Divergences don’t matter…until they do…

Over and over again, especially in bull markets, prices keep going higher despite divergences on internal indicators, but when a tumble comes, a “pull back”, even a crash and one looks back at its beginning there is usually a divergence there.

Or a cluster of divergences.

So as of today, we have one in CNN Money’s “Fear And Greed” Index. That index has been wildly over bought as prices have surged on most major indexes (in the SPY ETF surrogate for the S&P 500). It is back off, risen again and as of today put in its divergence by making a lower low while SPY has hugged its high (see the chart below). It is not infallible but if history do tell, it is a reliable context (not the red lines on the chart and subsequent market drops).

And wonder of wonders, the FINRA Margin Debt reading for October came out today (see the second chart below). It is a monthly and always a month behind so there’s always some guess work to be done in real time, but this reading is, indeed, ominous.

Besides having risen way beyond the debt levels of both 2000 and 2007 before those bear markets arrived, it has now been carving out a ledge pattern on its chart (sometimes called a bear flag) for the past few months as the market keeps rising into thinner and thinner air.

Why ominous?

Note it’s the same pattern that was in place as the market was making highs last time and, when it finally fell apart, it was the precursor of the bear markets in both 2000, and 2008. Is it different this time? Is it ever different this time?

History, history, history.

This is to say nothing of the divergences on the McCellan Oscillator (the NYMO) with its Summation Index (the NYSI) declining for the past 10 days even as the market as advanced.

Does this mean we’re about enter a bear market?

Maybe not, divergence don’t always matter. But if a bear comes roaring now there is a good chance when we look back to this day this cluster of divergences will have mattered.

(FEAR AND GREED – CLICK ON THE CHART FOR A LARGER VIEW)

(FINRA MARGIN DEBET – CLICK ON THE CHART FOR A LARGER VIEW)

$SPY – From Friday to Friday to “de ja vu all over again”

MARKET TIMING SIGNALS FOR 8/30/2019.

Long-Term Breadth (the NYSI): Buy DAY 2
Short-Term Breadth (the NYMO): Buy DAY 2
Price (the Nasdaq COMP): Buy DAY 2
Volatility (the VIX): Buy Day 2
Nifty-50-Stock-List: 39 BUYS, 15 NEW BUYS, 10 OVERBOUGHT; 11 SELLS, 0 NEW SELLS, 3 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 28, Rising, FEAR LEVEL.
Bellwether Stocks: 11 UP, 4 DOWN.

WHAT?

The market, after yesterday’s buy signal on all indicators, actually followed through today with a strong upside move.

As a result of the last two up days, we are right back right back to where we were five trading days ago with the SPY trying again to break out of its consolidation box (see the grey box on the chart below). Since last Friday into Wednesday, we’ve had Trump rally-killing tweets and at least a hint that China may timing the market to compound what he does with Twitter. The market quieted down on Wednesday on light volume with solid up day.

WHAT NEXT?

The NYSI, NYMO, Nasdaq Comp, and the VIX are all on buy signals.

Trump tanked the market last Friday and maybe he can manage to blunder into doing it again but, based on the technical indicators, the market “should” have at least one more up day going into the holiday weekend.

That is about all that needs to be said except to note the Fear and Greed index is up on the day and still at a level that gives it a lot of room to move to the upside if the SPY overcomes resistance that top of its consolidation.

(click on the chart for a larger view)

$SPY up against a high wall and ready to rise

MARKET TIMING SIGNALS FOR 8/22/2019.

Long-Term Breadth (the NYSI): Buy DAY 1
Short-Term Breadth (the NYMO): Buy DAY 1
Price (the Nasdaq COMP): Buy DAY 1
Volatility (the VIX): Buy Day 1
Nifty-50-Stock-List: 38 BUYS, 5 NEW BUYS, 10 OVERBOUGHT; 12 SELLS, 2 NEW SELLS, 3 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 25, rising, EXTREME FEAR LEVEL.
Bellwether Stocks: 12 UP, 3 DOWN.

