Friday September 15th, 2017

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Stormchaser80, L.L.C.
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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
Based on Technicals Model:
BULLISH since 8/25/2017 @ SPX 2443.05

Based on Unrelated Signal:
BULLISH since 8/29/2017 @ SPX 2446.30

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

The Modeling Feature is down as my data source pulled the plug. I found a work around but will need to find the time to do the coding.

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…

Swing traders: Up for the foreseeable future…

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

Recent trading has been more volatile than 8.1% of all trading periods 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 13th 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 9/15/2017! The model is well above its 200 dma that it lost briefly 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 is positive for the 5th 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.

7 negative divergences since late April indicated a significant change in trend is near. Look how much weaker the model was compared to before the SPX top! But then the model formed 3 little positive divergences that developed vs. SPX in late June and early July. This looks to predict perhaps a New All Time High [DONE]. Now 4 new negative divergences vs. SPX is in place, making 11 since mid-April. This negative divergence between early July and mid August is quite large!! I found a positive divergence however with the August peak vs. SPX September peak. There is negative divergence in the Model vs. SPX between late April and mid September.

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. 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 August 31, 2017

On the monthly scale, the market has been expanding since a 2015-2016 consolidation period. Its easy to see with negative divergences from the end of 2013 and 2014 on ADX DI, RSI, MACD and MACD histogram. July made a new All Time High.

ADX: Bullish, trading

RSI: Overbought

Candle: doji, indecision

Volume: Well below the slipping 20 period moving average.

Moving Averages: Close>12>36>72>120 period moving averages

% Bollinger Band: Upper quartile

Bollinger Band Width: Gradually rising from very narrow levels

MACD: Bullish at a positive value, histogram ticked lower for the 3rd month in a row.

SPX Weekly from September 15, 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 reformed in June. With 9/15’s All time High, new negative divergences have extended vs. the March 1st high.

ADX: Bullish, trading

RSI: Upper range

Candle: Bullish

Volume: Below the steady 20 period moving average.

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

% Bollinger Band: At Upper Band

Bollinger Band Width: At historically low levels

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

SPX Daily

With 9/15’s All Time High, negative divergences are strengthened for ADX DI, RSI, MACD and MACD histogram, most peaked in March. HO’s mean Hindenburg Omens. Orange ones mean that the McClellan was positive (likely just a strong rotation), Red is the real deal, the McClellan was negative (Likely pre-drop selling).

ADX: Bullish, trading

RSI: Upper range

Candle: Doji, indecision

Volume: Well below the slackening 20 period moving average.

Moving AveragesClose>20>50>100>200 period moving averages

% Bollinger Band: Upper range

Bollinger Band Width: Expanding?

MACD: Bullish at a positive value, histogram higher for the 5th day in a row

SPX Hourly

SPX has progressed beyond the 2479 pivot, to new All Time Highs. At today’s top I noticed negative divergences have strengthened on every indicator. Even if there is a pullback, new recent highs in RSI and ADX DI support an upcoming new high in order to form stronger and longer negative divergences at longer time scales.

VIX Hourly

VIX had a loss today. Hourly MACD did remains a BUY signal. At today’s lows ADX -DI, MACD, and MACD histogram strengthened positive divergences, yet RSI and ADX +DI have not developed them yet. Still waiting to bottom out.

VIX 15-min Intraday

At the VIX lows of the day, only noticed small positive divergences on ADX DI. Not a lot for VIX BULLS to hang their hat on right now.

SPX Breadth

High-Low was +40 today. The SPX McClellan Oscillator was positive for the 12th day in a row. The SPX A-D line is above its ascending 20 EMA, with its ATH made on 9/15/2017.

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. 5 of 5 of these signals are BULLISH.

Intermediate-Term Breadth Momentum Indicator:  A BUY signal was given on 9/1/2017.

Swenlin Trading Oscillator: A BUY signal was triggered 8/25/2017.

Bullish Percent Indicator: A BUY signal was triggered 8/30/2017.

Percent with PMO above Zero: A BUY signal was given on 9/8/17.

Percent with PMO giving BUY signal: A BUY signal was given on 8/30/17.

SPX %above MA

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

Participation improved across the board Froday.

UST10Y-2Y from September 15, 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 topped in mid July after forming a couple of weak negative divergences. It now remains weak, but could have put in a higher low as it is now above its 20 dma.

What’s interesting here, the spread is at 0.85, 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 September 15, 2017 

Deflation risk which steadily climbed in Spring, jumped in early summer. A reprieve lower then occurred and now it feels like deflation fears are building again.

The bond market Deflation vs. Inflation metric (iShares Barclays 20+ Year Treasury Bond Fund vs. iShares Barclays TIPS Bond Fund). 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

Once again this chart gave an accurate heads up on future trend changes in SPX. Friday 9/8 I said “HYG:IEF was lower today, making a new recent low. It is at the lower Bollinger Band and below all major moving averages. With today’s lower low, positive divergences have been strengthened across the board. Risk On should re-emerge soon.”

