11-07-2011 outlook

We opined that Friday would be down (and it was).  I expected somewhat a larger move down, but it recovered somewhat the last hour.  Monday the 5.6TD cycle continues down, but will this be enough to push the market down?

We have the 34TD cycle and 5.6TD cycles down.  We have the 22TD cycle, 11.2TD cycle and 2.8TD cycle up.  I suspect that this presents us with a situation where we could end down 10 points or up 10 points (or somewhere in between).  More on this later.

Here is the SPX swing cycles (my interpretation):

To check out my suspicion of a +10 points or -10 points on the SPX I turned to the DPO (Detrended Price Oscillator) to try an put a number on the potential move.  The DPO is based on the amount above/below an simple moving average.  It is shifted left half the moving average +1 to reflect the midpoint of the points being averaged.  The theory is this eliminates the impact of all cycles longer than the moving averages giving us a tool to evaluate shorter cycles. 

I began with the 5.6 (6)  day MA.  The DPO shows a potential movement of about 60 points from this cycle top to bottom (or bottom to top).  That is a move of about 60 points over 2.8 days or about 21 points a day average over 2.8 days.  Remember this ignores the impact of the 11.2TD cycle, 22TD cycle and 34TD cycle.  So it does not represent the expected daily average movement over the next 2 days.  It should account for the movement of all shorter cycles.  If this was the only cycle we analyzed with DPO we would expect a large down movement Monday.  Here is the 5.6TD DPO:

So down 21 points was our starting point.  Next we look at the 34TD cycle (also down) and determined it had a potential impact of 6.25 points per day giving us a total of about minus 27 points per day.  Next we looked at the 22 TD cycle (this one is up) and it has an impact of about 9 pts per day (+9) which reduces the potential downside impact to about 18 points.  Finally we look at the 11.2TD cycle (up) and it has a potential daily of about +14 points.  This gives us a downside of around  minus 4 points on the S&P.  This is within the  (+/-) 10 points we suggested earlier.

Here are the 34TD, 22TD, 11.2TD cycle DPOs:

GL traders.  Do your own analysis.

Note: We could have just looked at the 34TD cycle as it eliminates cycle impact longer than 34 days, but would include the impact of any cycles shorter than 34TDs.  It showed us an average move of about 6.25 points (and since the cycle is down) that would have been -6.25 points.  I wanted to show you though how the peaks and bottoms of the DPO matches the tops and bottoms of the different cycles.  So you can use DPO to help you in isolating cycles by focusing on the peaks and valleys in the DPO.  You may want to vary the DPO parameter to get a best fit.  Just remember the DPO parameter is half the cycle length +1.

11-04.2011 outlook

Today was up as expected.  Stronger rise than I would have guessed.  Still I said yesterday "but will not stop an upturn if indeed the shorter cycles are up".  Tomorrow we get the job #s for October.  Usually this number can move the market.  Recently I believe it has moved the market down.  This is the news on deck before the market opens.  Of course - the so called experts have trouble predicting the # so don't expect me to try.

Two of the swing cycles should top by mid day.  Given most of the swing cycles start the day up it seems we may get some push up early, but it should be over by/before mid day.  Looking at our chart you see the potential for an H&S pattern as the 5.6TD cycle turns down for 2.8 days.  So is the 5.6TD cycle going to give us a nasty little sell down starting tomorrow and running through Tuesday?  Looks possible.

Here is the SPX swing cycles (my interpretation):

GL traders.  Do your own analysis and be careful.    

11-03-2011 outlook

Market opened up and held green all day.  I had expected  a dip red at least some time during the day.  Still today looked like part of a bottoming process (along with yesterday).  These processes take 2-3 days usually to play out.  So we probably have seen the bottom near term.  If this process extends into a third day then it should test yesterday's low.

It looks like tomorrow should be up.  Greece seems determined to go into bankruptcy and the market didn't care.  The Super Committee seemed dead locked and the market didn't care.  Benny downgraded the Fed's outlook and the market didn't care.  Seems like the actions of a market at a bottom - not one headed down.

Most of the swing cycles should be turning up.  The 34TD cycle remains down. The 20 week (Wall) cycle should also have turned down in October.    This should limit upside potential but will not stop an upturn if indeed the shorter cycles are up,

Here is the SPX swing cycles:

GL traders.  Do your own analysis - be careful.

11-02-2011 outlook

Well today was a sharp down day as I thought it would be.  We are now about 80 points below last week's high on the S&P.  Question is do we have more downside and if so - how much.  So I took a look at the DPO for the 22TD cycle (that is the one set to bottom tomorrow if I have the cycles positioned correctly on my charts)..  The DPO  detrends the cycles giving us the expected amplitude.  So here is what the DPO projects:

As you can see the DPO gives us a downside target of around 1194.  I have heard 1208 and 1183 mentioned and would argue with neither as I have not included the potential impact of  longer or shorter cycles.  Most of the other swing cycles (all except the 2.8TD cycle) should be down and bottoming by the end of the day tomorrow.  So I would think 1183 more likely than 1208.  But you should do your own analysis and decide - I am providing you a road map not a GPS system.
Here are the swing cycles for the S&P:

In short I expect the day to at least dip in the morning.  Pinpointing the exact time of a bottom is difficult and it might be mid day instead of end of day.  Who knows - maybe we get something at 2:15Pm from the FOMC meeting that turns the market (has happened before). So be prepared for a bottom tomorrow.  If I am off by 1 day we may have seen a bottom today.... 
GL traders.  Be careful and be ready to change horses.

