Closing Read May 14, 2010

Primary Trend=Down

Number of days=14

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 14:  The Secondary gained 114 ticks to -199.

AM Update May 14:  The Secondary is gaining 91 ticks to -176 as the downcycle on the Secondary continues.  To turn up, positive signal weight of +1640 is needed.

PM Update May 13:  The Secondary gained 49 ticks to -85.

AM Update May 13:  The Secondary is gaining 66 ticks to -102.  Positive signal weight of +820 turns the Secondary up today. (btw, that white arrow doesn't really exist)

PM Update May 12:  The Secondary lost 126 ticks to -36.  The Secondary will be able to turn up tomorrow with strongly positive signal weight.

AM Update May 12:  The Secondary is losing 86 ticks to -76.  +2980 signal weight is needed to turn the Secondary up today.

PM Update May 11:  The Secondary lost 35 ticks to -164.

AM Update May 11:  The Secondary is gaining 60 ticks to -256.  It cannot turn up today because +3600 signal weight is required to do so.

PM Update May 10:  The Secondary lost 186 ticks to -197.

AM Update May 10:  The Secondary is losing 172 ticks to -211.  It will take several days of +1500+ signal weight to turn the Secondary up.

May 14:  Closing Read

I drew in that white line to show how much of the gap from 5/10 has been filled.  If you scroll down through the entire week, you'll start to see the volume fill in where there are nulls or voids.  And now we've got dualing gaps--one above to 116.08 and one below to 111.50, a whole group of targets.

With the Change now at +13 and signal weight -2371, we're obviously at that part of the cycle where any further declines in price are unsustainable in the current down cycle on the Primary as the Slope has reached its maximum.  So we should expect a slope change up either Monday or Tuesday.  The Primary isn't yet overextended at -1573, and within a few hours regardless of signal weight at the open on Monday, it will reach -5000 by mid-day.

May 14:  11am

Signal weight -2439, the Change -69, Primary +5961 and declining by 660 ticks per bar.  That gap that I wrote about in the Opening Read at 113.63 (is actually 113.77) was filled during the 10:30 bar this morning.  We've also got an opening gap down today as well at 115.30-115.90 which will be filled at some point.  With signal weight -2400 and the Change still quite strong at -69, we shouldn't expect any bounce until the Change approaches zero and signal weight becomes less negative.  But I fully expect to see this cycle last into late Monday or Tuesday of next week and the lower targets into the gap from May 10th be achieved (111.51) as the Secondary is firmly down.

That's it for me today folks, have a great weekend.  I'll update this evening.

May 14:  Opening Read

Signal weight has opened extremely negative at -2131, the Change -104.  The 115 target, the double chevrons up from 5/10-11 is being tested at the open.  If you switch to the Secondary on your program, you'll see the top of the gap from last week is 113.63 which seems another likely target for this down cycle.  Also, the Primary's value is still very high at +7700.  We should expect to see it at -7000+.

May 13:  Closing Read   Enter Short Confirmed, Trading Model Profit Target Achieved

The enter short signal was confirmed yesterday at 1:30pm at SPY 117.29.  The trading model was short SPY at 117.29 with a gtc exit at 116.14 which was achieved during the 3:30pm bar near the end of the day.  Signal weight at the time of the signal was only -90 and remained in a weak narrow range until late in the day when it became much more negative, price resolving in the direction of the Primary.  At the close, signal weight was -957, the Change -54 and the Primary still quite high at +8138.  Downside targets for this cycle are the double chevrons up at 115, then possibly to the very large volume spike in the middle of the gap at 113.

May 13:  12pm  Early Slope Change Down Signal Issued

There's the signal.  It'll confirm at 12:30 if signal weight is less than +60.  A double signal is also possible at 12:30, an early enter short assuming signal weight remains negative.  Downside targets would be the single and those two double chevrons up at 115+-.  Signal weight's always the key.  The model will be taking the short signal if issued.

That's it for me today until this evening.  

May 13:  10:45am

Signal weight has now reversed, standing at +636, the Change -52.  There's a volume null between 117.59 and 118.56.  If price gets into this area and signal weight strengthens further, price could easily move up into the mid to upper 118-119 area.  +820 signal weight turns the Secondary up and an early enter long would be issued.  My expectation would still be for a short signal but we're going to need signal weight to reverse again for that to happen.  

Here's where the discipline and patience comes in.  Yesterday, we could trade due to the fact that the Primary could not turn down and signal weight was extremely positive.  Today, we do not have that.  Aggressive traders would be selling or building shorts into any further price gains at this point in the up cycle on the Primary.

May 13:  10am

Signal weight has become much less negative at -284, the Change -109 and still 2 bars from an early slope change down.

May 13:  Opening Read

Signal weight -1189, the Change -169 and TTXSlope=2 bars at the current level of signal weight.  The 2010 trading model will be taking a short signal if it is issued today.

