Green for Now, but....06.18.15

A nice broad based rally today with new highs in the NAZ and Russell.  Volume was about 15% above average, the first time we've seen above average volume accompany a rally rather than a decline in over a month.  The ergodics and ADX were in sync all day suggesting actual accumulation and not just HFT arbitrage.  Friday's op ex day's tend to close lower and then there's this note>>>  According to the Stock Trader's Almanac the week after June option triple witching the Dow has been down 14 years in a row and 21 of the last 23 years. The average loss since 1990 has been -1.2%

  

Not Out of the Woods Yet...06.17.15

We were expecting a volatile day based on the FED meeting and the 11 AM blast off was timed to the minute of the FED release.  The surge was rapid and high volume but didn't hold into the close and the divergence of the ergodics and the ADX suggests that a goody portion of that volume was short covering and tomorrow we're likely to see the validity of the hypothesis.  Although M# and LM are now long SPY the 3 day low model is in cash.  We expect Friday, options expiration, to be volatile and close in the red.

Forget Greece...Bet on the FED.....06.16.15

Based on today's market action traders have ignored the Greek dilemma and bet on the FED to make them happy on Wednesday.  That may be a fool's bet and today's volume was NOT very enthusiastic but the bulls always get excited when the FED speaks and tomorrow looks like no exception.
We shall see.  Today's ergodics and ADX were in sync all day although the open was jumpy to say the least.  We got a nice BUY entry on the weekly SPY 3 day low model this morning and are still in that position until further notice.
Below note a run of the XLF 10 year study using the 3 day low.  Since these are weekly bars the lows are actually 5 day lows.  The reason I profile XLF (financials) is that financials usually perform exceeding well as the yield curve rises....which is the current milieu.  although other sectors may falter this summer XLF still exhibits strong momentum and relative sector strength. Tomorrow we'll post the actual 3 day low study on daily bars for XLF.

Looks like Last Week + 10 Year Results for 3 Day Low Model....06.15.15

Another Trap Door at the open dropped the SPY to the S3 pivot and it could have gotten really bad from there but the markets rallied (kind of) to finish at a dismal S2.  Selling was once again linked to the breakdown in the Greek negotiations and that's still a black hole of worry for the macro-economic traders. (see daily 3 minute bar chart below)
Also, further on down the page here's what the 3 day low model looks like after 10 years.  These are weekly bars and the model is exactly based on 3 day lows, but something similar ( 5 day lows). The model adjusts positions at Tuesday's open.  What's attractive about this version it that you only trade one a week and the drawdowns are stellar when compared with the raw SPY metrics. The 99% RSQ is the best I've seen yet.  We use a 1.5% limit stop per week, and that also helps the bottom line.

Trap Door Opens...06.13.15

The dreaded Trap Door, which I had suspected was lurking in the background until Friday, did in fact spring open on Friday ostensibly on breakdown of the Greece bailout program (that's getting to be an old story).  Next Wednesday we have another FED day so volatility will likely spike until then as traders assume proactive and defensive positions against any possibly change in FED policy.  Meanwhile, yields are up, 30 year bonds are falling like a stone and equities are displaying what might be considered a developing head and shoulders patter (see 2 hour chart below).  The SPY VDX looks pretty ugly in terms of risk and is now downslope.  Per the 2 hour chart SPY support in down where we defined it earlier in the week...around 207.50.  Keep in mind June is historically the worst performing month of the year and we're only half way through it.
Regarding the Mosaic models>  the 3 day low model was the winner for the week with a gain of 1%.

 

What...me worry?....06.11.15

So the markets kind of held together today but it sure wasn't what could be called a strong follow-through day.  Tomorrow will be the test of yesterday's surge and its anybody's guess how that will shake out.  Best idea is to be small.  Our 3 day low model and M3 have reverted to cash while LM is still modestly long the SPY.
Of some concern is the status of the DJ Transports, which have now clearly broken below the 8600 level. While DIA and SPY prices have bounced off the March lows the transports have not followed suit. This is worrisome to say the least in the longer term and highlights the current critical juncture that faces SPY.
 If we do get a Trap Door on Friday or Monday the next leg down could be painful.

Will It Hold?...06.10.15

A plus 4 NYAD day pushed the DOW up 236 points.  Just 2 questions>> how much of today's action was short covering and, more importantly, will it hold?.  The top chart is today's 3 minute bars of the SPY's pop above R3 showing that the Ergodics and the ADX were nicely in sync suggesting the HFT programs were in fact providing liquidity rather than trading against it as yesterday's chart indicated.
The lower chart is the 2 hour bar chart of the SPY showing what's happened on 2 previous occasions (yellow arrows) when we've experienced dramatic recovery moves such as today. Also note the similar Ergodic/ADX divergence at the yellow arrow reversals. Just something to keep in mind especially when considering that June is historically the worst performing month of the year and the Friday is coming up fast...so if we,re going to see a Trap Door or something similar then the best odds for such an event are Friday.