Closing Read May 28, 2010

Primary Trend=Down

Number of days=22

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

5th Target= 109.64  achieved 5/20

6th Target= 106.33  achieved 5/21

PM Update May 28:  The Secondary gained 45 ticks to -75.  The Secondary will be in a position to turn up next week.

AM Update May 28:  The Secondary is gaining 22 ticks to -56.  +500 signal weight turns the Secondary up.  (That slope change arrow doesn't really exist.)

PM Update May 27:  The Secondary lost 167 ticks to -33.  The Secondary will be able to turn up tomorrow if signal weight opens very strongly positive.  

AM Update May 27:  The Secondary is losing 155 ticks to -44.  The Secondary may be able to turn up tomorrow.

PM Update May 26:  The Secondary lost 80 ticks to -200.

AM Update May 26:  The Secondary is losing 150 ticks to -129.  It cannot turn up today.

PM Update May 25:  The Secondary was flat today.

AM Update May 25:  The Secondary is gaining 80 ticks to -358 as the down cycle continues.

PM Update May 24:  The Secondary gained 3 ticks to -278.

AM Update May 24:  The Secondary is losing 51 ticks to -231.  The Secondary cannot turn up without 3-4 days of strongly positive signal weight.

May 28:  Closing Read

Signal weight spent most of the day between -750 and -1350.  A slope change down was confirmed at 12:30 and an enter short confirmed at 1pm at SPY 109.53.  The model is short SPY at 109.53 with a gtc exit at 108.53.  The Primary is at +6896 with room to fall.  There's an obvious downside gap at 108.79 to 107.70 and we should expect to see price move into this area.

But the big point is what's going on with the Secondary.  If we're about to see an origination of a new up cycle on the Secondary, then we need to be cognizant of the signal weight required to not only turn it up, but move it above +70.  Hence, given we are about to see an upcycle on the Secondary, we will want to buy into the current decline and position ourselves by the time the Primary can turn up.

Over the last two weeks, we've seen signal weight in the +-2000 area frequently.  And as I have previously stated, we should expect to see this during periods of higher volatility.  So, if signal weight is just moderately negative for the balance of the current cycle, then we'll see further positive divergence in the Secondary indicating we are going to see the Secondary turn up.  Price will follow.

May 28:  10:15am

Signal weight has turned positive, +29, the Change -122.  I wouldn't be very surprised to see them fill the gap to 111.59 today if signal weight turns strongly positive, otherwise we should see a slow moving slope change down.  Since it's a Friday before a 3 day weekend (you're off Monday), a fitting day for golf don't you think?  See ya!

May 28:  Opening Read

Signal weight has opened modestly negative at -682, the Change -180 and TTXslope=3.3 bars.  An early enter long signal went out in error, please ignore.  If signal weight turns positive today, +500 will turn the Secondary up and generate a middle long signal which the model will ignore.  If we get a slope change down today, another short signal will most likely be issued as well.

May 27:  Closing Read

A rising tide carries all boats, especially when signal weight is +2686.  It will be possible for the Secondary to turn up tomorrow, which will generate a middle long signal that the model will ignore.  The Primary is +7438 and will be in overextended territory by mid day tomorrow.  The ranges have remained large and we should continue to expect this to continue.  Upside targets set on the 25th have partially been met, 112+ remaining.

May 27:  2:40pm

Signal weight still +2600, the Change now -9 hence the Slope has reached its maximum.  The value of the Primary is now +5891.  The top of the gap from 5/20 is 111.75.

May 27:  12pm

Signal weight holding +2600, the Change now approaching single digits at +10.7.  Price is trading above 109.46, but with the Change now so low, any move higher in price will be unsustainable in this up cycle unless signal weight continues to remain above +2000...and even then it will just stretch and be quite vulnerable.

I've posted some comments relating to the Secondary in the Advanced section.  The next down cycle on the Primary will be of particular interest as it will probably be the last down cycle that will be confirmed by the Secondary in the current cycle.

May 27:  10:30am

Signal weight holding +2590, the Change now +30, price is at the resistance levels at 109.46+-.  If the pattern of the last month holds, we should expect to see price weaken as the Change approaches zero again.  The Primary will be back into positive numbers at the next bar.

May 27:  Opening Read

Signal weight has opened extremely positive at +2501, the Change +44.  109.46 is still a hurdle price must rise above before any further advance can be sustained.

May 26:  Closing Read

109.47 has again contained any upside advance in price during the last two up cycles on the Primary.  Signal weight stayed extremely positive until the 3pm bar when it declined to +1700+.  Yet that small change was enough to turn the Change negative.  Once again we're seeing an extremely strong signal weight push the Slope to its maximum within half a day of a slope change.  And we certainly are seeing stronger price moves down than up which is consistent with the position of the Secondary.

