Tuesday, February 28, 2017

TLT prospects...02.28.17

Following up on this weekend's VDX updates below are the current TLT VDX and Ponzo forecast.
What's new for this week's Ponzo forecast is a net neutral outlook for the next 18 weeks as opposed to the previous bullish slope forecast we've seen for the last month. That scenario may be supported by what appears to be a triple top in the Price/Volume VDX chart as TLT has now hit near term upper resistance levels with an OVERBOUGHT status.

Monday, February 27, 2017

PONZO Updates...SPY vs GSPC (S&P500)...02.27.17

Expectations are for a rally tomorrow thru Wednesday as Trump addresses Congress and rolls out his economic plan. Either that or the market will sell off on the news.
Below are the current forecasts for 25 years of the S&P ETF SPY and the historical S&P index GSPC going back 50 years.
I though it might be instructive to add the extra 25 years of S&P price action into the mix to see if it aligned more or less with the SPY forecast.  It turns out that's pretty much the case although the GSPC is a bit more constrained in the range of the outlier scenarios and the current risk outlook.
Both models have very similar targets 18 weeks out.  Its just that the SPY outlook is considerably more volatile.

Saturday, February 25, 2017

VDX Updates and Trader's Outlook...02.25.17

The market is arguably in a consolidation mode....at least according to the way the VIX is behaving.
Friday's buy the dip action is a stark example of how traditional risk management modalities are not present in the current market. Trying to understand why is not an easy task.
Clearly there is considerable anticipation of the new Trump tax plan due next week but there also is evidence that potential market gains are being seriously hedged.  With any rate hike likely delayed until June bonds are showing some traction in spite on the low VIX and the recent surge in the utilizes (XLU), typically seen as a risk hedge, gives support to the increasing Risk Off paradigm.
Trader's Outlook is neutral to bearish.

Thursday, February 23, 2017

XLF Prospects...02.23.17

Following yesterday's QQQ posting here is the current technical view of the financial sector using XLF.  We are seeing a weakening in momentum on the VDX and the Ponzo forecast is nowhere near as enthusiastic as either the QQQ or the SPY posted on Tuesday.  The financials have had a strong recent run up and may have gotten ahead of themselves fueled by anticipation over Trump's upcoming tax program.  We may see further price erosion tomorrow based solely of typical Friday weakness but next week's price action will be critical to the survival of the current bullish trend.

Wednesday, February 22, 2017

QQQ Prospects...02.22.17

Trending rallies are historically led by tech and the financials so tonight we look at the current QQQ Ponzo and VDX outlooks.  While the QQQ VDX is extremely overbought the Ponzo forecast suggests that momentum may not peter out until the 138 level.  That little pullback we saw today managed to right itself (mostly) by day's end as the FED stood pat and issued its usual mumble of possible rate hikes to come.  The financials are still in a go go mood in anticipation of Trump's new tax program and tomorrow we'll check the technicals on XLF to see if they are aligned with QQQ.

Tuesday, February 21, 2017

Ponzo Updates fpr SPY, VIX, TLT...02.21.17

This week's Ponzo forecasts are startling.  The previous 18 week target for SPY was 236....a price level we hit today and the new Ponzo has a very bullish revised price target of 251, with a couple dips along the way.   Remember...all these Ponzo forecasts are based on what's happened over the past 25 years when the current price pattern has occurred.....so if you believe history repeats itself then you should be a (cautious) buyer.
Meanwhile, TLT is still modestly bullish....a bit of a contradiction to an uber bullish SPY but bonds have kept bouncing off 117 support and there are numerous arguments to suggest this level will hold.
VIX looks just plain boring and ripe for butterfly options and calendar spreads....just be wary of rapid decay in the VIX options.

Sunday, February 19, 2017

VDX Updates and Critical Reading...02.19.17

This week's VDX updates mirror last week's outlook with the the SPY overbought and the VIX and TLT in a trending neutral mode. The financials nay be starting a new ramp in expectation of Trump's mystery tax plan to be announced around end of this month.
It may be the case of buy the rumor sell the news.
Trader's Outlook is again neutralish and Tuesday should tell the tale for the rest of the week.
Here's the latest from .Mauldin..Its long on detail and economic history and focuses on the BAT and the possible consequences....quite scary actually. Some interesting references to the Hoover years and what went wrong there should serve as a warning going forward.

Thursday, February 16, 2017

Catalyst Drops the Markets...02.16.17

Amazing how short covering a few billion in leveraged options can drive the markets up..  But now those positions have been covered and today's selling may be more of an indication of the true market mood. Monday's SPY Ponzo was less than enthusiastic going forward short term and there's mounting evidence that we're topping out ....at least for a bit.
So...do you buy the dip or wait to see if this amounts to the start of something?  In very general statistical studies potential trend reversals moves "typically" run in 3 day cycles and if you subscribe to this view then buying the dip is a bit premature. Couple that with Friday's bias for being in the red >70% of the time and we're left with a neutral cash stance for now.

Wednesday, February 15, 2017

EEM Updates....02.15.17

As the dollar surges and European instability grows the prospects for EEM going forward are becoming more and more uncertain.  Looking at the technical overlays the best case we can make is that there has been no substantial price erosion.  In fact, what we're seeing are multiple bumps against overhead resistance....a pattern that is most often resolved to the upside.
Short term the Ponzo outlook is neutral to bullish.

