Thursday April 13th, 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
===================================================

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! Data flow has been restored. Thanks for your patience.

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…

More weakness today than expected…

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 13.8% 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 22nd day out of the past 27. 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. Today is the 29th day in the negative category.

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.

Wednesday 2/15 was the highest daily reading since the end of June 2016! Since then you can see a new negative divergence forming between a slumping Technicals Model and the rising SPX. There is also another negative divergence between the early February low and the early March low. The Model then shot higher through mid March, but its value was much lower than in February. The model had a very bad day today!!

Comparing the slope of the Technicals Model vs. SPX today, the Model is slightly more bearish. These 1-day signals are not very reliable, but better than 50-50.

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 preliminarily called a 0.50 gain within 5 days (with a peak above 0.35) a Technicals Thrust. 4 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 Mar 31, 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: At the top Bollinger Band

Bollinger Band Width: Slowly widening but at very narrow levels

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

SPX Weekly from April 13, 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.

ADX: Bullish, trending

RSI: Mid range

Candle: Bearish

Volume: At the steady 20 period moving average.

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

% Bollinger Band: Mid range

Bollinger Band Width: Narrowing

MACD: Bearish at a positive value, histogram ticked lower for the 6th week in a row

SPX Daily

At recent highs, the only negative divergence in place was the MACD histogram.

ADX: Bearish, trading

RSI: Lower quartile

Candle: Bearish

Volume: At the increasing 20 period moving average.

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

% Bollinger Band: Below lower band

Bollinger Band Width: slowly narrowing

MACD: Bearish at a negative value, histogram lower for the 5th day in a row

SPX Hourly

2 hourly charts today. The first is my typical hourly SPX chart with former support at 2351 and resistance at 2371. The red box is the duration at least 1 of my signals was bearish. Its been a long time! Remember that. Also a little green flag is where I went long. At today’s lows there was positive divergence with ADX DI, RSI, and MACD histogram. A turn higher is likely.

That takes me to my second hourly SPX chart. Here I propose 2 EW counts which both turn bullish between now and Monday. The Green trace marks the low on March 27, with this being a deep W2 retrace. For this to work out, the turn has to be now. The other scenario is a double zig zag making new lows early next week.

VIX Hourly

VIX has flashed a SELL signal with a bearish MACD. Was too quick with my reversal call with a marginal new high today. VIX shorts could be quite profitable here. With today’s higher high, Negative divergence all technical indicators became much stronger!!

SPX Breadth

High-Low was +8 today. The McClellan Oscillator was negative and fell harder today. Number of New Lows is very muted.

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!).

SPX %above MA


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

All of these indicators had a bad day. One exciting thing for Bulls is the percent of small caps above their 50 dma is a BUY for the STO from within the oversold level below 20!

UST10Y-2Y from April 13, 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 1.04, 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 April 13, 2017 

This spring has been characterized as increasing Deflation Risk.

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 made a matching low today compared to March 22nd. This ratio is positive diverging with price at the lower Bollinger Band. I smell reversal!

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 may be in a W4 with a slight pullback. This could last a few more days before new highs are made.

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

Today I present 2 EW counts that both eventually resolve for the bulls. However the market today was bleak, with strong losses on my proprietary Technicals Model. And my favorite signal is much deeper in BEARISH territory. The market looks like its feeling its way to a bottoming pattern, one which should end this 6 week consolidation period. Want the market to get above and stay above 2371 resistance line to say that the Bulls have regained control. VIX extended negative divergences, a huge VIX drop could be coming! Oil looks to remain in a sideways W4 for the short term.

Bullish

  • SPX Daily above the 100 and 200 dma
  • Cumulative Technicals Model finally made a new high on 2/14/2017
  • Technical Model (cumulative) is above its 200 dma
  • SPX 20 dma above the 50 dma for the 94th day, and above the 100 dma for the 102nd day
  • SPX 50 dma above the 100 dma for 81st day
  • SPX weekly broke MACD negative divergence and is close to doing to same with RSI and ADX +DI
  • $VIX downtrend
  • BUY signals on 3 of 5 of Number of stocks above their 20/50 dma

Bearish

  • Weekly MACD is a SELL
  • Technical Model is negative
  • UST10Y-2Y in downtrend
  • SPX Daily below 20,50 dma
  • McClellan Oscillator is negative
  • HYG:IEF Daily technicals are bearish, but is a bounce coming?
  • Oil’s bearish, but in a bounce
  • 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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