Closing Read May 7, 2010

Primary Trend=Down

Number of days=9

1st Target= 118.3  achieved 5/4

2nd Target= 117.24 achieved 5/4

3rd Target= 115.19  achieved 5/6

4th Target= 113.10  achieved 5/6

PM Update May 7:  The Secondary gained 29 ticks to -383.

AM Update May 7:  The Secondary is flat, gaining 2.6 points to -355.

PM Update May 6:  No, that's not a bad data bar on the Secondary.  SPY traded to 105 today.

AM Update May 6(2):  Signal weight has returned to extreme negative levels, price nearing the 3rd target level.

AM Update May 6:  The Secondary has opened flat.

PM Update May 5:  The Secondary gained 90 ticks to -231.

AM Update May 5:  The Secondary is gaining 104 ticks to -245.  The Secondary cannot turn up without several days of strongly positive signal weight.  The downcycle is in full gear now.

PM Update May 4:  The down cycle in the Secondary expanded as the Secondary gained 128 ticks to -143. The 1st and 2nd target levels have been achieved.

AM Update May 4:  The Secondary is gaining 123 ticks to -138 on extremely negative signal weight.  The first downside price target of 118.3 has been achieved.

PM Update May 3:  The Secondary lost 81 ticks to -15.  The Secondary will be able to flip up tomorrow once again.

AM Update May 3:  The Secondary is losing 72 ticks to -23.  To reverse slope positive signal weight of +1980 is needed.

May 7:  Closing Read

On April 19th, 2:20pm post, I said " What separates successful long term traders from those who burn out and leave the game disgruntled are clearly identifiable strategies and the discipline to stick with them regardless of how long the Secondary is blue.  We may turn blue waiting, but it won't turn red or green until it's >+-75.  We base our trades on the direction of the Delineator, not on the movement of price."  

While no one could have predicted how or why this week played out as it has, certainly the direction of the move must not come as any surprise to a Delineator user.  The wildcard isn't the market, or exogenous events, it's our level of patience and discipline.

During the previous panic, November 2008, the easy money was made waiting for the Secondary to be in a position to turn up, then build longer term positions.  For those of you that aren't so keen at trading both ways, or don't want to spend the time doing it, taking the confirmed signals and waiting for the Secondary to begin to show positive divergence before building longer term positions is the best way of moving forward from here.

There were a few times previously when the Primary dropped as low as it is now.  Exogenous events and forced liquidations were the driving force that kept price declining while the Primary actually rose.  I've only seen it do this twice, once in 2008, the other during the dot.com crash of 2000.  We'll see what signal weight brings next week.

May 7:  3pm

Signal weight back to more strongly negative levels, -1252, the Change +14.  An early slope change up signal will issue this bar if signal weight backs up to -980.  We also seen most of the energy today in the Change be eaten up by consistent negative signal weight.  

May 7:  1:50

Signal weight -800, the Change +47, Slope=-48 so we should see an early slope change up signal during the next bar unless signal weight turns back to more strongly negative levels.

May 7:  1:30pm

Signal weight -1221, the Change now only +25.  111.30 held during the previous bar.  Signal weight will need to move under -1000 before 113 can be tested again.  Set your signal weight alarms to a range of -1250 and -1000.

May 7:  12:30pm

Signal weight got near zero during the previous bar as SPY traded back to 113, near where you can see the very large volume spike.  If SPY can hold 111.30 without signal weight dropping back to -1500, we should see signal weight improve again and lead to a slope change on the Primary.

May 7:  12:16

Signal weight -267, the Change +90, TTXSlope=1.55 bars at this level of signal weight.

May 7:  12:03pm

Signal weight now under -1000, -958, the Change +55

May 7:  11:45

Signal weight -1230 and improving somewhat, the Change +49.  The value of the Primary is now -14,000+.  It hasn't been at that level for quite awhile.  Signal weight is the key, always.  If we see it turn positive, we'll recover a large portion of yesterday's loss.  A move back under -2000 would turn the Change negative and we'd begin to make the final low for this move as the Primary cannot go much lower and hence any move would be unsustainable and set up the potential for a huge reversal.

May 7:  11:15

Signal weight now -1585, the Change +35.  The potential for trading today is fantastic.  See Advanced section.

May 7:  10:30

Signal weight has returned to extreme negative levels again.

May 7:  10:25

Signal weight has returned to very strongly negative levels, -1655, the Change +31.

May 7:  10am

Signal weight was modestly positive for awhile during the first bar but has since dropped back to -1100, the Change +60 extending the time for any slope change today.  

