Closing Read June 18, 2010

Primary Trend=UP

Number of days=6

1st target level = 111.10 (achieved 6/14)

2nd target level = 113.61

3rd target level = 115.91

PM Update June 18:  The Secondary was basically flat today.

AM Update June 18:  The Secondary is flat this morning.  Negative signal weight of -2860 is needed to turn the Secondary down.

PM Update June 17:  The Secondary lost 26 ticks to +164.

AM Update June 17:  The Secondary is gaining 24 ticks to +215.  The Secondary cannot turn down without several days of strongly negative signal weight.

PM Update June 16:  The Secondary lost 63 ticks to +188.  The Secondary won't be able to turn down tomorrow.

AM Update June 16:  The Secondary is losing 120 ticks to +130.  The Secondary cannot turn back down for several days as -4380 signal weight is needed to do so.

PM Update June 15:  The Secondary closed up 92 ticks to +251 on very strongly positive signal weight.  The up cycle on the Secondary is very much in place.  It will take several days of strongly negative signal weight to turn the Secondary down.  

AM Update June 15:  The Secondary is gaining 64 ticks to +223.  To turn down -2820 signal weight is needed.

PM Update June 14:  The Secondary gained 21 ticks to +157.  It cannot turn over without several days of negative signal weight.

AM Update June 14:  The Secondary  is gaining 74 ticks to +210.  The Secondary cannot turn down today unless signal weight falls to -2460.  

PM Update June 11:  The Secondary closed at +136, up 69 ticks.  A new up cycle has been identified.  I have identified 3 initial upside target levels shown above.  This cycle should last 4-6 weeks and has the potential to recover to the April highs.

June 18:  Closing Read

An early slope change up signal was issued during the last bar.  This signal cannot confirm until Monday morning.

June 18:  3:30pm

Even if we get an early slope change signal this bar, it can't confirm until Monday.  So that's it for me since they're taking me offline in a few minutes anyway.  Have a nice weekend.

June 18:  3pm

Signal weight weakly positive as shown below.  Signal weight of +580 turns the Primary up this bar.  The cable company will be turning off my internet just before the close at 1pm.  I won't be able to post closing comments until later tonight.

June 18:  1:40

It totally slipped my mind, but SPY went ex-div this morning which accounts for most of the price decline today.  At this post, signal weight +248, the Change only +13 now.  A slope change is still hours away unless signal weight turns strongly positive.  

June 18:  12pm

Signal weight has reversed from this morning's levels, now +658, the Change +40 and TTXSlope=2 bars.  Assuming signal weight continues to gain, we should see an early slope change up next bar. 

June 18:  10am

Signal weight now modestly negative at -500, the Change +13.

June 18:  Opening Read

Signal weight has opened weakly positive at +300, the Change +52, TTXSlope=6 bars at the current level of signal weight.  Otherwise, still a waiting game.

June 17:  Closing Read

Signal weight ended flat, the Change already +40.  No question, signal weight doesn't want to stay negative for very long.  The Primary is still +3088 and obviously still has room on the downside, however a strong Change means the Primary wants to rise.  The driver, as always, is signal weight.  Unless driven by exogenous events tomorrow that force strongly negative signal weight, I think we can anticipate a slope change up and another long signal tomorrow due to the strength of the Secondary.

June 17:  3pm

Signal weight continues to moderate, now -504, the Change +14.  Still many hours from any slope change up.  The value of the Primary is now +3858.

June 17:  12:30pm

Signal weight has moderated somewhat during the previous bar as the Change went briefly positive.  Otherwise, just a waiting game.  I'm off to the gym, next post around 2:30pm. 

June 17:  11:30am

Signal weight holding -1000+ levels, the Change now getting near single digits.  The chevron up at 111.13 has held thus far.  We know that we typically get a move in the opposite direction as the Change crosses zero, so we should be aware of that for the balance of the day.  However, with the Slope at -531, unless signal weight reverses to +1000 we should still expect to see the Primary decline and there's little chance of a change in slope today.

We can also see on the Bid/Ask only SPY Accumulator, that the market picked up a bid around 11am as 111.13 was being tested.

June 17:  10:30am

Signal weight now strongly negative at -1266, the Change -39.  The value of the Primary is now +7667, down from +13,000 at the slope change yesterday.  110.44 is the next largest volume spike down from current levels.

June 17:  10am

Signal weight now weakly negative at -218, the Change about to go negative at +4.5.  There's a pair of chevrons, one up and one down, at 111.13.  Once that level is taken out we should see further increases in negative signal weight.