WHAT?

After slamming up and down in a price consolidation for nine days (some might say twelve) it appears SPY, and the rest of the market is ready to rise.

After a one-day dip, short-term breadth (the NYMO) turned up today putting in a low above a low above the zero line (see the pattern on the chart below).

Just as highs below highs below the zero line are gift or the bears (see the most recent on the chart), today’s pattern should be a gift for the bulls.

In addition, both price action (TQQQ as well as SPY) and volatility (the VIX) gave buy signals on today’s close for tomorrow’s open.

The stocks in my nifty-50 stock list have been gradually making the turn in the midst of this consolidation on the indexes. At the bottom of the sell off in late July and early August there were as few as six on buys (8/5), and even just six trading days ago as few as sixteen, but now there are 38 on buys and only ten overbought.

But maybe the best case for expecting an upswing here and a bull run, is CNN Money’s “Fear and Greed” Index (see the second chart below with TQQQ). It has been at “fear” and “extreme fear” levels during this entire past twelve days and today the index put in a low above low pattern while still deep in the fear zone.

That may be a big clue as to what comes next.

WHAT’S NEXT?

If it can vault above the recent highs of the last few days, the market is going to rally strongly, maybe even explosively – and given how far “Fear and Greed” has to run to the upside, this rally could carry back to the highs and possibly beyond in the next few weeks…

It better.

I say “it better” because if it doesn’t off this setup it’s going to be as Trader Vic Sperandeo always says: “If the market doesn’t do what is expected, it will do the opposite twice as much.”

Overall, I must say I am long-term bearish. I think this became a bear market on the sell down last December when margin debt, which was at that point higher than both 2000 and 2007 started to come apart, and all this jerking around this entire year is so far the death throes (however spectacular) of a long-term bull. President Obama brought this out of the depth of despair and it has managed to keep going on the tax-cut buy backs and the deregulation under Trump, but it is a ten-year bubble now waiting for the prick to bring it down. No wonder Trump, with his trade war and farmers going broke all through the Midwest and layoffs creeping into the headlines, is screaming desperately at the Fed to cut rates.

But none of this is going to matter tomorrow.

(click on the chart for a larger view)

(click on the chart for a larger view)

#MarketTiming – back to across-the-board buys…

MARKET TIMING SIGNALS FOR 6/14/2019.

Long-Term Breadth (NYSI): BUY DAY 6
Short-Term Breadth (NYMO): BUY DAY 1
Price: BUY DAY 1
Nifty-50-Stock-List: 18 BUYS, 5 NEW BUYS, 9 OVERBOUGHT; 32 SELLS, 1 NEW SELLS, 3 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 39, RISING, FEAR LEVEL.
Bellwether Stocks: 10 UP, 10 DOWN.

WHAT?

The question in the last market-timing post here was the market due for a Stall or a Drop?.

With barely two days down in the indexes it appears it was merely a stall.

The nifty-50 stock list worked off its overbought condition during the week from 41 stocks on buys Monday (28 overbought) to 15 on buys yesterday. Buy signals in the list clicked up today to 18 on buys with only 9 stocks overbought.

WHAT’S NEXT?

Since long term breadth continues to climb, assume there will be more upside with an up day likely again Friday.

Of particular note: CNN’s “Fear and Greed” Index put in a low above a low today (see its chart below with the Nasdaq Composite) as it works its way higher. It is still at a “fear” level so there is more room to move up.

(click on the chart for a larger view)

$SPY – six days up into a black candle

Does the market pause here, pull back, or continue to rally?

My bias going into Friday is a pause, possibly going into a pull back.

But, thanks to SPY rising six days in a row, putting a black candle on the price chart and an inside day today (see the chart below), it’s going to be easy to see the next move, either up or down. Every black candle, which I simply define as a day in which the close is higher than the day before and lower than its open, is a clear sign of indecision in the market and an inside day is a further indication of indecision. The indecision obviously is resolved above the high or below the low of the black candle day. It’s that simple.