10-30-2011 watching the VIX

Update 11-01-2011

Friday was a mixed day - only the DOW was down I believe.  So we now have 3 down days in a row on the DOW.  I suppose this could be taken as a confirmation of a VIX trend change signal.  I prefer 3 days with the major indexes (DOW, S&P, NAZ) all down as a confirmation - but would not argue if you said it was a confirmation.

Original post:

If you look at a Bell curve  2 standard deviations from the center covers 95% of the population.  Now if we apply that to the VIX  a move up in the VIX of 95% from a bottom or down 47.5%  from a top should indicate an extreme move.  The VIX has now moved down over 47.5% from its high around 48 - so we suspect a high is near (or may have already been reached).

To be on the safe side though we would like confirmation to call a trend change.  Back testing shows that if we get 3 red days in a row that this provides confirmation of a trend change to down.  So we are waiting that to confirm a VIX trend change signal.

Confused?  Reference prior posts on this topic.

outlook for 11-01-2011

I commented yesterday: "The pull back may start Monday as we have two shorter cycles topping mid day.  I suspect end of month window dressing is over (or nearly so) and the first  week of November is an ideal time for a pullback.  So I expect Monday could be a down day.".  That appears to have been the case.  Not much has changed from yesterday.

I looked at a couple of bloggers and they seem to think we see a bounce tomorrow.  I look at the cycles on the charts and can't agree.  All the short cycles from the 2.8TD to 34TD cycles should be down tomorrow if my interpretation is correct.  So to me this indicates possibly a sharp sell off tomorrow.

Here is the SPX swing cycles:

GL traders.  Do your own analysis and be careful.

Spiral dates calendar for November

The calendar shows a broad top for the week coming up (a turn down?) and two peaks around Thanksgiving (expected low turn).

http://spiraldates.com/2011/charts/scores_1011.png

FYI - there is also a Bradley turn date around Nov 22 which correlates to the second tops on the Spiral calendar.

outlook for 10-31-2011 and the week

Lots of news the past week:

1) A Plan in Europe, but not a final plan it appears.  Partial "kick the can" down the road as the plan seems insufficient to address all the problems in the Eurozone.
2) Earnings seem to maintain a positive tilt as companies continue to moderate hiring and try to increase efficiency.  Probably not a lot of productivity left to be gotten without some heavy investment in capital equipment.
3) GDP was better than expected.  Not something to get too excited about as these numbers will be revised (down is my guess).
4) Local and state government layoffs are offsetting the moderate pace of business hiring so unemployment continues to be flat at high levels.
5) Foreclosures may be increasing, but they are already at high levels.
6) Consumer spending was up, but savings rate was down.  It appears consumers are using savings to spend.

I am sure you can think of other items.  Over all the environment is mixed, but about as good as can be expected.  With Europe off the table temporarily (or so it appears) and earnings winding down I expect attention to shift to the super committee.  Last rumor I heard is there is a push for $1.5 trillion in tax increases and an equal amount in spending cuts.  The problem with this (as I see it) is tax increases are aways now and cuts are always in the future.  Are we supposed to be so stupid we think this is a solution?

So with things about as good as can be expected a pull back should not be unexpected.  So we look at the cycles and it appears we have several cycles bottoming toward the end of next week.  This could give us a short (but severe) pull back.  Since we are up about 200 points in October a quick pullback of 100 points (50%) would not be out of reason.

The pull back may start Monday as we have two shorter cycles topping mid day.  I suspect end of month window dressing is over (or nearly so) and the first  week of November is an ideal time for a pullback.  So I expect Monday could be a down day.

Here are the SPX swing cycles as I interpret them:

GL traders.  As always - do your own analysis and be careful.

outlook 10-28-2011

In September the shorter cycles (5.6 and 11.2TD) seemed to exert the most influence in the market and we got quick moves up and down.  In October that influence seemed to shift to the longer (22 and 34TD) cycles.  If I have it right those 2 cycles have now topped.  Will influence continue to shift to longer cycles.  If it does then the 20 week (Wall) cycle should become more dominant.  Not saying this will happen but speculating it might.  If it does then we could see a down trending market for about 8 weeks into the third week of December as the 20 week cycle should have topped by mid October.

The Europeans seem to have come up with a partial fix, but are also kicking the can down the road.  Earnings season is almost over.  So I expect we will start hearing more about the Congressional super committee.  I am not optimistic about the results coming out of this group.  I hope I am wrong and they do some much needed budget cutting.

In my estimation most of the cycles should be down today (did the 34TD cycle top yesterday?) and therefore expect we will end down at the close of the day.  Here is the SPX swing cycles:

Gl traders.  Do your own analysis.

10-27-2011

Sorry I was unable to offer comments the past few days.  Things happen in life that require you drop everything and deal with them.  Reviewing the news the past few days it seems the news out of Europe is about as good as can be expected.  Also, earning reports will start to wind down as we get into November.  So I wonder what will drive the market the next few weeks.  Seems to me it is about as good as we can expect at this time.

Looking at the data I would opine the longer swing cycles have been dominant in the market in October.  I believe I mentioned the 34TD cycle should top this week.  With the open today we well could be setting a top now.   We will see.

Here is the SPX with my interpretation of the cycles:

Gl traders.  My long positions are largely offsetting my "wrong" short positions.  Not a way to make money, but it protects you when your analysis fails you.  So - do your own analysis because I guarantee there will be times I fail to properly interpret the data.