June 17:  Opening Read

Signal weight has opened at +717, the Change +56 and TTXSlope=7 bars at this level of signal weight.  There is no question that the strength of the Secondary is manifesting itself in continued positive or modestly weak signal weight during this down cycle on the Primary.  We've seen this before at the origination of a new cycle on the Secondary.  But our expectations should still be for price to resolve in the direction of the Primary while the Slope continues negative.

However, if we do get a slope change back up, the model will take any long signal that is generated.

June 16:  Closing Read

Signal weight could not stay very negative today, closing at -598, the Change now near single digits at -13.  While it is unlikely the Primary will turn up tomorrow, it is nonetheless possible if signal weight exceeds +2000 for several hours.  The fact that price tested then took out yesterday's high despite the negative signal weight is evidence of the strength behind the up cycle on the Secondary.

June 16:  10:30  Slope Change Down Confirmed

As expected, the slope change has confirmed.  Frankly, I think most of us can ignore the market today and get interested again tomorrow.  Speaking of which, I have an appointment on the first tee.  I'll update later this evening.

June 16:  10am  Early Exit Long/Early Slope Change Down Signal issued

The early exit signal has issued and it will confirm at 10:30 if signal weight is less than +80.  We should expect this down cycle to last 2-3 days and move the value of the Primary at least to zero.  

June 16:  Opening Read

Signal weight has opened strongly negative at -1760, the Change -188 and TTXSlope=next bar at the current level of signal weight.  We expected this action today as Primary is obviously over-extended.  I identfied downside targets in the June 14th closing read below, at 109.10 and 108.80 and 108.05.  You should reread that posting.  There can be no short signal issued today.

June 15:  Closing Read   Profit Target Achieved

The trading model profit target of 111.89 was achieved during the last bar of the day as signal weight maintained very strongly positive levels for basically the last 5 days and consistent with an origination of a new up cycle on the Secondary.  At +13,000, the Primary is very much over-extended.  Any moderation in signal weight will turn it down quickly.  But clearly, the up trend is in place and we need to focus on positioning during the next down cycle.

June 15:  2:10pm

+1942, the Change still positive at +7 as signal weight continues to hold very strongly positive levels.  If we close with this level of signal weight, it will increase the amount of negative signal weight needed to flip the Secondary, making it more likely to stay positive during the next down cycle on the Primary.  The Primary's now at +12,416 and it will take the current level of signal weight to keep it from falling tomorrow.  The model is still long and price at this posting isn't too far away from the target.

June 15:  12:40

Signal weight continues to hold very strongly positive levels at +1790, the Change +6 as price tests yesterday's highs.  Kind of interesting that the range for the 12:30pm bar was .20 cents!  Can't recall a range that small...makes no difference anyway, just interesting.  I'm still expecting a slope change down today, tomorrow at the latest.

June 15:  10:30am

Signal weight continues to hold strongly positive levels at +1564, the Change +2 but it has already been negative a few times during the last hour.  The Primary is now in the over-extended range at +11,000.

June 15:  Opening Read

Signal weight has opened very strongly positive again at +1781, the Change +18.  The trading model is still long SPY at 110.89 with a GTC exit at 111.89.  The current up cycle on the Primary will continue until signal weight moderates.  As long as the Change is positive, we should expect that the highs from yesterday will get retested.  But as soon as the Change turns negative the process for the next down cycle on the Primary will begin.

June 14:  Closing Read

Signal weight couldn't hold its level past the point when the Change got into single digits.  This is always the risk we see when the Primary turns back on itself.  Over the past year, I think there's been 5 times when its done it and I think 3 of the 5 signals didn't make their targets.  But of course we knew this going into this signal.  With the Change now already -41, we should expect to see negative signal weight and a slope change down signal in the morning.

What's really important is the nature of the next down cycle.  Expand your numbars on your Primary chart to 250.  There's big volume spikes at 109.10 and 108.80 and 108.05, and there's chevrons all around these levels shown below.  These are the most likely retracement levels.

But, there is also a gap between 106.50 and 107.65.  At the worst I'd think 106.50 would contain the next down cycle.  As always, signal weight is the key.  We may see the Secondary flip down briefly depending on the duration of this next cycle.  It will take several days at -1000 to turn the Secondary down.  We should expect to see the down cycle begin tomorrow and last into Wednesday or early Thursday.  If it ends earlier, expect bigger moves.

