Wednesday, November 30, 2016

Yield Curve Drops the Market...11.30.16

XLE (oil) up 6% intraday on OPEC supply cuts while bonds and utilities break support and blow through stops. And some folks saw it coming.  Needless to say this is likely the start of something rather than the finish.  As we surmised yesterday weakness in today's and tomorrow markets can be seen as a paradigm shift from momentum to mean reversion and below are the current (today's close)
metrics for the M11 market model in both modes.
Note that the mean reversion model has a better win rate although returns are more subdued.
Below the M11 models is the current MO2 pairs trading chart package for SPY vs SH (SPY inverse)
We can clearly see that the skew has now come down to zero and the trend for both inputs both inputs has been crossed by the risk management stop.
The surprise is that VIX hasn't risen more today (+1.6%) and tomorrow's action is critical. 

Click once on chart below to enlarge

Tuesday, November 29, 2016

M11 Likes XLU and TLT...11.29.16

Below is the current M11 market outlook for tomorrow (Wednesday).  We're seeing some stalling in market momentum with some genuine concerns about the deterioration of the A/D line.  Some other cracks are developing in the Trump rally (see today's note from Schwab options desk below).
Eyes should be focused on tomorrow thru end of week. If the markets falter here then a pullback is likely the next move coupled with a rotation from a momentum to a mean reversion paradigm.

Monday, November 28, 2016

PONZO Updates .....SPY Bearish....11.28.16

Tonight's Ponzo consensus forecasts have turned bearish on SPY and flatline on TLT.
The VIX maintains its scary outlier scenario as a real possibility as traders have become bored and complacent with the recent 3 week run up.
Should you chase new highs?  Good question.  Can we really break out another 5-7% before Xmas or are these oversold SPY markets due for a pullback into the 212-218 range?
The Qs continue to look stronger than SPY and that was a nasty reversal on the Russell today, coupled with a retreat on the financials as market gurus lowered forecasts on several of the $ majors.

Saturday, November 26, 2016

VDX Updates and M11 Signal...11.26.16

Another week to the upside for the indices....that's 3 in a row and the markets are extremely overbought at these levels. Nevertheless this is the tine of seasonal strength and the end of month cusp is coming up quick...typically there may be more run up before a meaningful pullback. (just keep in mind last week's Ponzo will be interesting to see how this week's forecast looks...posted Tuesday midday..
The IWM has been making new highs every day and once again M11 likes its odds.


Wednesday, November 23, 2016

M11 Signal, M11 World, FXE prospects......11.23.16

Top matrix is the current market signal and below that a M11 world model in anticipation of BOA suggested paradigm rotation in 2017.
Then we have the current FXE (EURO) ETF) chart showing that FXE has finally broken long term support ...down from a triple bottom formation today with odds of going lower.
Finally the FXE Ponzo chart as of Monday's close. Things don't look bullish for the EURO.
Just some price dynamics to ponder over Thanksgiving and beyond.  
Have a Happy one!

Tuesday, November 22, 2016

Ponzo Updates change course +BOA synopsis...11.22.16

Here's a surprise...the newest Ponzo updates for SPY and VIX.....nobody wants to even think about that VIX outlier orange line scenario.....which is more like a Black Swan formation.  Also note the sudden deterioration in the mid term SPY outlook to only 40% bullish...not a happy state of affairs for the longs if it kicks in.
FED fund rate consensus is 100% for a Dec rate hike just in case you wondered.
Highlighting today's post is a recap of yesterday's BOA consensus forecast for 2017.
Europe (EFA) now looks like a potential bottoming pattern with bullish market ticks and tomorrow we'll look at an M11 profile of the world.

Monday, November 21, 2016

Monday Reading, Trader's Outlook and M11 market signal....11.21.16

There's a lot going on and here are 3 links you can spend some time with to help formulate both a short term and longer term trading strategy.
Up front is the Schwab weekly Trader's Outlook which, no surprise, is bullish both from a technical and seasonal viewpoint.
Next is Mauldin's reflections on what Trump is up against going forward (economically speaking.)
And finally the BOA trading prospects for the coming year along with supporting arguments for each.
The later 2 articles require some time to digest and the BOA article is best viewed with a companion trading screen standing by to review past performance and current positions of the inputs cited.
Following are the current M11 market outlook and a teaser from Mauldin's piece on how Congress spends your money....there may be a few surprises here.

Saturday, November 19, 2016

VDX updates and More...11.19.16

The VDX updates confirm the technical overboiught status of SPY and the overtsold status of TLT but, as everyone is aware, we're seeing a strong reaction to the ricing yield curve, strength in the dollar and the high probability that a FED rate hike is coming in December. And, despite the bullish trend of the markets hitting new highs volatility is still a traders game as we witness profound sector rotations.  The emerging markets and the Euro have been particularly hard hit (Euro down 10 days in a row) and the best prospects for the emerging markets (EEM) are on the short side.
See dollar vs Euro (FXE)  and dollar versus EEM charts below.
Finally, the current M11 market momentum signal is shown at the bottom.

Thursday, November 17, 2016

More Dollar Perspectives (UUP..double dollar ETF)....11.17.16

We'll post the VDX updates tomorrow in conjunction with the latest M11 signal.
For now here's a few more links of interest here and here regarding the dollar along with the latest M1 view and Ponzo forecast (as of Monday's close).

Wednesday, November 16, 2016

M11 Daily Signal and UUP model...11.16.16

As promised here's tonight's M11 market signal as of the close.
Also as indicated per yesterday's link to the dollar as the new VIX here's the MVP momentum model's take on the dollar...without the PCL filter.
What's interesting here is the model's ability to double the buy and hold UUP benchmark equity over 2 years while trading only 20% of the 502 buy and hold study period AND only winning 50% of the vested trades AND only sustaining 40% of the buy and hold drawdown..
The 2 Day Alert has fired in both models but so far a risk on strategy has not suffered drawdowns.
We'll look at how EEM (the nemesis of the dollar) fares with MVP on Friday.
An updated MVP version will be sent out this weekend to current license holders.

