Lift Continues...4.21.14

After an iffy opening and a retest of the lows an hour in the markets picked up traction and ultimately closed modestly higher.
 XLE (see VEGA below) continues its juggernaut run and prices at the pumps reflect its unbridled exuberance.  The Qs also pickup up some momentum although the financials continue to lag....so not the 1,2 punch we like to see
Nevertheless, the short term signs are bullish...XIV is leading the M3 pack and at least on the surface we're going up. 
From a tactical standpoint there may be a pullback before the end of the month when we typically see a multiday pop and then we'll see how the Sell in May play sets up.

Weekend Wrap....4.20.14

A positive close on Thursday but the risk adverse were clearly hedging their bets into the long weekend. 
The Qs continue to underperform SPY as can be seen from the M3 reports below.
XIV is ranked #1 in both cases suggesting a short volatility strategy for now although the SPY short term ALERT appears to be reversing.
Meanwhile, the Small World model has gone back into vested mode as EEM has once again turned positive (tentatively).   .
The next couple weeks should be interesting as traders consider a recent spate of articles on the old Sell in May adage, which has actually been a wise strategy on a long term basis (eg. > 20 years).

XIV Breakout...4.15.14

The VIX plunged and XIV soared....a breakout day for bullish indicators and a possible sign of things to come.  The lateral consolidation pattern still prevails in many sectors although energy (XLE) is hitting new highs each day and prices at the gas pumps reflect it.  Although crude inventories are up the sudden shutdown of 2 major California refineries has been blamed for the bump at the pumps although the timing of the shutdowns has been questioned by a number of market analysts who have stated that more likely than not its just the usual gouging by the oil majors...all without recourse.
Tomorrow may prove to be the acid test for this rally's validity ....with a 3 day weekend ahead the risk adverse will be selling into improved prices so the close should be watched closely.

See Saw Day...4.15.14

Good day for tech, not so good for a variety of other sectors midday but a late day resurgence of buying improved the outlook for Wednesday.  We have a shortened trading week (good Friday), which happens to coincide with April options expiration so expect increased volatility as we approach Thursday's close and the deadline for rollovers and covers.
We're still net downtrend.

Small World Model Update.....4.14.14

While the US equities markets have been under pressure the SMALL WORLD model has managed to hold its own and then some by remaining vested in EEM (emerging markets) and VGK and EWG.
While the returns are not wildly exciting the fact that the model managed to outperform SPY and keep on the right side of the equity curve highlights the advantages of using a multi-model approach for capital allocation and risk management.

Note that on April 10th the Short Term Alert flashed a cash signal.
The equity curve RSQ/P6 and the %  change pair study (SPY/EEM) both indicated a reversal in EEM"s trend was likely on April 8th.

Selling Pressure Persists...4.12.14

Thursday selling theme was repeated on Friday with QQQ and XLF leading the charge down (see VEGA below)....the exact opposite of what a bullish momentum model should look like.  Some of the big momentum movers are taking heavy hits while many of the large cap "value" stocks are actually remaining relatively strong...that's a good sign.
We still haven't seen any suggestion of a selling climax via the NYAD although the VIX has been in a steady grind up.
Typically we can see the next likely support level, but with selling pressure still building momentum, we need to be wary of a possible new support/resistance paradigm that could drop the markets another 10% before a bottoming pattern sets in.  That's not to say that such a scenario is expected, but simply to point out its possible.
Looking at Friday's run of the M6 Gamma model helps to show the relative weakness of the QQQs....surprisingly the Qs are weaker than the SPY ultra SSO....that's weak.
And, even with 3 bond components in the Gamma mix, the model is in cash having violated the Short Term ALERT cross.  

Now the Trap Door Opens....4.10.14

WOW!!  That was a nasty day with a complete reversal of Wednesday's strength and to drop to lows below Monday. Blog traffic suggests new fears above earnings but nobody seemed to care yesterday afternoon so the underlying factors for the collapse (and that's what it was) are still elusive. 
NYAD fell to the low .30s level and the VIX climbed 15% intraday...emphasizing the extent of the selling.
Today's reversal will no doubt dampen enthusiasm for another near term rally...nobody likes to be burned twice and buyers at yesterdays highs will likely be looking to recoup their losses at the earliest opportunity.
QQQ and XLF were 2 of the biggest losers today but even the utilities (XLU) got hit.
Treasury bonds were the big winner on the GAMMA model. (not shown)