May 12:  Closing Read

Signal weight remained extremely strongly positive all day, closing at +2244, the Change only +2.  The value of the Primary is now +8276 and while not yet overextended, it will approach +10000 in about 2 hours given the same level of signal weight tomorrow.  With the Change +2, we should be looking to sell into the next high.  It will also be possible for the Secondary to turn up tomorrow.  If it does, a middle long signal will issue that the 2010 trading model will ignore because the Secondary will obviously not be trending.

May 12:  10:15am

Signal weight now +1958, the Change +37.  The Primary can continue to rise only if very strongly positive signal weight maintains itself.  We can continue to trade in the direction of the Primary and expect price to resolve in that direction only if signal weight and the Change remain positive.  The expectation for the next signal still remains a short signal.  This is the last post until after the close this afternoon.

May 12:  Opening Read

Signal weight has opened strongly positive at +1293, the Change +12.  The Secondary cannot turn up today unless signal weight goes back to maximum.  This is one of those times when our patience and discipline get tested.  Only strongly positive signal weight can keep the Primary from turning down as the Slope has already reached its maximum.  We can still trade in the direction of the Primary but our price targets should be close and we must stick to our disciplines.

May 11:  Closing Read

Just after the 2pm posting, signal weight began to head back toward zero erasing most of the price gains for the day.  At the close, signal weight was +299.  Tomorrow, signal weight will need to open strongly positive to continue the current up cycle on the Primary, or we'll get our slope change down and another short signal by mid-day.

May 11:  2pm

Signal weight near the high level of the day at +1363, the Change +0.56.  Price is back to the break down level from 5/06.  Unless signal weight goes above +2000, the Change will not go much further positive from current levels.

May 11:  12:40pm

Signal weight has now turned positive at +727, the Change only -26 and the Primary has crossed zero.  Any slope change is even further out unless signal weight reverses again and goes strongly negative.  Otherwise, the up cycle on the Primary continues.

May 11:  11:20

The opening gap on SPY has now been filled.  Signal weight now weakly negative at -358, the Change -97.

May 11:  11:10

Signal weight now only -483, the Change still -104 and any slope change today has been pushed out further in time.

May 11:  10:20am

Signal weight a bit less negative but still -1057, the Change -170 and at least 2-3 hours away from a slope change down at this level of signal weight.  I still expect to see price resolve back up in the direction of the Primary until we actually get a slope change signal.  With the value of the Slope +744, it's still very high so don't expect a slope change down too soon unless signal weight turns much more strongly negative.

May 11:  Opening Read

Signal weight has opened strongly negative at -1607, the Change -223 and TTXSlope=4 bars at the current level of signal weight.  I am quite surprised to see the Change over -200!  I said last night that it would take all day to get a slope change down but that isn't the case as you can see.  You learn something new every day!  So a slope change down and a new short signal is expected today as long as signal weight remains strongly negative.

May 10:  Closing Read

With the Slope value at +1100, the Change +6 and signal weight at a maximum positive extreme, we should expect that with any normal signal weight ranging from -1000 to +1000 tomorrow, it will take virtually all day for the Slope value to approach zero meaning it will be very difficult for the Primary to turn down tomorrow.  It's doubtful that the Secondary will turn up either but we won't know that until the morning to see the Stats Calculator.  But my guess we'll need +3000 signal weight to turn it up tomorrow which is quite unlikely.  We should continue to view the current upcycle as unconfirmed and expect that the next signal will still be a short signal.

May 10:  1:35pm

Signal weight holding extreme positive levels at +2852, the Change +43 and now starting to decline.  The value of the Primary is -8123, up from -14500 this morning as we would expect.  As long as the Primary is rising and signal weight this strong, we should expect price to resolve back up until the Change turns negative.  However, a break of 114.76 will send price down into the gap especially if signal weight begins to decline.  Regardless, the trading model is neutral awaiting the next short signal.

May 10:  11:25

Signal weight +2900, the Change still over +100.  One consequence of an unusually high Slope value will be the length of time it will take it to reverse.  A slope of +1000 will take a day or more to reverse with signal weight -1500+- as opposed to the usual 3-5 bars.  A normal slope typically peaks at +-500.  So there will be quite a time lag between when the Change reaches zero and the Slope can approach zero.  Aggressive traders may want to consider front running the next slope change down signal and use the Change value, rather than the Slope, to time the entry.

May 10:  10am  Slope Change Up confirmed

There was no question about the slope change this morning.  Now, we've got this gap down to 113.51 that will need to be filled at some point.  Clearly, most of last week's action was well in place before the rout on Thursday which we must characterize as a 'market' related, not fundamental, event.  So if we discount the lows on that day and consider that the 'real' low was around 109.80 (which is what the program shows), then this decline isn't over although all of our targets have been met.

One thing however, notice the huge Change?  Given the Slope is now +386 and the Change still well over +150, the Slope is going to get really big before it reaches maximum for this cycle.

May 10:  Opening Read  Early Slope Change Up/ Early Exit Short signal issued

Signal weight +2308, the Change +197, Slope = 176 so we're obviously going to get a slope change up.  No long signal can be issued because the Secondary cannot turn up for at least several days.  

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.

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