Tuesday, February 14, 2017

GS Updates...VDX and Ponzo...02.14.17

GS continues to run higher...now driven by hawkish comments by Yellen that drove all financials into a panic buying mode today  Last week's bullish forecast caught the cusp of the breakout but now we are into woefully overbought territory.
The Ponzo suggests limited upside potential from this point although various talking heads have suggested GS could double from here in the next 2 years.  MAYBE.
On the other hand reality may soon catch up with hope so shorter term plays are advised.

Monday, February 13, 2017

Ponzo Updates...02.13.17

This week's Ponzo forecasts have finally diverged from our 2 month bullish momentum trend and now have SPY showing weakness and TLT showing strength.  Note that current long term price target is 237....whereas 2 months ago it was 236.....and here we are only a couple points from either target.
Despite the market enthusiasm for a Trump tax relief package (financials blew the doors off today including our focus stock GS), the bottom line is that any realized relief is not going to happen in the short term...and although the market tends to look out 6 months ahead in its pricing the technical reality is that we are grossly overbought.
TLT, on the other hand ,which has suffered a daily barrage of selling news, appears to be poised to hold it own longer term and to actually reflect some positive momentum.
Today's wild divergence between VIX and its ETF proxy VXX should throw up a giant danger signal and the dwindling daily volume in SPY and the NYSE in general should be a further cause for concern for the bulls.

Sunday, February 12, 2017

VDX Updates...02.12.17

This week's VDX outlook updates have SPY at the overbought threshold with VIX and TLT neutral,
Volume has been very muted and although we've seen low volume melt ups before this one is a bit more precarious as we sit at all time highs in many of the indices.
The prospect of a new tax plan announced by Trump last week was the catalyst for new momentum in an otherwise dull market and most  "smart money" was betting on the short side early in the week.
Trader's Outlook is also neutral (mostly) going forward next week but we're most likely to see continued advances in the industrials and big caps with huge offshore tax haven accounts.

Thursday, February 9, 2017

GS Prospects....02.10.17

As promised here are the MoDX (Mosaic version of the VDX indicator) and the Ponzo outlook for Goldman Sachs, which had been the best performing stock since Trump's election and which looks like it still has plenty of room to the upside.
February is typically a weak month post election but when Trump speaks or tweets it can move the markets quickly and dramatically and yesterday's release that major new tax program revisions are coming in 2-3 weeks finally moved the markets from their malaise and raised bull expectations .

Wednesday, February 8, 2017

XOM Prospects...02.08.17

Following yesterday's Ponzo updates I received a couple requests to profile single stocks which my humble readers believe are poised for strong upside going forward this year.
Today we'll take a look at Exxon XOM, tomorrow we'll look at Goldman GS.
We'll use the Ponzo and the shorter term MoDX analytics to get some momentum perspectives.
See the Ponzo link in the right User's Reference side panel for more info on the Ponzo.
These charts do not imply buy or sell recommendations.

Tuesday, February 7, 2017

Ponzo Updates....02.07.17

This week's Ponzo updates have SPY with a new, wider, volatility scenario band.  The forecast odds are almost equally balanced but Ponzo is suggesting the trend is likely to break out...up or down, with some vengeance. What we are not seeing is a comparable mixed scenario for the VIX...just continued cruising along the 11s until something happens to pop us higher.  The TLT outlook is almost exactly the same as last week,,,,a slow churn up and all the technicals currently support that view.

Monday, February 6, 2017

VXX Prospects...02.06.17

As the VIX continues to roll down here's a look at the VIX proxy ETF VXX.  Lots of daily volume, narrow spreads and a rich options chain make this ETF one of the daily big trades.  We've profiled this ETF many times before and the main caveat it that any long positions should be extremely short term due to the intrinsic decay function built into the security.

Sunday, February 5, 2017

VDX Updates and Weekend Reading..02.05.17

This week's VDX prospects are a continuation of last week's momentum themes.
SPY's at it highs as it seeks to follow through on breakout momentum.,
VIX continues to erode (to a 19 year low mid week) and TLT is stuck in a trading range.
As we move into earnings season the net effect has been optimistic but with a note of caution.
From a technical standpoint SPY is neutral to bearish as suggested by Trader's Outlook.
Here's a link to a lengthy interview with Jack Schwager, arguable a man who knows a lot about trading and investing and he offers a few trading lessons here that are worth paying attention to.

Thursday, February 2, 2017

EEM Prospects....02.02.17

EEM (emerging markets ETF) has been on a run lately and regular readers know its one of my favored trading ETFs.  Below are the prospects via the current Ponzo risk forecast and the M1 momentum model. Since EEM tends to trade inverse to the dollar, the recent dollar weakness has provided at least a short term trading window of opportunity.

Wednesday, February 1, 2017

M6 Market Outlook...02.01.17

Tech saved the day from an otherwise wave of red although volume was subdued.
Apple surged probably due to Samsung's delivery problems. A lot of short covering in evidence.
AMD and FB also joined the party and for now a marginal bullish skew remains in place.
The FED did nothing today to no one's surprise and bonds took a hit, largely reversing yesterday's gains (keeping in mind most bonds went monthly ex-div today).
Here are the current M6 market signals in momentum and mean reversion modes.
This is a new model in development using the probability ALERT as an active signal filter.
The biggest effects of the filter are the increased success of the win/loss ratio and the net return %.