SPX multtime frame trend chart

SPX has come to 1264 levels after breaking from the 1300 levels. We posted earlier that any break of 1300 levels can lead to straight fall. Link

The index has broken the first support of 1275 and is heading to 1250 levels.

In our multi time frame trend indicator we had a sell from 1330 levels. Attached is the chart.It shows how the bullish trend was captured and then the decline also. There were 2 whipsaws one long and one short. But the loss was not much. The trend followers look to capture the larger trend like the first bullish signal while keeping the losses minimized.

US Sector Rotational Strategy XLE loosing leadership

US Sector Rotational Strategy XLE loosing leadership

Energy sector has been a favorite of this Bull Run and has been the outperformer among all the sectors.

That though is changing now as the relative strength of this sector has not only broken the uptrend but also has declining strength vs SPX now.

The new leaders are Consumer Durables, Staples and Utilities.

US Sectoral Trend: Energy momentum powering ahead

Looking at the US sectoral trend for year to date, XLE i.e. S&P energy ETF  has outperformed SPX by 4% and is best sector.
The other two sectors giving +ive returns were Technology (XLK) and Industrials (XLI).

The snow effect is visible in Cons Staples and Cons Disc sectors as they were under performer by 4% and 2%.

The Utilities has been down for quiet some time. Financials which were leading are now performing in line.

Worth noting is the consistent leadership of Energy sector for last 6 months. There is a momentum theory in play here.

Dow Theory: Sign of caution or Crude effect

The latest signal from Dow theory is of caution. The last sign was of bullishness when Indu was at 11250 levels. Post here.

Now the Transports has broken the 50 DMA and has last swing high below 50 DMA while the Industrials INDU is trading above the 50 DMA. Chart:

While this could be the effect of crude as Transport companies use crude as their primary input and is there main cost. If crude stays above 90 levels then for sure it could have some effect on the Industrial index also as crude is used in every aspect of life which could for sure increase the inflation. More discussion can lead to debate here.So lets see charts.

The second way we can look at this is that divergence can be a buying point for Transports as Industrials is still at new highs. For that lets see how the broader US indices are telling us.

Not much of signs of caution in Midcap and smallcap indices.

Crude has moved to new highs though failed to cross the resistance there. The structure is still bullish of crude.

This all could be attributed to Egypt effect which lead to fresh highs in commodities. Reuters commodities index CRB broke to fresh weekly highs. Link here.

SPX: First signs of bearishness

SPX futures are facing resistance at crucial levels of 1283 levels.

As per earlier post about bull phase entry point the index could have been bot on bullish signs on at 4 hour 50 SMA. The index made a new high when the similar setup occurred in early Jan. Post here.

This is the first time when the futures are showing signs of bearishness as it has not given any bullish candle at the critical levels of 1283.

Though the major trend is still bullish but if the lower top gets followed by lower bottom on break of 1267 then the index can be good sell candidate on rise.

World Asset Allocation: SPY is the mover

This is a new report I am starting to know how globally money is flowing and to know if there any major changes in asset allocations. Planning to make it a fortnightly issue so that we can get more accurate picture.

The title is apt for this post as US SPX has moved most this year by 2% while the emerging markets moved lower by 2.5%. Are all the $$$'s flowing back?

Funds are withdrawn from Bonds also. The Dollar was -ive and it even broke the old support. The Dollar effect moved up the commodities index CRB as it was slightly +ive.

SPX : Magic of 10 DMA in Bull phase

The chart shows the power of 10 SMA in bull phase. Every decline is a buy. But how long?
Just the chart.

US Sectoral Trend: Financials all the way

XLF has outperformed all the other sectors in last 30 days.

The ETF was lagging for last 6 months and was worst performer during that period.

 

 

The defensive sectors such as Consumer Staples, Utilities and Healthcare were –ive.

Continuous improvement in the ISM Manufacturing Index has led to new highs for Industrial ETF as well.

The overall picture shows the improvement in the economy.

SPX Showing slowdown in momentum

SPX futures at 1266 are showing signs of weakening momentum.
The index was a buy when key support of 50 SMA in 4 Hr chart was hit. Read Trade Example: Bull Phase Entry points.

The index made a new high after the post at 1276 levels.

Now the index hit the 50 SMA in 4 Hr charts again twice in last 2 days which I view is a bearish sign. This is testing of support levels too fast which indicates selling pressure.

