A New Mean Reversion Model .....MR....06.29.15

Even if you were a talented fiction writer you couldn't come up with the plot twists we saw over the weekend in the on-going Greek tragic comedy. (see Briefing.com piece at the end of this post).
Meanwhile I've been working on a new model than incorporates elements of the 3 day low model and a more true mean version algorithm.  We'll be adding this model ...MR...to our daily signal update as it provides a completely different take on market dynamics than the LM and M3, which are momentum and relative strength based. As you may see in the screen shots below the model has a number of permutations.  We can simply look at a single equity...such as SPY, or we look at several issues such as SPY, QQQ and IWM to see if there exists a market wide mean reversion dynamic in effect.  We'll post a few more variations of  MR in the coming days including a long/short version. Once again, our goal is risk mitigation and maximizing the RSQ linearity of the equity curve and MR looks promising in that regard so far.

VDX Updates for SPY, XIV and XLU....06.27.15

Here are the current MoDx views of SPY, XIV and XLU.  Keep in mind these are technical perspectives and reflect how we might expect the markets to work if all things were equal....which is clearly not the case as the Greek situation continues to fester.  Here's a link to Mauldin's spin on the Greeks...it's definitive and exhaustive and is issued by truly one of the smartest guys in the room.
The MoDx (Mosaic version of the VDX) shows that XIV is actually behaving in a more technically aligned fashion than SPY, something we don't see that often (note that the skew in both is bearish) Meanwhile, I've included the XLU (utilities) chart as it represents a high probability buying situation.
HOWEVER, I mentioned in the M3 login page at Friday's close that although the Greek bailout deadline is June 30th, Merkel has stated that a deal MUST BE completed by Saturday night or bad things will happen (yet to be determined).  As such we should expect Monday's open to be volatile and explosive (big range).  Can't say which way it will blow but just a cautionary note for those that like to ride wild moves.

Break...06.25.15

The question at yesterday's close was resolved to the downside today as SPY pursued a slow grind down into the close with a little double bottom at S1.  Caused by what??????   Economic reports were net positive, BUT the Greeks are still up in air (no surprise) and with the FINAL deadline looming on June 30th ...Tuesday... we can expect wild gyrations until and likely after that date as doubts ebb and flow regarding the success of the bailout program.
Tomorrow is Friday, historically 70% down, and today's close offers some support for that thesis.
We reiterate our premise that next Wednesday is the best odds date for the bulls, discounting the effects of the Greek situation. Our models are net neutral (in cash) with the technical signals diametrically opposed....of the 4 models posted today...2 in cash, one in SPY and one in SH.
Some days are like that and until the smoke clears its best to stand back or trade small.  The current short term bias (2-3 days) is bearish.

 And the daily TRENDX signal....................

Make or Break...06.24.15

We did see our expected weakness for the week, with SPY retreating to a bearish S3 level for the last 2 hours of the day.  See 3 minute and 2 hour bar charts below.  Ergodics and ADX were divergent on about 60% normal volume, reflecting market instability.  We're now poised at a technical make or break level (see yellow line on 2 hour).  Unfortunately, there are no apparent prime movers to drive the markets one way or the other.  The Greek situation still has some traders feeling the jitters, but as Dave Moenning pointed out today...Greece has an economy the size of Dallas, so it's more the principle of the thing and the fear of a larger trickle down effect if there is a default.
On the up side we're approaching the end of the month although it may be until the actual 1st of the month (next Wednesday) before the typical bullish pop transpires.
This year July 4th is on Saturday so no free lunch for traders.

PONZO Updates for SPY, QQQ an XLF......06.23.15

A red bias today as once again (you can't make this stuff up) the Greek bailout is cloudy.  Dave's got another great post on the subject and I'm sure this ain't the last word on the subject. Being somewhat of a conspiracy nut I wonder if the Greeks don't know exactly what their next bi-polar pronouncement will be and are front running the markets accordingly.  If they do it enough times the central banks will make enough money to actually get them out of debt.  Hey!, stranger (and truer) things have happened. That's how Rothschild made his fortune (betting against Napoleon).  
Meanwhile, back in the real world, here are the Ponzo Mosaic Updates for SPY and the Qs,  which are looking amazingly bullish given the wall of worry yet to overcome.  I've also plotted the XLF risk forecast since as we all know bull markets are typically led by the Qs and the financials.  The outlook for XLF isn't quite so rosy but this may be in part because we only have 15 years of data to work with while SPY and the Qs have 25 years.

It's All Greek to Me...06.22.15

Despite strong historical precedents for bearish odds this week optimism for a FINAL resolution to the ongoing Greek tragedy let global markets higher and the US markets were happy to follow.  SPY opened at R2 with a NYAD value of 3.93.  Our general rule of thumb (95% reliability past 5 years) is that if the NYAD opens above 3 the odds for a green close are 100%.  (A little fun with numbers there).  SPY did manage to penetrate R3 before falling back in the afternoon session but still managed to close at R2.....that's bullish.  Volume was thin and we still have 4 days in the week to sustain losses but the models are bullish until proven otherwise.  We've seen this Greek bailout fail so many times in the past months that a healthy bit of skepticism is warranted. Here's my friend Dave Moenning's take on the Greeks. Just like Friday we had a nasty little selloff at the closing bar.
Tomorrow we'll look at the weekly Ponzo charts for the SPY and QQQ.

Bearish Odds for This Week...06.21.15

That was a lousy close on Friday and the technicals are supporting Thursday's note from the Trader's Almanac forecasting a bearish week ahead. Note below that the Ergodics and ADX were divergent all day....another bad omen.  The closing bar on Friday was particularly nasty and the 2 hour chart below shows we have broken through the 8/8 channel am may be looking to retest recent lows. Let's not forget we still have the black comedy of the Greek bailout hanging over our heads and if that situation finally does go down the toilet the markets are likely to react violently and bearish.
The weekly VDX update is a bit ambivalent but looks to be turning down.