairly high of late. ADX could continue to run higher. MACD on Daily has room to run down, or rebound higher. Like Number of Stocks above their 200 dma, the 50 dma version also correlates well to early Dec 2015 using Full STO levels, though coming off of higher levels.

The hourly chart looks setup for a rebound in the very short term looking at RSI, ADX and MACD. TRIN on the hourly scale is also getting quite oversold.

The number of stocks above their 20 dma is starting to get fairly low with FULL STO reaching oversold levels. Now it can stay this way for several weeks, but be ready for a rally when the tide on this chart turns.

VXX has been basing for a month and a half and really could start to see a lot of volatility come back to the market in a hurry. This is likely to play out over the course of weeks or months, not days.

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14 Comments on "Friday May 13, 2016"


  1. great update Storm! tried a small long at the close with stop at 2039. as you mentioned, looking for a bounce to around 2060 to load shorts with stop above 2070. if we gap down on Monday, will you unload your VXX calls and switch over to SDS calls on the subsequent bounce? have a great weekend.

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    1. Small long no biggie right? If we remain range bound, should bounce looking at hourlies and TRIN. Of course been waiting for acceleration to downside for a while as well. I compared VXX vs. SDS where I bought VXX. SDS up like 4.5% VXX up like 3.5%. So the contango as feared is eating profit. Thing though is if we start a mini waterfall, things work the otherway around and VXX rockets higher. I think I will end up switching to SDS options. VXX worked well for me before the start of the Bear market when the curve was more likely to be less fear in the future. Good question!

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      1. Storm, hope you’ll send out an intraday email when you buy SDS calls. thanks. I’m sure many would like to follow you on that trade.

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        1. Solely depends if I am at home at my PC or not. I am not being whimsical on will he or wont he 🙂

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  2. Storm,

    Are you expecting a bounce this week given that it is options expiration week? The full sto does look oversold but the market has not really declined much.

    Best,
    Ed

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    1. I don’t play the news, just highlight big things such as opex (like you pointed out) and the major CBs. If we dont start trending down harder there should be a bounce.

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  3. Storm, any plans to buy back into your 401k if we hit the 200dma next week?

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    1. Something to look at. Honestly have to see what the technicals look like. The STO on stocks above 50/200 dma is rolling over from very high (last done Nov/Dec) which went into 11 Feb. NY Summation index STO similar too, but index itself MUCH more inflated. At some point the bear will come out and hit everyone hard. Heck the bond guys have been preparing since 2011. I’m going to play the high percentage swings higher for 401k and go back and forth with fun money. Bear markets move fast and swing sharply.

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      1. Speaking of bonds, I’m presently holding several TLT calls. So far up 15%. Looking for the “waterfall” as you put it. Will not wait for a giant Niagra. Will settle for a smaller waterfall!

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        1. Yep gotta know when its time

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  4. technicals nor fundamentals are driving these markets at this point in time from recent price action imho. there needs to be a trigger for any sustainable action in SPX but i have no idea what that will and could be. fwiw, i still think there is more downside than upside but i have been wrong since 1950 to about 2100

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    1. Agreed. I may be biased but see all bad news, now spreading to economy like I claimed over 6 months ago! When commodities including oil turns, it will be a good time for the shorts!

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  5. Storm, looks like the market wants to go sideways into OPEX. Max pain around 2050-2060. Looks like you’ll have to position trade your VXX call options instead of buy and hold since premiums will be decaying rapidly in a sideways market. Best to sell options instead of buying them in this environment. Another stick save by the bulls. I tried a small short at the close with stop at 2072.

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    1. Yep I can see that in the technicals too. Not bad but I think will have 1 more poke higher!

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