05/22/2014 Live Update

[gappy]

a really good day for the correction to start would be tomorrow because a huge white candle will drop off MFIs radar on that day.

DG, you mean dip right? Cause Zirp/Ponzi must proceed the chart up and to the right, else the U.S. of A. is an "officially" bankrupt state. Can't have the curtain pulled back now can we? Best hope for bears is a black as night swan.

i would think something less than a 10% drop for the entire correction. tomorrow probably doesnt have to be a big drop because the huge white candle coming off would push MFI down quite a bit on its own.

That would make for a nice entry on some momo issues.

[fehro]

Partial long. No change. Picked up some VIX though.

My summation signal is neutral. A break of yesterday's lows could turn it down.
My composite trend signal tipped up to neutral yesterday. Very marginal and whippy these days.

Price is up, but I am not seeing strength under the hood yet.
Unfortunately the range trading and low volatility have really sensitized and marginalized my trend signal.
A little up can tip it up. A little down can tip it down. A lot of indicators jostling about thresholds.
So, a little more discretion and a little less mechanical are called for I think.

I have been patient with my long campaign, and for the moment it has returned to the black.
Can't say I have much confidence in it though given the recent action.
I picked up a little VIX, which may act as a hedge if we get a down draft.
I don't have a setup for VIX. It just seems cheap given the choppy nature of the recent market.
It may be a dumb idea as cheap things have a way of getting cheaper, but at least one pop in the next month for an exit seems like a good probability even if the bull keeps going.

A scan of the blogosphere shows others detecting risk ahead and some arguments for topping.
Emotionally, it seems like folks (not just permabears) are ready for a correction.
It could be so, and my paranoia wants to buy it. However, there is a bullish case too.
If the ECB easing drum beats louder into June, and the market makes some new highs, PMs could be forced to chase into quarter-end.
This is NOT a prediction. I am just trying to keep an open mind.

I'll stick to partial positions here in equities. Other markets are working much better and command bigger allocations.
If the trend picks up steam, I can supplement with occasional day positions or change my mind.

As always, your point of view is greatly appreciated. Thanks!

[gappy]

Capture.PNG

[uempel]

The problem with "top calls" is that SPY has 2 different types of tops: spike tops and rounded tops. In the case of spike tops, they can begin to correct even when MFI is overbought. Interestingly, rounded tops like to spend almost their ENTIRE duration where MFI is under 50. So if we don't get a spike top, look for that rounded top signal. The only day where rounded tops might be over 50 is that very first day, which typically involves a huge red candle that drops MFI under 50.

Our current position better fits the "rounded top" formation scenario, and recent price action has dropped MFI to just above 50, where rounded top corrections like to begin. The key at this point is to watch for that first huge red candle that drops MFI under 50. That should be the real signal that a correction has begun.

I don't know much about MFI, but I like RSI. DellGriffith's chart reminded me of the RSI on the weekly. Regular RSI setting 14 shows RSI well above 50, and RSI setting 191 (good track record) shows no divergence and not the slightest indication of a decline ...

Regular RSI setting, 14

RSI setting 191

[gappy]

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[Tutti]

The problem with "top calls" is that SPY has 2 different types of tops: spike tops and rounded tops. In the case of spike tops, they can begin to correct even when MFI is overbought. Interestingly, rounded tops like to spend almost their ENTIRE duration where MFI is under 50. So if we don't get a spike top, look for that rounded top signal. The only day where rounded tops might be over 50 is that very first day, which typically involves a huge red candle that drops MFI under 50.

Our current position better fits the "rounded top" formation scenario, and recent price action has dropped MFI to just above 50, where rounded top corrections like to begin. The key at this point is to watch for that first huge red candle that drops MFI under 50. That should be the real signal that a correction has begun.

I don't know much about MFI, but I like RSI. DellGriffith's chart reminded me of the RSI on the weekly. Regular RSI setting 14 shows RSI well above 50, and RSI setting 191 (good track record) shows no divergence and not the slightest indication of a decline ...

Regular RSI setting, 14

The attachment 2.png is no longer available

RSI setting 191

The attachment 3.png is no longer available

While not a short term technical signal, fitting into the argument for a top, S&P stocks topped out almost exactly 1 year ago. we have moved higher with lower and lower participation.

[uempel]

Tutti, too many bears out there, the market cannot decline. You too I presume

[uempel]

BachNut, I like your Paranoia

[BullBear52x]

%B is clear, bulls are no way close to giving up, I got weak indicators two days ago, now everything is improving we never going down ever forever again ever ever eva.....

[fehro]

VIX weekly... New 14 months lows.. in VIX 11.68.. next low point Mar 2013 11.05

[Heck]

All opening long ISE options on the put side up to more than twice calls.
Sell signals do not get much more clear

One caveat
Delayed sentiment data

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[Heck]

QQQ MAY 23 2014 88.00 P - 10:49:27
Bought to Open @ $0.05
All in

[Mr. BachNut]

NYMO this morning is making a higher high following a higher low on May 20.
I have been reluctant to update my NYMO cycles as the recent action can be interpreted in different ways.
It will all be clear in hindsight, which hasn't been much help to us in the here and now.

In any case, if the current NYMO action continues positively, I'll be marking 4/22 as a cycle high and 5/15 as a cycle low with a new cycle high to come.
This would suggest a possible trip to my upper Keltner band (1934+) and increases my attention to the possible megaphone top pattern (purple and turquoise).

On the other hand, if we stall and reverse, say before NYMO tops the May 12 high, there is an interesting cluster of support 1866 +/-.
It includes the 50 day SMA, 55 day EMA, a rising bottoms trend line from the February low and the megaphone meridian which is a nice divider in the heinous trading range.
If that gets broken, a hearty correction may be the ticket.

As usual, the closing NYMO matters more than intraday, and tomorrow's weekly close matters more than today's.
Let's see what happens.

[fehro]

Neutral is the name of the game... http://www.aaii.com/sentimentsurvey/sent_results

[K447]

QQQ MAY 23 2014 88.00 P - 10:49:27
Bought to Open @ $0.05
All in

Exit target?

[Mr. BachNut]

BachNut, I like your Paranoia

I think I saw you post a signal for tomorrow at some point. Is that still the case?

[uempel]

BachNut, I like your Paranoia

I think I saw you post a signal for tomorrow at some point. Is that still the case?

I think you are referring to this chart A few days ago as SPX bounced off the MA 55. As the 55 is often pivotal and the week leading up to Memorial Day tends to be bullish I suggested that this week is going to be green I cannot remember a signal for tomorrow, but I'll have a look later on.

[Tutti]

Tutti, too many bears out there, the market cannot decline. You too I presume

actually, I think we go higher before we go lower. Im fading myself Odd thing is about the "too many"argument - there were "too many" bulls from 2009 - present. that didnt stop the run. Also, most of the traders I speak to have a long bias here, so while I think everyone talks short, they play long...

[Mr. BachNut]

Bull snack and bear meal:

My notes have an upside P-Bar to SPY 189.97

In the after-market yesterday, there were downside bars to SPY 188.59, 188.36 and... 187.6

[TWT]

$SPX: On the way to achieve a new ATH