squark62's  Instablog

S&P 500 indication:  possible momentum change in progress to the down-side

(visit my intro to trading long/short ETFs in pairs using geodesic concepts)

the signal (blue line) & it's 12 DMA (yellow line) are now moving in opposite directions.  the previous 2 short-term tops preceded in a similar fashion.  i'm looking for 3 more indicators to confirm a bearish trend.  technically we're not there yet.  (1) if the blue line and yellow line cross, that would signal a bear warning is in order.  that would confirm the short-term top.  (2) if the blue line crosses y=0, that would signal a bear watch.  (3) if and only if the yellow line inflects and crosses y=0 & maintains the same downward slope as the blue line for a day or two, that would signal a bear market is in progress whether for the short-term or long-term.  the model as is today does not necessarily make a distinction between the two.  development on that idea is ongoing.

S&P 500 indication:  highly probably change in momentum coming

(visit my intro to trading long/short ETFs in pairs using geodesic concepts)

the sensitivity of the signal (amplititude) has increased with time as neutrality has gone far beyond "normal" ranges on the geodesic curve (not shown).  as such, it's momentum change signals are more pronounced.  what is shown below is a plot of daily differences of the 2 key parameters of the model.  the focus of today's update is recognition of short-term top formations in the S&P 500 as highlighted below.  today, another top just may have formed.  each formation includes 2-3 data pts at the top of each rise in the index followed by an equally sloped downward trend in the blue line.  confirmation of the top comes a few trading days later as the blue line crosses it's 12 DMA.  if trends continues as expected, anticipate a possible sell off in the index lasting for around 7-8 trading days.

indication:  swinging wildly, oh, ah, and the beat still goes on....

(visit my intro to trading long/short ETFs in pairs using geodesic concepts)

from a technical stand point, this chart says it all as far as the S&P 500 is concerned.  frequency of oscillation seems steady and peak-to-peak is greater each cycle.  looks like we're due for another short-term pullback.  looks can be deceiving, however. 

so what's going to happen in the next few trading days?  who knows.  but i can say for sure volatility is increasing no matter what the VIX says.  the primary factor to watch for now i think is the frequency of the signal.  as long as it stays at this lower level compared to oct-08 and mar-09, the foundation of the index has a chance to withstand the vibration.  amplitiude is perhaps seconday at the moment as long as frequency remains comparatively low.

indication: and the equities beat goes on..

(visit my intro to trading long/short ETFs in pairs using geodesic concepts)

whether one likes it or not, the liquidity-fed equities beat goes on...for now.  as i said earlier this week, if the signal & 12 DMA cross, i would cancel the latest bear watch.  but it's becoming quite clear from my vantage point that the index is getting quite stretched.  peak-to-peak amplitudes of this parameter are getting more energetic with each cycle which is about every 4 weeks.  if recent index behavior is still a good indication of what to expect, we have about 10 more trading days of upward momentum before the next ground shift changes.  more charts coming through out the weekend.

(visit my intro to trading long/short ETFs in pairs using geodesic concepts)

S&P 500 model indication:
the 12 DMA of the geodesic delta diff parameter has continued downward as it lags the signal.  however as the charts shows, the signal today advanced rapidly toward the 12 DMA.  my observation says tomorrow's trading will determine the course of the index probably for another 10 trading days.  if the signal does cross the 12 DMA, more than likely my BEAR watch will be cancelled for the short-term.  pudent traders will however begin to shave profits from long positions and seek to put some of those proceeds into short positions, other hedges or just cash.  swings appear to be going higher up & lower down.  stay sharp and ahead of the ball.

(visit my intro to trading long/short ETFs in pairs using geodesic concepts)

S&P 500 model indication change:
in the graph below, the 12 DMA of the geodesic delta diff parameter has crossed into negative territory technically confirming a sentiment shift to BEARISH for the S&P 500.  the raw signal has been negative for several trading days and with wednesday's lackluster index reponse to the Fed's continuation of easy liquidity was enough to drag the 12 DMA negative.  the change has been very steep but overall volatility has risen significantly.  expect dramatic intraday & day-to-day changes in the S&P 500 up and down for the foreseeable future. 

there will be days when the market pops but know it's incumbent on the bulls to show they can pull the rug out from underneath the bears.  bears have a better grip and momentum is in their favor.  days when the market pops, start taking some profits off the table and start buying a little insurance via put options in the index, or short ETFs such as SH or SDS in small chunks.  buying the volatility ETNs is another approach.  just make sure they're liquid.