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S&P 500 geodesic model update - Oct 16, 2009

|Includes: AGG, BIV, BND, HYG, IEF, IEI, JNK, LQD, SDS, ProShares Short S&P 500 ETF (SH), SSO, TIP, TLT
Current S&P 500 model indication:
overbought
- (since 2009-09-09)
cautiously bullish - (since 2009-10-09)
notes - watching for a possible 5% or so decline to materialize in the index over 10 trading days out from october 16.

(see my basic geodesic concepts post for a general model description)

i did not post any charts for the week ending on 2009-10-09.  the results are included in this one.  coincidently the geodesic coordinates reversed direction on 2009-10-09 as indicated by the arrow in the diagram below.  motion along the geodesic path in this direction always indicates a positive upward bias in the S&P 500.  remember, the geodesic is 2-D curve in time so anytime the arrow has a negatively-sloped theta directional component, the model indicates a positive upward bias.  a positively-sloped theta directional component indicates a downward bias in the S&P 500.  note, the current plot shows an increase in velocity of motion along the geodesic consistent with the quick rise in the S&P 500 over the last 7 or so trading days despite selling off the last 2 trading days.




the chart below looks at the difference between the rates of change in angular and path velocity.  > 0 indicates a positive upward bias in the S&P 500 and < 0 indicates a downward bias.  the yellow trace is the 12 DMA.  the yellow trace therefore responds more slowly to changes and is a longer term index indicator than above.  the yellow trace almost dipped below zero when it looked like the market had recently sold-off but then recovered.  the pattern is very similar in the end of may when the trace touched zero, went up for a bit then actually crossing zero & staying below zero for about the last 2 weeks in june & the first 2 weeks in july.  watch for the yellow trace to peek below the last rise no higher than a y-value of 0.007.



dislosures:   in my SH-SPY pairs trade, i am 66% SH & 34% SPY.  my long holdings are also counter-weighted by bond ETFs listed in my tags. operating with 15% cash.  use of the information contained in my blog is at your own risk.  the data if for personal information purposes only and is not to be considered as financial advice.