June 14:  2:35pm

The Change fell below +20 during the 1pm bar and now stands at -27 with signal weight at +1002.  The opening gap has also been filled.  The value of the Primary is +10375.

June 14:  12:30pm

Signal weight remains +1975, the Change +25.  I'm off to the gym, next posting around 2:30pm.

June 14:  11:30am  Enter Long Confirmed at SPY 110.89

The enter long has confirmed at SPY 110.89, the model is long at that price with a GTC exit at 111.89.  Signal weight remains extremely positive at +2121, the Change +44.  The 1st upside price target at 111.10 was achieved during the previous bar. (see Advanced)

June 14:  11am  Early Enter Long Signal Issued

The early enter signal has issued and it will confirm at 11:30 if signal weight exceeds +1300.  Signals generated when the Primary turns back on itself typically fail unless the Change is strong enough to hold in for at least a day.  The model will take the signal if the Change is >+25.  If confirmed, this signal will be a higher risk signal than one issued when the Primary is at an extreme negative level.

June 14:  10:30am  Slope Change Up Confirmed

The slope change has confirmed and I'd expect to see an early enter long signal issue at the next bar.  It's possible to see it this bar if signal weight expands to +2300.

June 14:  10am  Early Slope Change Up Signal Issued

An early slope change up signal has issued that will confirm at 10:30am if signal weight is greater than +1700.  We're still at least two bars from an early enter long signal assuming signal weight maintains the current level.  The Change will need to be at least +25 at the time of any enter long signal for the model to take the signal.

June 14:  Opening Read

Signal weight has opened very strongly positive at +1859, the Change +60 and TTXSlope=next bar at this level of signal weight.  A new long signal can be issued today if signal maintains these levels.  It would be nice to see price close the opening gap, which by the way is nearly the same as the gap from the 4th.  Regardless, if a signal is generated the model will take the signal.

June 11:  Closing Read

The slope change signal confirmed at 1pm as expected.  However, signal weight never got very negative after the slope change.   By the 3pm bar, the Change was in single digits, signal weight reversed and got strongly positive closing at +1442, the Change +49, TTXSlope=2 bars.

This reversal in signal weight is consistent with the new up cycle that has been identified by the Secondary that we have been expecting.  We can now clearly see that the 'tide has turned' as has been predicted by the positive divergence that has been showing on the Secondary for the past two weeks.

Next week, we should see the Primary complete its down cycle.  However, as I have seen in previous originations of new cycles on the Secondary, the Primary can get stretched initially to larger extremes.  If it turns back up from +8000, it should close the gap at 110.73 then achieve the first target level at 111.10. (more in Advanced)

June 11:  12:30pm  Early Exit Long/Early Slope Change Down Signal Issued

The early exit/early slope change signal has issued and it will confirm if signal weight is less than +100, otherwise the following bar.  The Primary is at +9500+ so a full cycle this time and during an up cycle.

That's it for me for today folks, the first tee beckons.  I'll post comments later this evening. Enjoy the weekend. 

June 11:  11:04am

Signal weight has again moderated as we would expect at this point in the cycle.  +54, the Change -83 and TTXSlope=2.3 bars, faster of course when signal weight turns more negative.  Observing the signal weight today has told us that the propensity of it to be more positive than negative, as it has for the past week, continues.  Switch to your Secondary chart, turn off the Delineators so you can see the price action and start identifying upside targets.  Load in any of your favorite symbols and you can do the same with them as long as they correlate to the S&P.

June 11:  10:10am

Signal weight has now turned moderately positive at +862, the Change -64 and TTXSlope=6 bars.  The Secondary has a green dot on its line now indicating that it's trending now, but it will need to close at this level.  This up cycle on the Primary can go on for a bit more but it will turn down so initiating new positions now will violate the discipline obviously.

June 11:  10am

Signal weight has reversed, now -61, the Change -113, TTXSlope=3 bars.  The Secondary has turned back up and if signal weight closes at +300 or more, a new up cycle on the Secondary will be identified.  I am still expecting a slope change down today.

June 11:  Opening Read

Signal weight has opened -1479, the Change -197 and TTXSlope=2 bars at this level of signal weight.  -1280 signal weight turns the Secondary back down.  A short signal is possible today but it will not be taken by the 2010 model. 

June 10:  Closing Read

Signal weight held strongly positive levels all day, ending at +2313, the Change -6.  With the exception of a few bars late in the day yesterday, this is the first up cycle on the Primary that has been confirmed by the Slope of the Secondary for nearly a month.  

