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=========SWING TRADING SIGNAL, NOT INDICATIVE OF POSITIONS=========
BULLISH since 3/29/2018 @ SPX 2640.87
This chart represents BUY and SELL signals using my signal since late 2016. It was slow with the BUY signal after the big February plunge, but at least worked out before the plunge in late January 2018.
S&P500 Volatility (proprietary)
I developed the S&P500 Volatility Index to help characterize the volatility of the S&P500 market. 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 price data from 1990 to 8/9/2016.
Recent trading has been more volatile than 87.6% of all trading periods since 1990.
Zooming in, You can see that the 5 dma above the 20 dma, but rolling over. This could be an indication that volatility may be near the end of it’s run.
Technicals Model (proprietary)
The first chart below is the cumulative Technicals Model dating back to 2006. The Model was lower today for the 12th day in a row. Here you can see the model performance (in blue vs. SPX in black) all the way back to 2006. The cumulative Technicals Model last made a new All Time High on 1/30/2018.
This next chart shows the daily readings, not cumulative 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 significant market Tops and Bottoms.
The model is nowhere near its February levels, which may set up a key positive divergence if SPX does drop below that value.
Orange circles (on top) represent an indicator called a Technicals Thrust. Similar to the Zweig Breadth Thrust, it looks for hard reversals higher. To be a Technicals Thrust, I look for a 0.50 gain within 5 days (with a peak above 0.35).
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.
HYG:IEF ratio is a way of looking at Greed vs. Fear in the more sophisticated bond market.
This ratio had been back near January highs, obviously quite a bit of resistance here at the same level as March 2017. A significant break higher from this level should point to many BULLISH days ahead, while a significant retreat would be quite a warning sign.
And that retreat has occurred, with the early March high not reaching the resistance line, and now the ratio is below its 200 dma!! Danger!
I put this chart ahead of the SPX analysis for a reason, its important.
SPX Monthly from February 28th, 2018
February 2018 was the first down month since October 2016, and had the highest volume since February 2016. February 2018 hit its 20 ma for the first time since November 2016.
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 and MACD histogram. January 2018 made a new All Time High.
ADX: Bullish, trending
Candle: Bearish, but off the lows
Volume: Well above the steady 20 period moving average.
Moving Averages: Close>12>36>72>120 period moving averages
% Bollinger Band: Upper Bollinger Band
Bollinger Band Width: Steady
MACD: Bullish at a positive value, histogram ticked lower for the 1st month in a row.
There are negative divergences back to 2013 on the ADX +DI, and MACD histogram in 2016. The one thing that really sticks out is the volume is not huge like it was in early February. There is always time for it to expand, but not as of yet.
ADX: Bearish, trending
RSI: Mid range
Volume: Just above the increasing 20 period moving average.
Moving Averages: 20>Close>50>100>200 period moving averages
% Bollinger Band: Lower Band
Bollinger Band Width: Narrowing
MACD: Bearish at a positive value, histogram lower for the 3rd week in a row
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: Bearish, trending
RSI: Lower range
Volume: Above the steady 20 period moving average.
Moving Averages: 50>20>100>200>Close period moving averages
% Bollinger Band: At the lower band
Bollinger Band Width: Broadening
MACD: Bearish at a negative value, histogram lower for the 1st day in a row.
ADX DI and RSI have been positively diverging since 18Z 3/19, and MACD is now also positively diverging. A turn higher for SPX could be coming soon.
VIX hourly remains in a MACD BUY signal.
VIX 15-min Intraday
VIX 15-min scale shows negative divergences formed on 2 indicators before the top today.
VIX 442-hr Which Side of Trade?
Traders who prefer to trade one side, should be trading WITH CAUTION, and continue to watch that blue line as it surpassed the17.5 purple horizontal signal line.
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.
High-Low was -25 today. The SPX McClellan Oscillator was negative for the last 12 of 13 days in a row, but is now positively diverging as well as the number of New Lows. The SPX A-D line is below its descending 20 EMA, with its ATH made on 3/9/2018. The summation index is barely in positive range, but topped in July 2016, with negative divergences going back to 2016. The negative divergence for New Highs was broken on 1/12/18.
More SPX Breadth
More breadth indicators, note the negative divergences since early 2016 on many of these. 5 of 5 of these signals are BEARISH.
Intermediate-Term Breadth Momentum Indicator: A SELL signal was given on 3/19/2018.
Swenlin Trading Oscillator: A SELL signal was triggered on 3/14/2018.
Bullish Percent Indicator: A SELL signal was triggered on 3/20/2018.
Percent with PMO above Zero: A SELL signal was given on 3/21/2018.
Percent with PMO giving BUY signal: A SELL signal was given on 3/21/2018.
SPX %above MA
The stochastic indicators have signaled a SELL for 5 of the 5 indicators.
Participation has fallen off, but in some cases is positively diverging vs. the previous low.
This should peak when SPX is high and VIX is low. The ratio still is below SPX price (blue) which indicates excess VIX in the marketplace in a BULL market, but an overbought market in a BEAR market.
A chart that study’s the stocks in the SPX as if they all had equal weighting. They align quite perfectly at the moment showing selling is broad. Most indicators are positively diverging.
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 long and strong positive divergences since last summer, have finally allowed a bottom to be put in early in 2018. But now its turning lower from early February, below the levels seen in October 2007, and well below when Trump took office.
What’s interesting here, the spread is at 0.47, 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.
BUT WAIT…THERE’S MORE ON THE YIELD CURVE
I downloaded US Treasury data (all maturity periods) for every day since 1990. Then I preformed a linear regression on the yields for every maturity period each day and calculated the slope of the linear regression line. This is more robust than merely just subtracting 10Y-2Y as many (including me) do. The resulting graph shows the periods slope were negative in light red. See how nicely they line up with the SPX top in 2000 and just before the 2007 top? Now look from 2009 to present day. The yield slope is quite stable and actually rising! Remember, there are lies, damn lies, and statistics!! We’re at the best levels since before the 2008-2009 Great Recession!!
Zooming in, I have been tracking the Yield Curve Slope with regard to its 20 dma vs. its 50 dma. This measure seemed to work well on the way up in 2017, pausing during the early Autumn before ramping up with the market to close out the year. What’s particularly interesting to me is how the 20 dma crossed below the 50 dma mid January 2018 as a warning sign to the upcoming peak in SPX late in January 2018. Since that point, the Yield Curve Slope made a low on 2/8/2018, with its 20 dma now back above its 50 dma.
Deflation risk which steadily climbed in spring 2017, jumped in early summer 2017 before going sideways. Thus far in 2018 this ratio is declining, but we should keep an eye out to see if it has bottomed here.
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.
Lots of positive divergence here, and my Propitiatory Model had significant GAINS today. Still want to see a low below 2529.5, the early February low, for a perfect scenario to BUY BUY BUY. Only scary thing out there is HYG:IEF and 10Y-2Y (which is garbage).
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