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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
401K/Long Positions: Yes
Short Positions: No
I have identified my BUY and SELL signals for LONG positions, with 1 model member. It will become a lot more robust, and a lot less whipsaws when I develop an ensemble of 999 members this upcoming winter. These signals are the result of several scripts and a very large Excel Spreadsheet on my desktop. So I will post the ‘final answer’ above which is what most of you want anyways!
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.
==============My Website To-Do List (Vision)=============
This site which only premiered on April 1st, 2016 has already come a long way. But there is so much more that I want to do, so I thought I would demonstrate my goals below! If you have any suggestions, feel free to shoot me an e-mail or comment
- Build robust LONG/SELL swing signals using 999 ensemble members to help avoid whipsaws and maximize profit (50% done)
– This will also utilize my proprietary Volatility Model!
- Expand signals beyond the Technicals Model, to include other Breadth indicators, expanding the Ensemble to about 4995 members!
- Build a real-time display for worldwide indicies, currencies and commodities, this is the first step in transitioning the site to a real-time tool for more active traders
- Replicate the Technicals Model at the Weekly, Hourly, 15-min scales to give a real-time view of Market Trends expanding from the Daily view that I already provide
- Custom charting code so I can display multiple models in best possible way
- Real-time charting of Hindenburg Omens
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!
Happy Veterans Day!
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From Thursday “The bullish trend looks on track, though sideways/lower is likely here in the very short term.” What do things look like today?
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]
3-day average S&P500 volatility is scored at: 14.1 [12.3 single day]
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 last negative day was Mon 11/7 (after being down 26 days in a row)! This was worse than any time during the 2008-2009 crash! 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). I also want to point out that the cumulative Technicals Model has not made a new All Time High in 2016. In fact, it HAS FALLEN below the 200 day moving average once again, which supports a bear market, if this persists!
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 3rd day in the past 75 trading days, that the ratio of the two is above zero! This broke the worst streak I have recorded!
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. Note that significant deterioration has taken place in the comprehensive list of SPX individual stocks’ technicals in the past 4 months. But we must keep an eye on potential positive divergence vs. early September. This has given advanced warning of a bull rally! There is further evidence of continued momentum for the bulls as the latest Daily readings are higher than in September as well.
Comparing the slope of the Technicals Model vs. SPX today, the Model is more bullish. These 1-day signals are not very reliable, but better than 50-50.
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.
ADX: Bearish, trading
RSI: Mid range
Candle: Bullish, but indecision well off highs and lows
Volume: Much Higher, well above the slackening 20 period moving average. Last time we saw volume like this, was in April 2016!
Moving Averages: Close>20>50>20>200 period moving averages
% Bollinger Band: Upper Quartile
Bollinger Band Width: Steadily falling
MACD: Bearish at a positive value, histogram ticked higher this week
ADX: Bearish, trending
RSI: Mid range
Candle: Doji, indecision, well off highs and lows
Volume: Lower, but still at the steady 20 period moving average. Last time we saw volume like this, was in Jan/Feb of 2016!
Moving Averages: Close>100>50>20>200 period moving averages
% Bollinger Band: Upper Quartile
Bollinger Band Width: Steadily rising
MACD: Bullish at a positive value, histogram ticked higher for the 5th day
Above the 2131 pivot, near the 2177 pivot.
Thursday I said “At the highs today did not see significant negative divergences. Looks like sideways/down will translate to another leg higher.” This looks to be happening with sideways/lower consolidation below the next pivot. This is bullish since no significant negative divergences were seen yet.
Thursday I said “No new low in $VIX so no new positive divergences. Do see a potential bullish $VIX cross on the MACD shortly. If this occurs, dont think resulting higher $VIX would be anything more than a short bounce.”
We got the BUY $VIX signal I talked about yesterday. However still needs to develop additional positive divergences before the low in $VIX is in. Last hour suggests negative movement ahead for $VIX as well.