Price has reached 108.80 again.  Recall that 108.80 was support as shown on the Secondary chart; switch to your Secondary screen, set numbars to 300 and you can clearly see the big volume spike at 108.80.  It will need to be tested and hold for it to be turned back into support.  I would expect that this will play itself out over the next down cycle on the Primary unless signal weight opens +2000+ tomorrow and stays at that level all day, in which case it will happen a day later.

With the Change now negative, and the value of the Primary approaching over-extended levels, we know that any moderation in signal weight tomorrow will turn the Primary down.  As we did two weeks ago, and continue now, we must be aware of the relative levels of signal weight during the next down cycle.  We should continue to use weakness to position for the Secondary's new up cycle that I believe will be identified very soon.  

 June 10:  2:40pm

Signal weight maintaining strongly positive levels, the Change now -8 and has been negative for several bars.  The Primary has reached +7000 and will rise further as the Slope value is +581.

June 10:   12pm

Signal weight continues extremely positive at +2278, the Change getting weak now at +10.  We have both upside and downside gap targets at 109.39-110.30 (up) and 106.53 (down).  With the Slope now near its maximum, we can expect to see the Primary reach at least +8000 on this cycle.

June 10:  10am

Signal weight extremely positive at +2407, the Change +43.  All of the SPY Accumulators are showing selling this morning, or more volume on downticks than upticks.  Big gaps bring out this behavior.  As with recent Primary cycles, we should expect to see price hold its levels until the Change gets near zero.

June 10:  9:45am

The positive divergence pattern seen above on the Secondary chart continues.  Notice how the orange line, the Change, continues in an upward pattern while price tests the lows.  This is good and indicates that we should continue to buy into any test of the recent lows.  Given the fact that the Primary is already well into its up cycle, we will have another opportunity to position longs during the next down cycle on the Primary.

June 10:  Opening Read

Signal weight has opened very strongly positive as the up cycle on the Primary continues.  The Secondary has turned up again as +980 signal weight is needed to do so.  

June 9:  Closing Read

Signal weight held very strongly positive levels until the 3pm bar, closing at +40, the Change -73 and the up cycle on the Primary out of confirmation.  Signal weight will need to open strongly positive tomorrow otherwise this cycle will end by mid day and another short signal is possible as well.  (The enter long signal did achieve its profit target during the 11:30 am bar.)

June 9:  10am

The long signal has confirmed at 107.19 as signal weight has remained above +1380.  Signal weight +1600, the Change +95

UPDATE:  10:20.  Signal weight +1521, the Change +75.  I'm out for the rest of the day.  I'll update after the close as I have an appointment on the first tee.

June 9:  Opening Read   Early Enter Long Signal Issued

+1380 signal weight turns the Secondary up today.  At the open, signal weight is +1734 and an early enter long signal has issued that will be ignored by the 2010 trading model.  More aggressive users may want to consider taking this signal.  The model won't be taking it because the Secondary, while now up, is not yet trending.  If signal weight moves below +1380, a long signal will come out of confirmation.

June 8:  Closing Read

Today was a good day to see that not all slope changes are equal.  The good ones are those that occur, then are impossible to reverse in the same day.  Today, we had multiple slope changes that could easily change again.  This is key...when they cannot change slope again for at least a day, that's when trading in the direction of the Primary is assured.  When they can change slope easily again, then there really hasn't been a true change of trend at all, has there?  Trading is more risky.

At the close, we held the slope change up on signal weight of +613.  However, -1000+- signal weight in the morning will turn it down again.  It is somewhat interesting to see SPY up 1% on signal weight of +600.  Makes me think most of the activity was in the higher weighted S&P issues.  (10% of the 500 issues represent 85%+- of the index.)

June 8:  3pm  Slope Change Up Confirms...but...

Here we go again.  -680 turns it back down.

June 8:  2:30  Early Slope Change Up

The Slope ended the last bar at ZERO!  At the moment, it's up and we're technically under an early slope change up signal as signal weight has once again reversed.

June 8:  2pm  Slope Change Down Confirms...but...

There's another slope change and I'd bet 50 cents we get another one later as well as -300 turns it back up again.  I am seeing very thin trading in a lot of securities, very thin.  I think this is why signal weight has moved around so much today.  Look at X for example between 1-1:30pm...look how little volume took it from the highs to nearly back to the lows in 30 minutes.  So, from here we could get a slope change up or an early enter short signal.

June 8:  1:30pm  Slope Change Up Confirms....but...