Tuesday, November 15, 2016

Ponzo Updates and More...11.15.16

Yesterday's 2 Day Alert on the M11 real time model kept us out of today's minor correction but all things highs in the Russel and DOW and a possible bottming in TLT and the gold/silver slide may be arguing for a return to technical analysis as an investment tool.  There's still a lot of risk balls in the air but earnings have generally been better than expected and the fears of a Trumpnado market crash turned out to be as wrong as the rest of the pundits forecasts.
This week's Ponzo forecasts maintain the bullish theme, at least until the end of the year (remember, these are weekly bars). (Data shown is as of Monday's close)
Tomorrow we'll have an extensive analysis of the dollar (UUP) using a variety of tools.  Why?

Monday, November 14, 2016

A New Daily Feature....11.14.16

Here's a real time version of the M11 Market model using the momentum mode and a top 2 sorting (equally vested in the top 2 ranked positions).  This is a bit different than the older M!! end of day model and offers a wider view of the markets than the M6 Market model.  Going forward we'll post the pre close update of M11 RT on Monday, Wednesday and Friday.  Ponzo updates will be posted on Tuesday and VDX updates on Thursday.  Inevitably there will be scheduling glitches that may derail this schedule but for now this is the plan.
Note the new metric showing # of win days for M11 versus the SPY benchmark.  We'll explore how and why this trading strategy works in upcoming posts.  All limit stops are set for .7% .
Also note the 2 Day Stop Alert is now at a Risk On crossing point.

Sunday, November 13, 2016

VDX Updates and Trader's Outlook....11.13.16

After a huge run up the markets may be ripe of some consolidation before a push to new highs. Although the SPY is heavily overbought at these levels the underlying current technicals are neutral to bullish except for treasuries, which are in freefall as yields rise and prospects for a December rate hike loom large. Last week's SPY Ponzo forecast looks more and more likely at this juncture.
Trader's Outlook is similarly cautious following the election rally, at least short term.

Thursday, November 10, 2016

MVP SPY Update...11.10.16

With yields rising 20 year Treasuries (TLT) and utilities (XLU) are getting crushed while the DOW30 hits a new high and financials (XLF) rocket up while tech sectors like FANG get hit based on fears of reduced overseas sales.  Its a wild market with GE and IBM soaring while Apple, AMZN and Netflix retreat.  Needless to say trading solely on technical analysis is a risky proposition for a least the next 10 days or so. Even some of the smartest guys in the trading room are looking for new pastures.
Meanwhile. our MVP volatility buffered model has kept its head above water and although the returns have not be spectacular it has kept us on the right side of the market.

Wednesday, November 9, 2016

Trumpnado Hits the Markets.....11.09.16

The limit down swoon in overnight trading was short lived in the US session with SPY inching up on all time highs.  Below is the 130 minute bar chart of SPY showing exactly where we are.  And....based on today's momentum...which was clearly not short covering...the recent Ponzo forecast looks very plausible. Of course there's always a few caveats along the way as Mauldin points out, but some of the big money guys made a killing buying the open today and there's probably more to come.

Tuesday, November 8, 2016

Ponzo Updates Look Bullish...11.08.16

Following last week's bullish outlook for SPY this week;s update echos the same theme.  AND, the VIX chart looks to be favoring a slide in volatility which would support the bullish argument.
However,,,note the forecast for TLT which is also bullish...and although bonds and equities have been moving somewhat in tandem recently the duration of the bullish outlook in both these charts is unlikely.
Tomorrow is a new day for the markets and following tomorrow's close we may have a better gauge of how momentum will play out for the next 10 days or so.

Monday, November 7, 2016

A 2-Fer Strategy and State Street Chart Updates...11.07.16

When Comey speaks the market reacts...of course he looks like a complete fool to both sides of the isle and those pending en mass FBI resignations will likely cascade although you, dear reader, will probably never hear about it.
Just in case you missed it this project Veritas tape is highly illustrative of how corrupt this election is.
Looked like a lot of short covering today so we'll see how tomorrow plays out before the votes get tallied.
Checking out the latest results of the M6 market's an idea.  Buy both models and you'll seldom go wrong.  This is different that a delta neutral strategy as we're vesting in the best raked momentum and mean reversion inputs from a full beta spectrum.
Not sure why I didn't pick up on this idea earlier but a tip of the hat to long time reader Carl W. for the idea. Note that the sorts are set for top #1 positions.
We'll look at a couple variations of this idea later in the week.
Also below....portions of the the latest State Street Advisors chart pack...for you entertainment.

Sunday, November 6, 2016

VDX Updates and Trader's Outlook...11.06.16

Two days until elections and then expect all Hell to break loose.  The markets are just biding their time until Armageddon and the last 9 days of selling may be as precursor for things to come.  The good news is that the downdrafts haven't been in the triple digits each day but more a steady erosion of price as opening gap ups have consistently turned into losses by market closes.
Here's the VDX updates but, really, at this point in history there's no actionable guidance to be derived.  Wednesday morning will likely usher in at least a short term (probably volatile) trading opportunity...just don't be on the wrong side.
Trader's Outlook shares this view with some detailed perspectives on the VIX.
For delta neutral players this is a perfect setup although the danger is the limit stops will be blown through at the open and we'll end up net flat at the end of the day.
Tomorrow morning we'll look at a couple put spreads for playing the election that have attractive risk/rewards.