10:15am:  For an unknown reason, the Primary view doesn't show yesterday's low on the price bars.  I'm looking into this.  Doesn't affect signal weight or the calculation of any of our numbers.  The lows do show on the Secondary.

May 7:  Opening Read

Signal weight has opened modestly negative at -676, the Change +95, TTXSlope=4 bars at the current level of signal weight. Not much more to add, other than I'd expect to see signal weight build to positive levels and begin to trade back out of some of the loss from yesterday.  No long signal will be generated after a slope change up for obvious reasons, but given the increased volatility, I'd be inclined to play a slope change up.

May 6:  Closing Read

Well, what a day.  We had what's typically known as a melt down during the 3pm bar.  A flood of sell orders hit the exchanges and fed on themselves, forcing the S&P down to 105 at one point.  The tape ran 10 minutes late and huge volumes.  Signal weight held extreme levels all day; at one point 100% of S&P issues were down.  Every gap since Feb. 5th has been filled.  

At any rate, I've always viewed such market events as opportunities.  Obviously, the Secondary has achieved all its targets.  How long this cycle will last will depend on signal weight.  Such collapses typically have led to strong recoveries assuming the exogenous events that have caused them get no worse.  But with today's extreme signal weight, it will take a week of positive signal weight to turn the Secondary back up.

With the Primary at -12,567, it's clearly overextended.  Signal weight will need to open tomorrow as strongly negative as it is today, otherwise we'll see the Primary change slope up.

May 6:  3:20pm

Signal weight still -2911, the Change -26.

May 6:  2:50PM   AMAZING!!!

The market totally collapsed as huge volumes of sell order at market came in.  The tape was running 10 minutes late at one point.  SPY traded to 105!!  

May 6:  2:38pm

The gap from Mar 5th at 112.80 has been filled.

May 6:  2:20  -2829 Signal weight is at maximum.

That's virtually every stock in the S&P is down.

May 6:  2pm

You don't get to see signal weight in the +-2600 area too often.  The Change is still -26, but obviously, any moderation in signal weight will turn it sharply up.  Nice day to cover shorts.

2:11pm:  sell spikes running through most of my Accumulators right now...there's panic out there now.

May 6:  12:30pm

Signal weight -2039, the Change -6.  SPY hit 115.22 which is close enough to our 115.19 target to consider it met.  With the value of the Primary now -10,500, we're into overextended levels.  While I wouldn't fight -2000 signal weight, a test of the lows again should be bought from an aggressive trading position...certainly, trading shorts should be covered out.

May 6:  12:10pm

Signal weight holding extreme negative levels at -1970, the Change -8.  Once the Change again returns to zero, we'll probably see a move back near 116.60+- area and only if we see signal weight become less negative.  The Primary will be at -10,000 in 1 bar.

May 6:  11am

As price neared the lows, signal weight increased to very strongly negative levels again, -1588, the Change only +5.

11:03:  Signal weight now -1634, the Change +2.5 as price makes new lows.  Too early still for any bounce until we get nearer to SPY 115.

11:20:  Signal weight got to -2000 while price was making new lows.  Starting to see buy spikes on X and SPY (and others) into the lows.

May 6:  10:30am

Signal weight has returned to more strongly negative numbers as price nears the lows of the last day.  Unless signal weight returns to -1500+, any move lower from here will most likely be unsustainable and I'd expect to see something of a short covering bounce. 

May 6:  Opening Read

Signal weight has opened strongly negative but has quickly reversed and now sits at -98, the Change +94 and TTXSlope=3.4 bars.  We'll get a slope change up most likely today with no long signal as the Secondary is strongly down and cannot turn up without several days of strong positive signal weight.

May 5:  Closing Read

Signal weight spent most of the day greater than -1500, closing at -1881, the Change +4.  With the Primary now at -8111, we're entering overextended territory so we can most likely expect a slope change up tomorrow.  It will take several days of very strongly positive signal weight to turn the Secondary up.  Hence, we should expect an unconfirmed up cycle on the Primary given positive signal weight tomorrow, then another short signal early next week.

May 5:  10:15am

Signal weight remains strongly negative at -1901, the Change +13.  The trading model is neutral having achieved the profit target.  I have meetings away today, no not golf, so I won't be posting again until well after the close.

May 5:  Opening Read   Profit Target Achieved

Signal weight has opened strongly negative, the trading model achieving the profit target of 115.40 during the second minute of the trading day.  Signal weight -1957, the Change +7.  With the Primary at -2257, and declining 666 ticks per bar, we should see the Primary reach into strongly negative levels later in the day.

May 5:  Pre-Opening

SPY is trading near the target price pre-market.

