Bullish Signals Fire.....4.9.14

After a tentative pop at the open the markets roared forth in the afternoon session with a classic XIV..SSO...SPY alignment.  XLV and XLF were noticeable for their strength in VEGA.
The only missing element was above normal volume but that may change in Thursday's action if the rally is able to maintain traction. 
AA's earnings report was better than consensus estimates and that likely added an optimistic factor for other upcoming earnings.
The SPY TrendX in the right side panel is now upslope and M3 is flashing the bullish ranking noted above as of today's open.

Tentative Rebound...4.8.14

No trap door evident today and although SPY, QQQ and DIA all closed in the green the bounce wasn't exactly convincing. The Qs were the biggest gainer...reasonable considering the index has fallen almost 5% in the past 3 sessions and were technically oversold.
The bounce wasn't shared by all sectors, which is a risk factor for now... while some of the instability in the markets may be linked to earnings season which kicks off tonight with AA.
Trader blog traffic is mostly negative on earnings for this quarter with a common argument that massive technology uplifts in many companies have accomplished as much as possible in productivity and hence profits and EPS are most likely to be flat rather than accelerating in many cases.
We shall see.
For now we remain in cash in the SPY M3 Trader.
Note the Gamma model below using an all in top 6 sorting....the rankings are not used, the portfolio is just rebalanced each week.

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Watch for Trap Door...4.7.14

Another red day, as expected.  Regarding Saturday's post, the NYAD is still a long way from capitulation levels in the low teens or <.... it closed at .37 
The Qs made an early rally attempt but then went into a slow decline for the rest of the day with a late afternoon rally fizzle.
Generally speaking, when a major stock or ETF is in a downtrend and price hits a new low early in the day ..that low will be revisited (or penetrated) sometime in the remainder of the trading day.  That was the Q's story today.
In fact, the early low of 85.56 turned out to be the closing price although price did crumble below the S1 pivot in the afternoon session.

The thing to watch out for now is the dreaded Trap Door....wherein price appears to be on a rally and then suddenly reverses to the downside.  Such an event would likely usher in a sub teen level NYAD and POSSIBLY provide a capitulation level buying opportunity....but not for the risk adverse trader.
For now the downtrend continues at a measured pace with the internationals ( EFA) and the emerging markets (EEM) showing some surprising strength.

QQQ Plunges....4.5.14

A really bad day on the Qs on huge volume has put them in the red for 2014.  Is this is an omen for more downside to come or will we see the usual dip buying and then a pop to new highs? 
That's the $64 question.
One of the very interesting factors in Friday's swoon was the relative strength of the NYAD (NYSE advance/decline line.  We typically see downtrend bottoming when the NYAD drops to the low teens or below (intraday readings below .10 occur approximately 1% of trading days and are usually driven by really bad earnings or geopolitical news). 

The Above chart shows 130 minute bars, so every 3 bars reflects a trading day (6.5 hours =390 minutes/3= 130 minutes).  And we can see that the closing NYAD level was .54...a moderately bearish reading....but not a panic or capitulation level.  NYAD reflects NYSE stocks.
Clearly the Qs were displaying a different fear pattern on Friday as can be seen form the chart below.

The white and blue lines on both charts are the 7 and 20 day moving averages.

Here's the current status of the M3 SPY.  Our short term ALERT did a good job of letting us know that caution was warranted 2 days ago asw XIV began its fade and SPY began to wane.

Our next opportunity to become vested will likely occur when the pair signals cross the zero line and we'll assess the odds when that happens.

The Qs look a bit risk prone based on a similar M3 run>

In the case of the Qs the short term ALERT fired on the same day but the rankings actually warned us out of the trade a day earlier than in the case of the SPY by failing to even register in the rankings scale....always a side of weakness or impending reversal.
For now the pair charts look very similar to the SPY version with the exception that there is now a zero line cross of the QQQ/QLD pair (A).  This situation may suggest a long QQQ trade for Monday but the QQQ/XIV signal has not confirmed so the element of risk is high.

XIV Goes Flat...4.3.14

As suspected in yesterday's post XIV has now taken a pause and gone to a CASH position...along with SPY and SSO.
Meanwhile energy in the form of XLE continues to run wild even as several of the XLE component stocks took red hits today...so its a mixed bag.  Short covering may be the culprit.
QQQ was the weak VEGA component ...reversing recent strength, while the DOW (DIA) was the strongest of SPY, QQQ and DIA.
Tomorrow's Friday...typically a bit more volatile than the other week days, but the M3 crystal ball is providing little guidance at this point other than caution

Time for a Pause?...4.2.14

Another up day although QQQ was in the red midday.  Utilities (XLU)continue to fade while energy (XLE) picked up the pace once again and hit another new high. We're at a critical juncture here regarding volatility as prices have actually risen above momentum signal parity = technically overbought.
The M3 SPY Trader went into a Short Term ALERT mode today having racked up some recent gains relative to the SPY.  That XIV long status is now in jeopardy.

XIV Soars...4.1.14

XIV continued its acceleration today, gaining over 3% by the end of the day while the VIX collapsed almost 6%.  The DOW did penetrate 165 today...it's taken a while since we projected that target a couple weeks ago, but momentum in all the indices pushed it over the top.

Utilities were weak (XLU) while QQQ has again gained the momentum edge...always a bullish sign.
Checking the SPY TrendX in the right side panel suggests there's a lot more opportunity to the up side before we hit the next overhead resistance level.

If interested, here's another article on high speed trading following yesterday's post.