Trend in this ratio has lost some momentum in recent days.

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

Oil finished at its 200 dma and upper Bollinger Band again today. A break of these make be a short term BULLISH FAKE OUT.

Oil has performed very poorly when rigs were shuttered across the gulf due to the tropical system, and really all spring and summer. The only positive I see yet for oil bulls is on its MACD histogram.

It’s performance during the seasonably strong Spring and Summer has been very poor. Perhaps a major leg down in oil is due in the coming months?

Summary: Bulls vs. Bears

New All Time High for SPX today, but then weakness. SPX 20 dma has regained its 50 dma Thursday after 7 days in a row of the reverse being true.

My swing trading signals have been BULLISH since 8/25 and 8/29 respectively. My proprietary Technicals Model was higher for the 13th day in a row, with a positive divergence at 9/1’s peak vs. SPX, foretelling of this bullish run. The Model is off the high on 9/13. It was an odd previous bottom as the Model did not positively diverge as it usually does in advance. The Cumulative Version of the Technicals Model made a new All Time High 9/15. My statistically driven Volatility Model has significantly diminished through this past week, reloading for a new run higher.

8/29’s SPX Hindenburg Omen ended up being a bottom reversal variety. Many HO in June and July leading up to the All Time High, then 5 more during the decline in mid August. None since then.

SPX Weekly indicators continue to negatively diverge since at least Spring, and as far back as 2013 in the case of RSI. It finished the week at its upper Bollinger Band. SPX daily is near its top Bollinger Band and above all major moving averages, though negative divergences are set from the March 1st high. At the hourly scale, the 2479 pivot was taken out. A short pullback may occur here with negative divergences seen once again at today’s top, with the uptrend likely to resume thereafter given new uptrend highs for RSI Tuesday 9/12.

VIX hourly MACD continues to flash a BUY. Today it made a lower low, which allowed additional positive divergences to be put in, so VIX could rise from here. Drilling down to the 15-min chart, a couple of very weak positive divergences on a ADX DI occurred at the lows Friday. VIX continues to struggle to put in a firm low.

Market Internals, participation and breadth indicators were higher today. Many of these are in positive territory, yet are well off peaks from earlier in the year. SPX A-D line in an exception, making a new All Time High on 9/15, obviously above its 20 dma which is now ascending. SPX McClellan made its 12th positive reading in a row.

The Yield Curve may have put in a higher low this week, and that would be bullish for the economy and financials should it be the case. This as TLT:TIP shows deflation fears have been climbing since Spring.

Oil remains at both its 200 dma and upper Bollinger Band. Do not expect any significant amount of time much above these levels, unless a gas shortage occurs due to tropical weather activity. Oil performed terribly during the tropical system in the Gulf of Mexico which shuttered rigs (If Harvey couldn’t boost prices an east coast Irma shouldn’t help much either), and all Spring/Summer during typical peak price season, last peaking at the beginning of this year. HYG:IEF made a lower low last Friday 9/8, which only served to strengthen significant positive divergences in doing so. This suggested that Risk-On should return soon, and this bullish run has come to fruition during the past week!

 

Bullish

  • The SPX A-D line made an All Time High on 9/15/2017
  • The SPX A-D line is above its 20 EMA, and it is sloping upward
  • SPX Daily above its 20, 50, 100 and 200 dma
  • Cumulative Technicals Model made a new All Time High on 9/15/2017
  • Technical Model (cumulative) is above its 200 dma
  • SPX 20 dma above the 50 dma for the 2nd day
  • SPX 20 dma above the 100 dma for the 209th day
  • SPX 50 dma above the 100 dma for 188th day
  • SPX Monthly continue in a small upward run
  • Technicals Model is positive for 13th day in a row
  • McClellan Oscillator positive for 12th day in a row
  • BUY signals on 5 of 5 of Number of stocks above their 20/50 dma
  • BUY signals on 5 of 5 of other Breadth indicators
  • Technicals Model is diverging positively with the previous peak vs. SPX at 9/1’s peak.
  • Positive divergence on HYG:IEF at its lows Friday 9/8, Risk on

Bearish

  • UST10Y-2Y (Yield curve flattening may be improving again though)
  • Technicals Model is diverging negatively 7 times since mid April, but then had 3 minor positive divergences since 7/2/2017. Since 7/19/20117 4 more negative divergence appeared, making 11 total. There is now negative divergence in the Model vs. SPX between late April and mid September.
  • Summation Index has been negatively diverging since last summer
  • Oil unable to rise during major tropical event, has to surpass upper Bollinger Band and 200 dma to sustain bull run
  • SPX weekly has been negatively diverging since 2013/2014 and finished off its highs again this week

Levels to watch

  • 2525 pivot
  • 2479 pivot
  • 2456 pivot
  • 2444 pivot
  • 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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