High-Low was +41 today. The McClellan Oscillator was positive for the 5th trading day. With the summation index below zero, shorts will be quite fruitful when short term signals align. Still need to form negative divergences with New Highs/Lows and McClellan Oscillator before talking about a turn lower for $SPX.
SPX %above MA
The stochastic indicators have signaled a BUY for 5 of the 5 indicators. Huge negative divergence seen on the Full Stochastics (red arrows) since March.
Positive divergences between September and early November with 2 of the 5 of these indicators. Looks like they broadcasted the reversal higher.
TLT:TIP lower again today as folks dumped treasuries hand over fist for the inflation based TIPS bonds. Are we nearing the end of this flush or is this the new trend (meaning Trump saved America from Deflation)?
TLT:TIP has shown weakness after the record high for deflation fears occurred on 7/11/2016. Note we are still at the 2008 peak crisis levels. This does not even consider that SPX is near All Time Highs, nowhere near 900 when the first peak occurred!!!
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 ratio gaped lower and closed lower today. Volume was still good, but much lower than the past couple of days. Technicals suggest its likely a short pullback with an indecision candle, though we must monitor it closely falling below the 50 dma.
HYG:IEF ratio is a way of looking at Greed vs. Fear in the more sophisticated bond market.
Thursday I said “Oil lost ground today, but did not make a new low, so it was an inside day. If a new low is recorded, technicals set up for a bounce higher.”
Looks like we are setting up for a bounce.
A collapse is still possible based on negative divergences since summer in the technical indicators for the end of 2016.
Summary: Bulls vs. Bears
Final Thought: I’d say we did a good job navigating this volatile market this past week, but you can see for yourself if you register for a free Log-In at the bottom of the post. First, I demonstrated the superior use of my proprietary Volatility Model vs. $VIX. When $VIX was getting crushed, traders could feel and see the volatility which remained in the market as demonstrated by my model, meaning short term trades should be actively reversed quickly.
On Tuesday, I made 2 daring calls in the face of 5% Futures Losses. 1) That $VIX was in a downtrend and 2) That a reversal would likely imminently occur for $SPX which is a call I made looking at the 5-min chart as I finished up posting around 11p EST.
So now the real question, is what’s next? Well, it sure looks like $VIX needs to make lower lows before a tradeable bounce occurs. My proprietary Technicals Model remains quite bullish, much more so than the market tipped off today. This likely means we are currently in a sideways/consolidation pattern before the next leg up which is likely to resume Sunday night or Monday.
- SPX Daily above the 20, 50, 100, 200 dma
- Positive Divergence vs. September Low on McClellan Oscillator
- Positive Divergence vs. September Low on 2/5 Percent Above Moving Averages
- Positive Divergence vs. September Low on Technicals Model
- $VIX in downtrend, nearing an end?
- Above the 2131 pivot
- HYG:IEF short term bounce, ending or consolidating?
- Oil short term bounce looks to be setting up
- BUY signals on 5 of 5 of Number of stocks above their 20/50 dma
- Broke long term trend of the number of New Highs decreasing
- Cumulative Technicals Model has not made a new high in 2016
- Technical Model (cumulative) below its 200 dma every day since 10-19-2016
- Technical Model negative for 26 of past 30 days, unprecedented!
- Number of New Lows increasing?
- The Performance of the Technical Model:SPX ratio has been negative for 72 of the past 75 trading days, unprecedented!
- Daily scores from the Technical Model negatively diverging through the months of July-September
- SPX 20 dma below the 50 dma for the past 40 trading days and below the 100 dma for the past 12 trading days
- SPX 50 dma below the 100 dma for past 5 trading days
- After 3 weeks in a row closing above Top Weekly Bollinger Band, it failed to do so for the past 12 weeks
- Weekly MACD is a SELL
- Monthly technicals very favorable for a stalling market
Levels to watch…
- 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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