QQQ 50 day Butterfly...05.29.15

While we're watching the market undergo a mini-swoon today we should also note that our Ponzo model has been dead on forecasting this week's action.  And, as a follow up to yesterday's post here's the actual QQQ options butterfly setup the model is indicating.  There's a free site I mentioned before to explore the various options risk/reward scenarios and these are the calcs for our trial trade.  We'll check back in a month to see how it's doing and then at 50 days...the defined options expiration date. Some brokers will let you put on 3 legged options trade for one commission although most will charge you a double commission.
Keep in mind this is just a trial balloon trade but the risk/reward ratio is pretty attractive.

Roller Coaster Ride Continues...05.28.15

There was no follow through on yesterday's strong close, presumably due to the Greece credit collapse.  The Euro was actually up but the Chinese markets plummeted (6.5% at one point).
Once again we're swimming in a sea of uncertainty with occasional whirlpools of optimism.
Here's the latest on the QQQ Ponzo update.  I'm spending a lot of time developing a couple new models based on QQQ since the QQQ forecast appears much stronger than the SPY....which is a characteristic of a bull market.  It may all end in tears but for now we're looking at a two pronged approach using a market neutral strategy (the options Butterfly band) and the LVQ incremental daily model posted yesterday.  Tomorrow I'll post the weekly version of the LVQ going back 7 years so it includes the 08-09 crash.  I think you'll see the merit of this incredibly simple system.

Turnaround Push a new QQQ model and more...05.27.15

The oversold condition of SPY yesterday created with a plunge to S6 was reversed today with increasing momentum throughout the day and closing on the near highs of the NYAD.....bullish.
The intradday Ergodic and ADX chart shows in sync behavior suggesting real accumulation not just HFT chatter.  We're coming up on the end of the month, typically bullish, so we may see continued strength into next week.
We have a new low volatility QQQ based model (LVQ) that will be one of the cornerstones of the Mosaic hedge fund to be launched in the Fall.  The future of the current Mosaic Newsletter and daily M3 updates is under review to determine if they are legally and logistically compatible. Be assured there will be no disruption of the current service without at least 30 days notice.
Tomorrow we'll look at the companion QQQ Ponzo forecast and an outline of a strategy to reap potential benefits with rigidly defined risk.

The JAWS Pattern ....05.26.15

Per Saturday's post regarding the narrow band conditions and the expectation for a subsequent biqg move....we got it today and it was an ugly JAWS pattern (see SPY VOXEN chart below).  The Ponzo and Pairs models had argued for a bearish opening today and it went from bad to worse with SPY ending at the S6 pivot and the NYAD never showing any buying strength.  Tuesdays and Wednesdays following Memorial Day tend to be bearish with a potential turnaround on Thursday. The longer term momentum still looks bullish as long as this drop doesn't accelerate into something more than a modest pullback.

Looking for Mr. Goodbar...05.23.15

Here's a variety of weekend stuff including the daily Ergodic/ADX chart showing the HFT dominance on Friday, the current Ponzo SPY Forecast and VDX mosaic for SPY and XIV and the SPY TrendX.  I hope you had a chance to read the Schwab piece on performance metrics....the whole CAPE concept puts the current P?E status in a different light.
Going forward next week (Monday's not a trading day) the various graphics project a neutral to down odds scenario and I'm a bit concerned about the SPY TrendX rolling over.  We are setting up a narrow band (wedge) consolidation on decreasing volume (see the VDX mosaic chart).  Narrow band patterns tend to behave like coiled snakes and when the bands are broken it tends to be in a dramatic fashion.  That doesn't help us a lot right now other than to watch the stops and be ready for a likely pop in volatility. As I mentioned in Friday's M3 closing comment, the XIV is extremely overbought by most metrics....more so than what is suggested by the attached VDX mosaic.

A Schwab White Paper as we wait for the Break...05.21.15

Here's today's Ergodics/ADX chart of the SPY and for those that haven't been following along the thesis is that divergence in these indicators reflects HFT activity versus the trend while indicator convergence reflects true accumulation or distribution.  It's been noted that in divergent situations the ADX tends to lead the Ergodics, which is really a proxy for price.
Those using the VIXEN approach will appreciate that this little nugget of info can be very useful as a confirmation signal for both entries and exits.
I regularly listen to the one hour bi-weekly charting presentations offered to Schwab clients (I"m not trying to push Schwab).  Today they talked about an interesting series of white papers available to the public,  This current one offers some original thinking on what performance metrics may or may not be telling you.

Keeping Pace...05.20.15

The markets basically went nowhere today, even with The FED minutes offering an excuse for a rally.  There actually was a rally minutes after the FED release but the mood couldn't be sustained and price fizzled down into the close. SPY is still overbought on a daily basis although the consolidation of the past 2 days has worked some of that off.
Surprisingly, there was little evidence of HFT price manipulation per the ergodic/ADX alignment so we're left with a neutral (cash) forecast for Thursday and then the usual negative bias for Friday...which is more likely than not considering Monday is Memorial Day and a non-trading day.
XIV is WAAAY overbought and M3 signaled an end to short term bullish prospects at the close.