The index did bounced after exhibiting a doji below the support followed next by a bullish candle.
But this time the index is hesitating at the 20 SMA which is the mid band.

Also the bands are contracting with macd having divergence at new tops.

How to trade: Thats the most important question.
I will not short out rightly as the signs are of range not of bearishness. And since the index is in bull phase shorts have a very low winning rate.

Long if the index moves above the current bearish candle and gives a close above the 20 SMA with profits to be booked at 1275 levels  OR long at the lower band when there are bullish signs like doji or long lower wick.

Trade Example: Bull Phase Entry points

This post is to highlight some of the good entry points for the Bull phase.

The best entry points are on declines to suitable level where buying emerges. One such entry points is the 50 SMA where many times the buyers enter in a big way and propel the indices to new highs.

One such example is recent bull phase in SPX.

The index has been in the bull phase from mid Nov.  Whenever the index touched the 50 DMA it made a new high.

Highlighted are 3 points on 4 hr charts when the SPX made a new high. Most recent was y’day when it declined to 1256 levels but then closed at new yearly high.  Now the catalyst was ISM report and Employment numbers but the charts were foretelling that this is a good entry point for the upmove.

Attached is the chart.

Well, the above trade is not as easy as many other factors need to be considered to differentiate good entry so that risk reward is favorable. Example is Gold decline in last 2 days.It failed to move up on touch of 50 SMA on daily charts.

I will make a detail system with proper back testing results for the above system

Hindenburg Omen is triggered for NYSE

Hindenburg Omen is triggered for NYSE.
Will update more on this, what are the conditions and how it is traded.
I just wish if similar data would be available for NSE.

Meanwhile I did a simple analysis of the SPY and the NYSE new highs- new lows with the stocks above 50 DMA. The charts showed that while SPY was making new highs the NYSE breadth is not following it. And at market tops like this where there are two doji's makes this a very significant factor.

Will post the complete in next few posts.

Sector rotational model: Recovery in full swing

The state of the economy can be gauged by the performance of the different sectors of the economy or better different sectors perform differently as per the phase of economy
The above theory calls for the sector rotation between different sectors. More can be read Details in the book here.

The below chart shows the sectoral performance of the different sectors of US spider ETF for the last 4 months.

The sector which have outperformed are Energy, Metals, Consumer Discretionary, Industrial, Tech.
While the sectors which are down are Healthcare, Utilities and Financials.


The out performance of Energy, Materials, Cons Disc, Industrails suggests that there is demand of goods which is now showing in GDP growth of US.
The Utilities and Healthcare are generally regarded as defensive so they underperform in bullish Markets.

The only outlier in Financial sector which is underperformer even in the decreasing interest rate scenario.
One explanation for this can be the -ive news of the mortgage front coupled with the Euro crisis which shows more of bad loans in the system.

I will put a similar sectoral analysis like this of Indian Markets also.

Which index is more volatile Nifty or SP500?

There is a perception that US markets are more stable then the emerging markets.

Well it is not the case always.

The best barometer of volatility is the VIX index which is regarded as fear index. It is calculated from the options premium. More on this and the VIX related ETF's later.

I have compared the US VIX and Indian VIX on a normalized basis. The IN VIX has been consistently lower than the US VIX for last 9 months. In September the Indian VIX was near all time lows in IV's.

The white line is the US VIX and the red line is Indian VIX measure.

This can be attributed to better returns of Indian markets than to US markets which has seen huge swings based on bets on the economy while Indian economy has been more stable.

Also the huge FII inflows show the confidence in the Indian and other emerging markets.

Does this mean that Indian markets are less volatile than US markets? In some sense it is true while not completely.A part of it because of slightly different way calculating them but thats only a small part.

Larger picture still  shows that the Indian markets have been less volatile atleast this year.
Next time I will do the same analysis using other technicl analysis volatility tools.

SPX recent shorts

S&P 500 rallies seems to be driven entirely by the short coverings. Every time there is a fall the SPX reverses and makes a new high.

Also there is remarkable similarity in the way the fall comes and the %age of the fall.
Like the average fall for last 4 times has been 5.5%age form the top and then there is new top formation of about 2-5% from previous top.

The same pattern was in play during the recent downtrend and then rally. Also SPX has made a new high at 1105 worth noting is how much further the rally can go now.