9:15am:  SPY has traded to 116.43, near the target price.  

May 4:  Closing Read

Signal weight held extreme negative levels all day, closing at -2253, the Change -12.  Support identified at 118.30 has been broken and we should see a continuation of the down cycle on the Secondary.  Any moderation tomorrow in signal weight will obviously turn the Change up quickly, but with the Slope at -674, even if we get +1500 signal weight tomorrow it will take hours to change slope again.

May 4:  3:30pm

Signal weight remains -2268, the Change now approaching single digits so the slope is already near maximum.  If the pattern of the last several weeks continues, we'll get a bounce as the Change nears zero.  Never got a secondary trade opportunity above 118.

May 4:  12:40pm

Signal weight holding at extremely negative levels, the Change -68.  There's plenty of downside room for the Primary to fall since it's still +2100.  If we traded to 118.24+- within the next two bars and the Change is still at least -25 and signal weight holding -2100 or more, I'd enter a secondary short trade with a cover around 117.30.

May 4:  11am  Slope Change Down Confirmed, Enter Short Confirmed at SPY 117.55

Both signals have confirmed, the trading model short at 117.55 with a gtc cover at 116.40.  With SPY already down -2.3% the current down cycle on the Primary will need to extend for more than 1 day if the profit target is to have any chance of being hit.  But a signal is a signal so the model is short.

May 4:  10:30am  Early Slope Change Down/Early Enter Short signal issued

Both signals have issued and the slope change will absolutely confirm at 11am, the enter short if signal weight exceeds -1460.

May 4:  10am

With the Slope at +15 and the Change -151, we're going to see an early slope change down and an early enter short signal most likely issue at 10:30 if signal weight remains at -2000 or more.

May 4:  Opening Read

Signal weight has opened extremely negative at -2180, the Change -175 and TTXSlope=1bar.  Double signals are expected within the first hour.

May 3:  Closing Read

This last down cycle lasted barely a day, similar to the one on 4/22.  Everything else being equal, signal weight has a hard time staying negative for very long despite the down cycle on the Secondary.  Since the Secondary turned down on April 16th, any attempts to break the high from that day have failed, and no sustanined down trend in price has occurred either.  It is what it is.  119 to 121.50 isn't much of a range to try to trade, yet that's been the range for the past three weeks.

So, we should expect a test of the high from the 28th while the Primary approaches +6500 if signal weight opens again strongly positive tomorrow, otherwise it's another slope change down with a short signal the model will take if we open negative.  The pattern has been that +1500 or more signal weight doesn't follow through for more than a day.

May 3:  12pm Exit Short Confirmed at SPY 119.78

The exit signal has confirmed, the trading model losing .33 cents.  Another shortened cycle, just as we've been experiencing over the past several weeks.  There can be no long signal today unless signal weight goes over +2000.  The trading model is neutral.

May 3:  11:30  Early Exit Short Signal Issued

The early exit signal has issued, it will confirm at 12pm if signal weight exceeds +920

May 3:  11am

Signal weight has begun to decline, now at +977, the Change +55 and the time to a possible early exit short signal has been pushed out at least a bar.

May 3:  10:30

Signal weight +1376 and TTXSlope=next bar at this level of signal weight.  We should expect an exit short signal to confirm in 1 hour unless signal weight begins to reverse.   

May 3:  Opening Read

Signal weight has opened strongly positive at +1458, the Change +117 and TTXSlope=2 bars at the current level of signal weight.  The 2010 trading model is still short SPY at 119.45 with a gtc exit at 118.30.  Here again we're seeing a repeat of the same pattern in signal weight resulting in very short cycles.  It's unlikely we'll see signal weight increase enough to turn the Secondary up.

Apr 30:  Closing Read

Signal weight closed at the lows of the day, as did price, -1578, the Change -44.  There's still some additional range left in the Change so we'll have to wait to see how signal weight opens on Monday.  If the patterns of the prior several weeks hold, we'll see a slope change back up late Monday.  But if price breaks 118.30, I would suspect that more sustained selling will ensue and we'll finally get the Secondary to complete a more normal looking cycle that should take SPY back to the highs in January, 115.10+-.

The purpose of the Delineator Journal is to introduce you to the Delineator Analytic so you may evaluate your level of interest. You are welcome to view these pages for that purpose.  The manner in which I present information does not purport to be investment advice or an advisory service.  The Journal and the "Plus a Percent" strategy described herein are intended to introduce you to the concepts and manner of application of the software so that you may evaluate its purchase for your own use.  I may or may not have positions in the securities mentioned on these pages.  There are many more applications of the Delineator than are described on these pages.

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