But what is of note today is the position of the Change graphic on the Secondary.  It is starting to build a positive divergent pattern.  A few more days will tell for sure.  

May 26:  10:30am  Exit Short Confirmed at SPY 109.08

Probably the worst loss of a trading signal in several years in terms of points.  As long as the Change remains strong, and it's huge at +161, any weakness can be traded back up in the direction of the Primary.  109.56 is a key upside resistance level which must be taken out before any advance to cover out the gaps in the 109.80-111.20 region.  I'm off until later in the day.

May 26:  10am

The early exit short signal has issued that will confirm at 10:30 if signal weight exceeds +1740.  

May 26:  Opening Read

Signal weight has opened the reverse of yesterday, now +2184, the Change +206 and TTXSlope=1 bar at the current level.  An early exit short is expected within an hour.

May 25:  Closing Read

Signal weight closed at -834, the Change +64 and price recovering from the lows to close flat on the day.  The trading model is short SPY at 105.47 with a GTC exit at 104.47.

Assuming we get a slope change up tomorrow, there can't be any long signal because the Secondary cannot turn up.  If users have been using an aggressive approach since volatility has risen, then that strategy must continue.  Upside targets for the next cycle go up to 110.43 to 112 from current levels.  Assuming we open with strongly positive signal weight, we should position for the next slope change up.

May 25:  3:30

The Change went positive during the 3pm bar, price moving back to fill the gap.  Signal weight has become much less negative at -1000. 

May 25:  2:30pm

Signal weight -2411, the Change getting low at -12.  

May 25:  12:45pm

Signal weight remains -2559, the Change -52.  Price has bounced a bit from the opening lows, but unless signal weight moves under -2000, we should certainly expect price to resolve back in the direction of the Primary and retest the lows of the day. (a good time to use the signal weight limit minder, set up limit to -2000, lower to -2825 and go do some pushups)

May 25:  11am  Slope Change Down Confirmed, Enter Short Confirmed

Both signals have confirmed, the trading model is now short SPY at 105.47 with a GTC exit at 104.47.  Signal weight remains extremely negative.

May 25:  10:30am  Early Slope Change Down/Early Enter Short Signal Issued

The early slope and early enter signals have issued.  The slope change down signal will certainly confirm, the enter short will confirm at 11am if signal weight exceeds -2700, otherwise it will confirm at 11:30am.

May 25:  10am

Signal weight remains extremely negative at -2790, the Change -139 and TTXSlope=next bar.  Price has bounced somewhat from the opening lows.  We should expect an early slope change down signal at 10:30am and probably an early enter short as well.  The trading model will be taking the signal if it's generated which seem extremely likely at this posting. 

May 25:  Opening Read

Signal weight has opened -2297, the Change -138 and TTXSlope=1.5 bars at the current level of signal weight.

May 25: Pre-Opening Read

SPY is trading at 104.80 in pre market trading.  This is a significantly large gap and places the market automatically in panic mode.  It's going to take at least an hour or more to generate an early slope change down signal.  Such periods are very difficult to predict unless signal weight is greater than -2000 in which case price will stay down and any bounce will get hit again.

May 24:  Closing Read

A weak signal weight day, ending at -744, the Change -68, the Primary now -5274.  So the Primary has now risen 11000 ticks from the lows.  If signal weight opens negative tomorrow, we'll certainly get a slope change down and another short signal.  105.48 is the previous low.  If we gap down on very strongly negative signal weight, aggressive users may consider front running the slope change and signal.

 May 24:  2:45pm

Signal weight beginning to erode again, now +183, the Change -28.  Unless signal weight turns strongly positive tomorrow, we'll get a slope change down and another short signal.

May 24:  12:30pm

Signal weight moderately positive at +807 the Change +3 as the up cycle continues although weakly.  The Primary is now at -7900, price has thus far held the highs from Friday.  We should continue to expect price to resolve up and this cycle to last until the Primary reaches at least zero.

May 24:  10am

Signal weight now moderately negative at -695, the Change -70.  If we get a slope change down today and another short signal, the trading model will be taking the signal.

May 24:  Opening Read

Signal weight has opened weakly positive at +29, the Change -44 and TTXSlope=15 bars at the current level.  We should expect to see this up cycle play out for at least another day if not more since the Primary is still overextended on the downside.  110.40 then 112 are upside targets from current level assuming signal weight turns strongly positive. 

May 21:  Closing Read

Another gap opening down on extreme signal weight while the Change was strongly positive:  a balloon underwater.  The lows of the first half hour of trading obviously couldn't sustain and another reversal up.  By the end of the first bar, the Change was so high that a slope change up today was a certainty, the Primary reaching -17,989.

It will take many days of positive signal weight to turn the Secondary up, much less make it trend.  The next signal will still be a short signal, but aggressive users should continue to take advantage of the increased volatility especially since the upside targets from here are so easily identified.

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