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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
Based on Technicals Model:
401K/Long Positions: NO as of 6/12/2017
Based on Unrelated Signal:
BEARISH as of 6/20/2017
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!
Hope all had a good holiday. Back to work!
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 13.1% 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.
Technicals Model (proprietary)
The first chart below is the cumulative Technicals Model dating back to 2006. The Model was lower today, for the 9th 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 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 has been negative for the 11th 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 there was a little positive that developed vs. SPX recently. We’ll have to keep a close eye on that.
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 June 30, 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. June made a new All Time High.
ADX: Bullish, trading
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 1th month in a row.
SPX Weekly from June 30, 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 June 19th’s All time High, new negative divergences have extended vs. the March 1st high.
ADX: Bullish, trending
RSI: Upper quartile
Candle: Bearish with indecision
Volume: Just above the rising 20 period moving average.
Moving Averages: Close>20>50>100>200 period moving averages
% Bollinger Band: Upper band
Bollinger Band Width: Narrowing
MACD: Bearish at a positive value, histogram ticked lower for the 3rd week in a row
With June 19th’s All Time High, negative divergences are in place for ADX DI, RSI, MACD and MACD histogram. HO’s mean Hindenburg Omens. Orange ones mean that the McClellan was positive, Red is the real deal, the McClellan was negative.
ADX: Bearish, trading
RSI: Mid range
Candle: Doji, indecision
Volume: Below the rising 20 period moving average.
Moving Averages: 20>Close>50>100>200 period moving averages
% Bollinger Band: Mid band
Bollinger Band Width: Narrowing to historical levels
MACD: Bearish at a positive value, histogram higher for the 1st day in a row
After the bounce on 6/29 off the 2411 pivot an upwave began, reaching above the 2428 pivot. At Monday’s highs little to no negative divergences (other than MACD histogram) were spotted so a higher high is more likely than not in the short term. Right now its a waiting game to see if the push higher materializes.
VIX had a loss today, still on a MACD SELL signal. Technical indicators look as this move lower is not quite done yet.
High-Low was +24 today. The McClellan Oscillator was negative (11th day in a row). The SPX A-D line is above its 20 EMA, but off its All Time High set on 6/19/2017.
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 SELL signal was given on 6/22/2017.
Swenlin Trading Oscillator: A BUY signal was triggered 7/5/2017.
Bullish Percent Indicator: A BUY signal was triggered on 6/5/2017.
Percent with PMO above Zero: A BUY signal was given on 6/1/17. it seems to be topping.
Percent with PMO giving BUY signal: A SELL signal was given on 6/16/17. It may be bottoming?
SPX %above MA
The stochastic indicators have signaled a BUY for 4 of the 5 indicators.
These indicators had some notable losses today.
UST10Y-2Y from June 30, 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 toward its lower Bollinger Band. But now some life as positive divergences formed near its recent bottom.
What’s interesting here, the spread is at 0.88, 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 June 30, 2017
Deflation risk which steadily climbed in Spring has now started to jump this summer. A reprieve lower occurred this week.
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 sold off today, off the upper Bollinger Band to near its 100 dma. Technicals still favor a higher high with no negative divergences at the recent peak.
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.
As I said Monday “Technicals have not deviated so higher prices are more likely, yet in the immediate term price could come down off the 50 dma a bit.” And it did make some big losses, well off the lows at the 20 dma. Would not bet bearish quite yet.
It’s performance during the seasonably strong Spring and early Summer has been very poor. Perhaps a major leg down in oil is due in the coming months?
Summary: Bulls vs. Bears
SPX Bollinger Bands are the narrowest I’ve seen since my data goes back to 1970. These conditions can last a bit, but will result in a big move, often times set off in the opposite direction as a fake out. As boring as things look now, this is the time to keep on top of the market the closest. SPX hourly is trading sideways with little divergence on technicals to help out. VIX remains on an hourly MACD SELL, and I think a lower low is needed to put in positive divergences.
Breadth for the most part remains positive yet well off recent highs. My signals remain BEARISH however are closing back in to neutral territory. My proprietary Technicals Model has made 7 negative divergences vs. SPX since mid-April, but now has a weak positive divergence since 7/2/2017.
Oil traded down significantly, but also closed well off its lows near its 20 dma. Don’t think recent run-up is finished as negative divergences have not yet been put into place.
Disclosure: Bought SPY SEP 29 2017 245.00 P on 6/23/2017.
- The SPX A-D line is above its 20 EMA, and made another All Time High on 6/19/2017.
- SPX Daily above its 50, 100 and 200 dma
- Cumulative Technicals Model made a new All Time High on 6/21/2017
- Technical Model (cumulative) is above its 200 dma
- SPX 20 dma above the 100 dma for the 158th day
- SPX 50 dma above the 100 dma for 137th day
- SPX 20 dma above the 50 dma for the 43rd day
- BUY signals on 4 of 5 of Number of stocks above their 20/50 dma
- Oil’s higher
- HYG:IEF is higher
- VIX hourly on a SELL signal
- UST10Y-2Y downtrend may be ending (Yield curve steepening?)
- Monthly continue in a small upward run
- BUY signals on 3 of 5 of other Breadth indicators
- SPX Daily below its 20 dma
- Technicals Model is negative
- Technicals Model is diverging negatively 7 times since mid April, but had a minor positive divergence since 7/2/2017.
- cClellan Oscillator is negative
- HYG:IEF well off its recent peak from March 2nd, negatively diverging from SPX
- Summation Index has been negatively diverging since last summer
- SPX weekly has been negatively diverging since 2013/2014
Levels to watch…
- 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
Feb-March 2016 Posts: https://stormchaser80.wordpress.com/
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