At the moment, the key numbers on SPY are 287.76 at the high and 285.75 at the low.

Of course it takes a down day to start a decline and SPY, at six days up, has not had one but the Nasdaq Comp, after five days up in a row, was down slightly today and there were eighteen sell signals today on my nifty-50 stock list, CNN’s Fear and Greed Index is overbought in the greed zone… All of which contribute to my bias.

On the other hand, long-term breadth (NYSI) continues to rise, short-term breadth (NYMO) also is positive so it’s likely, when and if it comes, the dip will be more of a pause than a deep pullback.

In the meantime, it might be time for swing traders to tighten stops to lock in profits. It’s been a good upside run this week with TQQQ up 3.8%, TNA, up 3.1% and UPRO up 2.5% at today’s close.

Among the bellwether stocks FB is up 4.9 %, FSLR up 3.9%; AAPL lagging but up 2.1% (watching for a short soon); remarkably WYNN is up 13.1% and AMD up 10.4% and GS up 4.2% and BAC up 4.5% at today’s close. All of these are four day trades from the market-timing buy signal on the open Monday.

(click on the chart for larger view)

#MarketTiming – today’s “gasp” in the slow rollover…

Yesterday in this link below it was suggested that there might soon be a collective market gasp as the fierce bear-market rally might becoming to an end, possibly as soon as today:

$SPY – the slow roll over?

The rollover didn’t show up all that much today in the indexes but if the leverage ETFs across the most prominent sectors are any indication (see the illustration below), this could be the start of something big for the bears.

Besides the solid gains in these leveraged ETFs (see percentage change column on the chart below), 42 of the stocks in my nifty-50 stock list were in the red. That was mass selling, a veritable blood bath on the day. SPY puts in or at or near the money on the open, expiring today, were up a minimum of 93% from today’s open (the 279 put was up 243%, showing there is nothing “slow” about a rollover on an expiration day).

In addition, CNN’s Fear And Greed Index appears to have topped again at an extreme greed level and turned down (see the SPY chart below). And the VIX has edged up above 15 again, a key level in the ebb and flow between bull and in this case more importantly bear markets.

Again, as it was coming into today, the market looks primed for more down side. As long as the breadth indicators (NYMO/NYSI) are negative, shorts are in play.

(click on charts below for a larger view)

(click on the chart for a larger view of SPY in relation to CNN’s Fear And Greed)

$SPY – chances are the market plops tomorrow

I was going to write a detailed analysis of why I think the general market (SPY, QQQ) takes at least a dip Thursday but I’m kind of tired.

So suffice it to say, the Nasdaq Composite is up seven days in a row, and SPY, except for a brief pause a few days ago, the same. My Nifty-50 stocks have gone from 40 on sells at the beginning of the rally up to 41 on buys Monday and are now rolling over. A lot of the stocks have been sluggish since that peak three days ago.

CNN Money’s Fear and Greed Index is one click away from an extreme greed level.

Most importantly, long-term breadth has gone negative today (see the red line on the chart below).

Yup, there’s good chance a pull back begins tomorrow. Hopefully it is a down swing that lasts for a couple of trading days since this advance is now in thin air and can surprise to the downside any second.

Time to tighten stops or look to to exit the up swing.

(click on the chart for a larger view)

$SPY options – another freaky Friday?

Last Friday, the calls in what I’ve ironically labeled for myself the “Fool’s Game” exploded 250%.

In my post in this link below I noted that going into that Friday, my game was looking at its first losing week this year and there had been no trending day during the week also for the first time this year. I define a trending day as any day either the weekly SPY calls or the puts close with a 100% or more gain.

TRENDING DAYS IN THE FOOL’S GAME

So what’s this week look like? Pretty much the same as last week.

As of today’s close, this day-trading system, buying SPY calls and/or puts, expiring either Wednesday or Friday, is losing money, a jarring 81% for each $10K traded (it was losing 152% at last Thursday’s close). Obviously, one does not trade this with any more than a small portion of any account. In addition, this week again there has been no trending day.