The Slope change has confined but signal weight continues to trend more negative than positive.  The Primary can still go in either direction given the fact that the Slope and Change are essentially zero.  Given the down cycle on the Secondary, we must expect that trend to continue to influence the Primary as its value is only -5484 and has room still on the downside.  Unless signal weight becomes positive, we can easily get a slope change back down.

UPDATE:  1:32...I didn't even get the posting finished before signal weight again turned negative enough to turn the Primary back down.  Be agnostic today.

June 8:  1pm  Early Slope Change Up Signal Issued

The early slope change signal has issued and it will confirm at 1:30pm if signal weight is less than -520.  Signal weight is weakly positive at +187 at this posting.  Price will need to rise above 106.60 to get anywhere on the upside as long as signal weight is so weak.

June 8:  12pm

Signal weight reversed yet again, now -1.  +360 signal weight turns the Primary up this bar, otherwise, unless signal weight reverses yet again, we should see an early slope change up signal within an hour.

June 8:  10:30am

Signal weight now -347, the Change +21 and TTXSlope=4 bars.  Signal weight has ranged between +1500 and -850 so far today.  The X and SPY accumulators are showing some buying at the present time but it's still a waiting game here.  If we take out the lows we should expect to see signal weight become more negative.

June 8:  10am

Signal weight now -158, the Change +37, the Primary -5170.  I'm still expecting to see a slope change up today.

June 8:  9:50am

Signal weight has reversed.  Now -194 and TTXSlope=3 bars.

June 8:  Opening Read

Signal weight has opened +1513, the Change +119and TTXSlope=next bar.  No long signal is expected as it will take +2400 signal weight to turn the Secondary up.  

June 7:  Closing Read

Signal weight began to expand down as the Change went negative during the 3pm bar.  As soon as the lows were taken out, signal weight expanded further closing at -1477, the Change -36.  Because the Primary flattened mid day, it can change slope up within an hour if signal weight reverses; and it can continue slowly lower if the trend maintains.  Until the Primary becomes overextended, price will continue to resolve in the direction of the Primary.  There are new downside targets identified in the section above.

June 7:  2:40pm

The Change is now +7 and about to go negative.  Signal weight is -501 and price nearing the lows of the day.  The Primary is only -4744 and has room on the downside.  Unless signal weight turns positive shortly, we can expect a break of the lows.

June 7:  11:30am

Signal weight -490, the Change +45 and the Primary's at -4071.  Unless signal weight turns strongly positive again, I'm frankly expecting more negative action until the Primary reaches -8000+-.  

June 7:  10:14am

Signal weight now +1165, the Change +160 and TTXSlope=3 bars at this level of signal weight.  +1520 turns the Secondary up as you can see in your Stats window.  

June 7:  Opening Read

After 12 minutes, signal weight is -194, the Change +110.  Not much volume between 107 and 105 showing on the chart.  With the Primary at -2586, there's still plenty of room on the downside for it to fall.

June 6:  Pre Opening Comment

At the beginning of last week I said:

"...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 up cycle on the Secondary, we will want to buy into the current decline and position ourselves by the time the Primary can turn up."

On Friday, -680 signal weight on the close would have been enough to turn the Secondary up, and hence it would be fairly easy for it to go past +75 and originate a new up trend.  The fact that signal weight opened negative and price collapsed doesn't negate the validity of using our tools to anticipate a trend change.

At any rate, back to the position of the Secondary and what we can expect in the coming weeks.  I have learned to trust divergences as they develop.  As we saw during the previous up cycle on the Secondary, divergence can go on for some time.  But at the end of the day, price always trades back at least to the level where the divergence began.

Unless driven by exogenous events resulting in forced liquidations, if we trade lower this coming week into the 104 area and the Primary is over-extended, we should buy into those lows for a reversal trade.  Volatility continues high so we should continue to expect wide ranges and reversals.  

If, on the other hand, the down cycle on the Secondary continues, driven by exogenous events, then 104, and 91.50 on SPY are additional targets.

June 4:  Closing Read

Signal weight remained extremely negative all day, price dropping back into the lows of the previous two weeks.  The Secondary turned back down but is still showing positive divergence.  Obviously, 108.80 has not provided support and is now resistance to an up move back into the range of this week.

So, with respect to the comparative levels of signal weight and the movement in price, today's action is more in line with the past month's downside pattern than a reversal in trend I have been expecting.  With the Slope value now very near to its maximum, we should expect to see the Primary get into over-extended levels late Monday or Tuesday if signal weight again opens extremely negative.

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