Friday May 5th, 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: YES

Short Positions: NO

Based on Unrelated Signal:
BULLISH
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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…

My main computer is back! However, I discovered my real-time data source cut the cord. I have a new one lined up but it will take me a little time to re-work the data acquisition code.

Cinco de Mayo = Bullish! All Time Highs as I have been expecting!

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 0.90% 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 higher today, for the 12th day in a row, making a new All Time High! 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 went negative for the 4th day.

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.

Comparing the April low to the one in late March you can clearly see a strong positive divergence in the Model vs. the SPX. This is very very bullish! [And it came to fruition!]

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. Bears be warned, a Technicals Thrust occurred in late April!

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 5, 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. With May 5th’s All time High, new negative divergences have appeared vs. the March 1st high.

ADX: Bullish, trending

RSI: Upper quartile

Candle: Bullish

Volume: At the slackening 20 period moving average.

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

% Bollinger Band: Upper quartile

Bollinger Band Width: Steady

MACD: Bearish at a positive value, histogram ticked higher for the 2nd week in a row

SPX Daily

With May 5th’s All Time High, negative divergences are now in place for ADX DI, RSI and MACD histogram. We’re closer to the end of this uptrend

ADX: Bullish, trending

RSI: Upper Quartile

Candle: Bullish

Volume: Below the declining 20 period moving average.

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

% Bollinger Band: Upper quartile

Bollinger Band Width: slowly expanding from near record narrow levels

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

SPX Hourly

Former support at 2351 and resistance at 2371 are drawn in black. I added one in around 2391, you can clearly see how its been resistance.

I said this on Thursday “SPX continues to trade sideways. Bollinger Band is getting tighter, so a bigger move will likely occur during the next several trading days. I still believe it will be bullish. Today’s break below the 2385 pivot was worrisome at the time, but SPX has since reflated closer to the 2391 resistance, just like yesterday.”

SPX had a bullish breakout as I have been forecasting, now clearly above the 2391 resistance line, making new All Time Highs.

VIX Hourly

Not trusting the new VIX uptrend using MACD. VIX was up today despite the strong bullish day.

SPX Breadth

High-Low was +58 today. The McClellan Oscillator was positive. Number of New Lows was zero today! I added the SPX A-D line at the bottom, and it remains near All Time Highs and above its 20 ema.

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!).

More SPX Breadth

I added this new chart to show more breadth indicators. Note the negative divergences since early 2016 on many of these.

Intermediate-Term Breadth Momentum Indicator:  In late April the trend changed to bullish

Swenlin Trading Oscillator: A SELL signal was triggered Wednesday

Bullish Percent Indicator: In late April the trend changed to bullish, but is now giving a SELL signal

Percent with PMO above Zero: In late April the trend changed to bullish, but may now rolling over

Percent with PMO giving BUY signal: In mid April the trend changed to bullish, but may now rolling over

SPX %above MA

The stochastic indicators have signaled a BUY for 3 of the 5 indicators. 

These indicators were up today as one would expect.

UST10Y-2Y from May 5, 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 5, 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 finished only slightly higher today. No significant information gleaned from the technicals.

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

As I had been calling for during the past week or two, a new low occurred. Today’s long tail and finish higher clearly demonstrates a bullish reversal for next week.

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

As I have been consistently stating here on my blog day after day, a new All Time High was achieved today, using the all-hours data. The previous high was on March 1 at 2401.2, while today SPX reached 2401.5 after the bell. It feels like a 3 of 3 of 5 is occurring. I’m not sure how much upside is left, perhaps a percent or two. But we will continue to monitor details on a daily basis.

Much of my high confidence calling for a new All Time High was based on my own proprietary Technicals Model. In late April, it had what I call a Technicals Model Thrust (Google Zweig Breadth Thrust for the conceptual idea). Just before this thrust occurred, a significant positive divergence occurred in my model vs. the prior March low on SPX.

Breadth by more traditional measures still looks strong, but off recent highs.

My followers were well prepared for this bullish move, as I have also been saying “SPX hourly still showing consolidation since April 25th, with a narrowing Bollinger Band. This is supportive of the start of a new leg higher this week. While the progress higher has been slow, believe it will start a new leg up as soon as SPX can sustain above 2091.”  

Oil traders should consider today a reversal candle with higher prices likely to come in the short term.

Bullish

  • SPX Daily above the 20, 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 117th day
  • SPX 50 dma above the 100 dma for 96th day
  • SPX 20 dma above the 50 dma for the 2nd day
  • SPX weekly broke MACD negative divergence and is close to doing to same with RSI and ADX +DI
  • BUY signals on 3 of 5 of Number of stocks above their 20/50 dma
  • Technicals Model had strongly positively diverged!
  • Technicals Model is positive
  • McClellan Oscillator is positive
  • Technicals Model made a Technicals Thrust in late April
  • Oil’s is about to go on a bull run
  • Breadth indicators remain bullish, but weakening
  • $VIX downtrend??

Bearish

  • Weekly MACD is a SELL
  • UST10Y-2Y in downtrend
  • 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

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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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