Friday May 19th, 2017

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Stormchaser80, L.L.C.
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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
Based on Technicals Model:
401K/Long Positions: NO

Short Positions: YES

Based on Unrelated Signal:
BEARISH
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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.

=====================MODELING=====================

Click the ‘Trader Platform’ Menu link for access to the Real-Time Technicals Model! 

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)!!

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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!

First Thoughts…

Uptrend completed in early May.

My Real-Time technicals model is online for good. I spent time Wednesday night developing a hidden page where I will be doing my development, so the Trader Platform page will only change after testing of new features/models is complete.

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 40.8% 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.

MOMO

Technicals Model (proprietary)

The first chart below is the cumulative Technicals Model dating back to 2006. The Model was lower today, for the 6th day in a row. 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. The ratio has been negative for the 14th day in a row, and is giving a -200% SHORT Signal for the 3rd day in a row!

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.

2 new negative divergences since late April indicated the upcoming change in trend lower for SPX.

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 preliminary called a 0.50 gain within 5 days (with a peak above 0.35) a Technicals Thrust. 5 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 April 28, 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

RSI: Overbought

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: Upper quartile

Bollinger Band Width: Slowly widening but at very narrow levels

MACD: Bullish at a positive value, histogram ticked higher for the 6th month in a row.

SPX Weekly from May 19, 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. With May 7th’s All time High, new negative divergences have appeared vs. the March 1st high.

ADX: Bullish, trending

RSI: Upper quartile

Candle: Doji, indecision

Volume: Higher, above the steady 20 period moving average.

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

% Bollinger Band: Upper quartile

Bollinger Band Width: Declining

MACD: Bearish at a positive value, histogram ticked lower for the 1st week in a row

SPX Daily

With May 7th’s All Time High, negative divergences are now in place for ADX DI, RSI and MACD histogram. We are now in a downtrend.

ADX: Bearish, trending

RSI: Mid range

Candle: Bullish

Volume: At the rising 20 period moving average.

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

% Bollinger Band: Mid band

Bollinger Band Width: Narrowing

MACD: Bearish at a positive value, histogram higher for the 1st day in a row

SPX Hourly

Thursday I said “No negative divergences were noted at today’s highs, so a higher high is likely, which means we are likely in a wave 2 higher.”. And today we saw that continuation of a rebound. At today’s highs the only negative divergence was with the MACD histogram, so at least another nominal high is likely.

VIX Hourly

VIX is on a MACD SELL right now. At today’s lows no positive divergences were set. A lower low is expected.

SPX Breadth

High-Low was +22 today. The McClellan Oscillator was positive. Number of New Lows during the past week has been elevated. The SPX A-D line is once againabove its 20 EMA.

The summation index is in positive range, but topped in July 2016. Negative divergences are shown going back to 2016.

More SPX Breadth

More breadth indicators, note the negative divergences since early 2016 on many of these.

Intermediate-Term Breadth Momentum Indicator:  A SELL signal was given on 5/17/2017.

Swenlin Trading Oscillator: A SELL signal was triggered 5/3/17, but is it coming up to a BUY signal soon?

Bullish Percent Indicator: A SELL signal remains

Percent with PMO above Zero: SELL signal on 5/11/17.

Percent with PMO giving BUY signal: Rolled over to a SELL on 5/12/17

SPX %above MA

The stochastic indicators have signaled a BUY for 4 of the 5 indicators. 

These indicators made a significant bounce today.

UST10Y-2Y from May 19, 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). The chart looks poor with technicals blowing out as the ratio falls below its 200 dma and lower Bollinger Band. Will take some time to bottom from this.

What’s interesting here, the spread is at 1.03, 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 May 19, 2017 

This spring has been characterized as increasing Deflation Risk, but it has been muted.

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 gapped higher but fell slightly intra-day. It remains below all major moving averages except the 200 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 Daily

5/5/17’s long tail and finish higher clearly demonstrated a bullish reversal. Gains continue as technicals continue to improve.

Summary: Bulls vs. Bears

SPX continued what seems like a wave 2 higher to its 2385 pivot today. At today’s highs the only negative divergence was the MACD histogram, so a higher high (even nominal pre-market) is expected. SPX is back above its 50 dma, but remains below its 20 dma. The 2391 resistance line should hold if this is a wave 2 higher. VIX had large losses today, and did not make any positive divergences at today’s lows. Breadth is still negative, but improving.

For all the SPX rebound, my Technicals Model is barely off its recent lows, indicating that this is likely not a sustainable rally. HYG:IEF improved today but continues to struggle. Oil continues its run higher.

Bullish

  • SPX Daily above the 50, 100 and 200 dma
  • Cumulative Technicals Model finally made a new All Time High on 5/2/2017
  • Technical Model (cumulative) is above its 200 dma
  • SPX 20 dma above the 100 dma for the 127th day
  • SPX 50 dma above the 100 dma for 106th day
  • SPX 20 dma above the 50 dma for the 12th day
  • SPX weekly broke MACD negative divergence
  • Technicals Model made a Technicals Thrust in late April
  • Oil is on a bull run
  • UST10Y-2Y downtrend may be ending
  • VIX downtrend
  • BUY signals on 4 of 5 of Number of stocks above their 20/50 dma
  • McClellan Oscillator is positive

Bearish

  • SPX Daily below the 20 dma
  • HYG:IEF remains below all major moving averages except the 200 dma
  • Most breadth indicators weakening, but could be bottoming
  • Technicals Model is negative and is diverging negatively
  • Weekly MACD is a SELL
  • 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

  • 2428 pivot
  • 2411 pivot
  • 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

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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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