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=========SIGNALS, NOT INDICATIVE OF POSITIONS=========
Based on Technicals Model:
BULLISH since 8/25/2017
Based on Unrelated Signal:
BULLISH since 8/29/2017
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!
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
Recent trading has been more volatile than 27.6% 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.
Technicals Model (proprietary)
The first chart below is the cumulative Technicals Model dating back to 2006. The Model was higher today for the 4th 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 8/3/2017! 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 now positive for the 1st time since July 25th.
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!! Is a BULLISH positive divergence now forming? NOPE, the positive divergence was nullified on 8/21/2017!! I found a positive divergence however with the previous peak vs. SPX.
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
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 August 25, 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 August 8th’s All time High, new negative divergences have extended vs. the March 1st high.
ADX: Bullish, trending
RSI: Upper range
Volume: Just below the steady 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 higher for the 1st week in a row
With August 8th’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 (likely just a strong rotation), Red is the real deal, the McClellan was negative (Likely pre-drop selling).
ADX: Bullish trading
RSI: Mid range
Candle: Off the highs
Volume: Well below the steady 20 period moving average.
Moving Averages: Close>20>50>100>200 period moving averages
% Bollinger Band: Upper band
Bollinger Band Width: Slowly narrowing
MACD: Bearish at a positive value, histogram higher for the 9th day in a row
SPX hit the 2479 pivot, though with negative divergences across the board at Friday’s highs, a pullback is anticipated in the short term.
VIX was lower today. At today’s lows, a negative divergence on ADX -DI (bullish VIX) and positive divergence on MACD and MACD histogram were made. Hourly MACD may be basing for a new VIX BUY signal shortly.
High-Low was +40 today. The SPX McClellan Oscillator was positive for the 3rd day in a row. The SPX A-D line is above its ascending 20 EMA, with its ATH made on 9/2/2017.
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. 4 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 SELL signal was given on 8/3/17, bottoming?
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 3 of the 5 indicators.
Participation continues to expand at a greater pace each day last week.
UST10Y-2Y from August 31, 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, below most all major moving averages and near the lower Bollinger Band. This week weak positive divergences were put in for only MACD histogram.
What’s interesting here, the spread is at 0.79, 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 August 31, 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 was higher again Friday, now above its 20 dma. Most technicals remain 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 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. There have been a series of lower highs and lower lows since early August.
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
My swing trading signals have been BULLISH since 8/25 and 8/29 respectively. My proprietary Technicals Model was higher Friday for the 4th day in a row, still with a positive divergence looking at the most recent daily values vs. SPX. It was an odd bottom as the Model did not positively diverge as it usually does in advance. My statistically driven Volatility Model continues to become more volatile as SPX trends upward.
Tuesday’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.
Nice gains on the week for SPX, but not yet at its ATH. The weekly chart still contained in its Bollinger Band and above all major moving averages, similar to the SPX Daily chart. SPX hit the 2479 pivot Friday, with the hourly chart showing negative divergences at Friday’s peak. Lower prices can be expected in the short term as a result.
VIX has a couple of positive divergences at Friday’s lows, with its hourly MACD nearing a BUY signal. All internals and breadth indicators are improving with many of them in positive territory, yet well off peaks earlier in the year. SPX A-D line in an exception, making a new All Time High Friday, obviously above its 20 dma which is now ascending. SPX McClellan made its 3rd positive reading in a row Friday, the highest value since July. SPX/Small and Mid cap participation skyrocketed all week long.
The Yield Curve is flattening which continues to support the notion of a weak economy. This as TLT:TIP shows deflation fears have been climbing since Spring.
Oil has had a series of lower highs and lows since early August. Its performed terribly during the tropical system in the Gulf which shuttered rigs, and all Spring/Summer, last peaking at the beginning of the year.
- The SPX A-D line made an All Time High on 9/1/2017
- SPX Daily above its 20, 50, 100 and 200 dma
- The SPX A-D line is above its 20 EMA, but it is sloping upward
- Cumulative Technicals Model made a new All Time High on 8/3/2017
- Technical Model (cumulative) is above its 200 dma
- SPX 20 dma above the 100 dma for the 200th day
- SPX 50 dma above the 100 dma for 179th day
- SPX 20 dma above the 50 dma for the 85th day
- Monthly continue in a small upward run
- Technicals Model is positive for 4th day in a row
- McClellan Oscillator positive for 3rd day in a row
- BUY signals on 3 of 5 of Number of stocks above their 20/50 dma
- BUY signals on 4 of 5 of other Breadth indicators
- Technicals Model is diverging positively with the previous peak vs. SPX.
- UST10Y-2Y (Yield curve flattening and needs a backstop soon)
- 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.
- Summation Index has been negatively diverging since last summer
- Oil unable to rise during major tropical event
- SPX weekly has been negatively diverging since 2013/2014 and finished off its highs again this week
Levels to watch…
- 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
Feb-March 2016 Posts: https://stormchaser80.wordpress.com/
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