Can last Friday be happening again this week? I’m going to suggest — yes!

SPY is down this week four days in a row (not much) which tends to be a magical number for a turn-around in my experience with swing trading, especially in this bull market. The Nasdaq Comp is down three consecutive days. CNN Finance’s “Fear and Greed” Index is down four days to 21, an “extreme fear” level, a neighborhood in which one should consider going long. Yesterday, 40 of the stocks in my nifty-50 stock list were on sells (that is usually the bottom or the beginning of the bottom in any downswing, however small). Today those stocks clicked up to just 38 on sells. The VIX gave a swing buy signal to go long on tomorrow’s open.

And tomorrow is Friday. There have been twelve trending days by my definition so far this year and seven of them have come on Friday. Freaky.

Added all up, tomorrow looks like a run to the upside again and the calls could go crazy, again, if its another trending day.

Or the market could have a monster fifth-day-down crash…but then that would also be a trending day, only in the puts instead.

$SPY – Can “Fear and Greed” bring on a tumble?

The market Tuesday opened up, ground down, firmed into the close. I hardly know what to say, another day of chop with an upward bias.

However, the grind down managed to turn all my swing signals negative which would indicate further downside but of late that has seldom happened in this bull market. It is almost as if the signals (reliable for years) work again, it will be a sea change, or at least a nasty little rogue wave sucking that the bull’s ankles.

Took a look at CNN Money’s Fear and Greed Index (see chart below). Talk about divergences with the ever rising S&P…that is an ugly, ugly chart, and the last time it got this ugly the general market took a bit of a tumble back in August. That, in retrospect was a tumble that reinvigorated the market for another bull run.

So here’s to tumbles?

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Sell (Day 16).

PRICE: Sell. (Day 1).
SHORT-TERM BREADTH: Sell. (Day 1).
VOLATILITY: Sell, (Day 2).

CONTEXT:

SPY CLOSE – 258.67
QQQ CLOSE – 153.88
CNN MONEY’S FEAR AND GREED INDEX: (58, falling, greed level).
NIFTY-50 STOCK LIST: 24 Buys; 13 Overbought, 3 Oversold, 3 new buys today, 9 new sells.

(click on the chart for a larger view)

Sell, sell, sell and SELL!

Wonder of wonders.

All three of the swing signals I pay attention to – based on price, breadth and volatility — gave sell signals today for tomorrow’s open, and even long-term breadth turned down too.

I can’t remember the last time all these were in sync but I think it was back in early August, not long before the last decent dip this bull market had.

What I’d like to see now is this market take a drop like an airliner that runs out of fuel in mid-air, a slam down that falls hard and fast enough to scare the complacency out of every long-term passenger in the first-class and economy seats alike. Can’t say the C word since that would insure we get no pullback at all…but down hard and fast enough would, as they say, clear the air.

And we are still in “extreme greed” on CNN Money’s Fear and Greed Index (see chart below – SPY in blue, FGI in red) and it too has far to fall. Ideally, a three to five week pullback into “extreme fear” again would truly refuel and restart the engines.

Needless to say, as strong as this bull market has been (and probably still is) none of that is likely. So okay, I guess, a nice glide down for two or three days before a charge up to the highs again would be fine too.

Might not even get that in the wild blue yonder of this market.

SWING TRADING SIGNALS:

PRICE: Sell. (Day 1).
SHORT-TERM BREADTH: Sell. (Day 2).
VOLATILITY: Buy, (Day 23).

CONTEXT:

SPY CLOSE – 253.95.
QQQ CLOSE – 147.48.
LONG-TERM BREADTH: Sell (Day 1).
CNN MONEY’S FEAR AND GREED INDEX: (84 falling, extreme greed level).
NIFTY-50 STOCK LIST: 24 Buys; 18 Overbought, 5 Oversold, 5 new buys today, 7 new sells.

(Click on the chart for a larger view)