Friday September 29th, 2017

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Stormchaser80, L.L.C.
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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
Based on Technicals Model:
BULLISH since 9/29/2017 @ SPX 2519.36

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)!!

———————————————————————————————————-

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…

Another leg higher, but clues of a pause coming…

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 2.0% 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 23rd 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 9/29/2017! 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 has been positive for the 1st 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.

There is negative divergence in the Model vs. SPX between late April and mid September, as well as 2 new ones in 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 September 29, 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. September 2017 made a new All Time High.

ADX: Bullish, trading

RSI: Overbought

Candle: Bullish

Volume: Well below the declining 20 period moving average.

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

% Bollinger Band: Upper range

Bollinger Band Width: Steady

MACD: Bullish at a positive value, histogram ticked lower for the 4th month in a row.

SPX Weekly from September 29, 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 9/29’s All time High, new negative divergences have extended vs. the March 1st high.

ADX: Bullish, trading

RSI: Overbought

Candle: Bullish

Volume: At the steady 20 period moving average.

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

% Bollinger Band: Above the Upper Band

Bollinger Band Width: At historically low levels

MACD: Bullish at a positive value, histogram higher for the 3rd week in a row

SPX Daily

With 9/29’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: Overbought

Candle: Bullish

Volume: Below the steady 20 period moving average.

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

% Bollinger Band: Upper band

Bollinger Band Width: Steady

MACD: Bullish at a positive value, histogram higher for the 2nd day in a row

SPX Hourly

SPX has progressed beyond the 2479 pivot, to new All Time Highs. At today’s highs, negative divergences were put in for all indicators except MACD. SPX is more likely than not to retrace lower in the short term.

VIX Hourly

VIX had a loss today, with hourly MACD indicating a SELL signal. New downtrend low, with positive divergences for RSI, MACD histogram and ADX -DI, but not on the other indicators. A reversal higher is more likely than not, with another lower low probable to formulate and strengthen positive divergences across the board before any significant bounce.

VIX 15-min Intraday

VIX as mentioned earlier made a lower low today. On the 15-min chart only positive divergences have formed during the past several days for all indicators except MACD histogram. Expecting a pop in VIX here.

VIX 442-hr Which Side of Trade? From 9/29/2017

Traders who prefer to trade one side, should be trading with the BULLS.

This chart attempts to use a long term average for VIX to identify Bull markets. I use a 442 hour EMA of VIX as that is approximately how many trading hours there are in a quarter of a year. When this value is below 17.5, those who like to trade one side at a time should make sure to be trading the long side. This chart makes no comment about the other times, meaning the inverse is not necessarily true.

SPX Breadth

High-Low was +49 today. The SPX McClellan Oscillator was positive for the 21st day in a row. The SPX A-D line is above its ascending 20 EMA, with its ATH made on 9/29/2017.

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. 3 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 SELL signal was triggered 9/22/2017, bottoming?

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, topping?

Percent with PMO giving BUY signal: A SELL signal was given on 9/27/17, bottoming?

SPX %above MA

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

Participation was mixed today, with the SPX indicators leading higher.

UST10Y-2Y from September 29, 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 made a lower low in September, formulating significant positive divergences vs. the June low. The yield curve should continue to steepen here which is bullish for the economy.

What’s interesting here, the spread is at 0.86, 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 29, 2017 

Deflation risk which steadily climbed in Spring, jumped in early summer before going sideways.

The bond market Deflation vs. Inflation metric (iShares Barclays 20+ Year Treasury Bond Fund vs. iShares Barclays TIPS Bond Fund). Values early in 2015 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 made solid new uptrend highs today. Its nearing its Upper Bollinger Band, above all major moving averages. Negative divergences have only formed on MACD histogram. A higher high is more likely than not, which is bullish.

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 had another consolidation day finishing little changed, above all major moving averages near the Upper Bollinger Band. Minor negative divergences formed at the recent highs, with stronger ones on ADX +DI and MACD histogram dating back to July and early August.

While I do not think this move will sustain itself, momentum riders should continue with positions as ADX is well above 20, until new negative divergences strengthen and are put in place. Too late for new bulls as RSI has already been overbought.

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 Highs for SPX Friday. My October 20 SPY calls I picked up in early September are currently up 78%. I will be looking to exit at least half of my position early next week. My swing trading signals are now both BULLISH again, with the signal based on the Techncials Model being whipsawed BEARISH for a few days until Friday. I stuck with my favorite signal which has remained BULLISH since 8/29 at SPX 2446.30.

My proprietary Technicals Model was higher for the 23rd 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, though SPX is at All Time Highs, which is giving notice of an upcoming swing trade top in the markets. The Cumulative version of the Technicals Model made a new All Time High 9/29. My statistically driven Volatility Model has significantly diminished to historically low levels during the past 2 weeks. I have been expecting a big move for the markets which is currently unfolding to the upside.

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 daily is above all major moving averages, though negative divergences are set from the March 1st high. At the hourly scale, at today’s highs, several negative divergences have developed so in the short term I am looking for a softening market. Still, lack of negative divergences for the other indicators suggest a new high is likely on the horizon.

VIX hourly MACD remains a SELL, finishing lower today. Positive divergences strengthened and a couple more developed at today’s lows, so I am looking for a short turn higher in VIX. This is easy to spot at the 15-min scale, with strong positive divergences across the board supporting an uptrend in VIX at least in the very short term.

Market Internals, participation and breadth indicators were mainly 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 9/29, obviously above its 20 dma which is ascending. SPX McClellan made its 22nd positive reading in a row.

Oil continues to consolidate, above its 200 dma and near its top Bollinger Band. ADX is flashing strong momentum building. If I were long Oil I would ride it until additional negative diverges formed. However with RSI being overbought recently it could be dangerous to chase for new trades chasing momentum.

HYG:IEF continues to support the BULLS making a new uptrend high on Friday. It did not make any new negative divergences at the top so a higher high is more likely than not before any sizable reversal takes place. RISK ON!

The yield curve made positive divergences at recent lows, so I’m looking for it to steepen in the coming weeks. Deflation risks, though not significantly below historical highs, has been sideways since early summer.

Finally this week I unveiled a new chart I will update weekly, the 442hr VIX EMA. I show how I use this chart for deciding periods I for sure want to be bullish vs. have to check for bearish tendencies. Obviously right now its firmly in the BULLISH camp long term, and has been for much of the time since summer of 2012.

Bullish

  • The SPX A-D line made an All Time High on 9/29/2017
  • 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 9/29/2017
  • Technical Model (cumulative) is above its 200 dma
  • SPX 20 dma above the 50 dma for the 11th day
  • SPX 20 dma above the 100 dma for the 219th day
  • SPX 50 dma above the 100 dma for 198th day
  • SPX Monthly continue in a upward run
  • Technicals Model is positive for 23rd day in a row
  • McClellan Oscillator positive for 22nd day in a row
  • BUY signals on 5 of 5 of Number of stocks above their 20/50 dma
  • BUY signals on 3 of 5 of other Breadth indicators
  • Technicals Model had diverged positively with the previous peak vs. SPX at 9/1’s peak.
  • HYG:IEF still strong
  • Oil on a run above its 200 dma and upper Bollinger Band with increasing ADX, RSI though is overbought

Bearish

  • UST10Y-2Y (Yield curve flattening may be improving again though)
  • There is negative divergence in the Model vs. SPX between late April and mid September, as well as 2 new ones in September.
  • Summation Index has been negatively diverging since last summer
  • SPX weekly has been negatively diverging since 2013/2014

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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