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Jan 16th:
Closing Read
The
Primary continued higher today, closing at -11,500. We knew
it was impossible for the Primary to change slope back negative
today, hence we would expect to see any move towards the lows on
SPY to resolve back in the direction of the Primary, which describes
today's SPY behavior. The trading model (plus a buck) is neutral
as the current direction is not confirmed by the direction of the
Secondary. The Secondary may be in a position on Tuesday to
change slope which would generate a middle long signal on the Primary.
Readers
should take away from the action this week the notion that if you
focus on predicting the motion of the Delineator first, then apply
that knowledge to the price action, you can set your trades accordingly.
For example: both yesterday and today there were distinct
points in time wherein you could predict absolutely that 1) the slope
of the Primary HAD to change and 2) it was impossible for it to
reverse slope. With this knowledge you can then confidently
trade a direction at that point in time with knowledge that
any counter trend price move would resolve back in the direction
of the Delineator.
These
points in time occur at every slope change. I often refer
to these periods as "balloons underwater". If you
hold a balloon underwater, as soon as you let go, it will pop to
the surface. The deeper the balloon is pushed down, the
greater the distance to the surface, and it won't stop until it gets
there.
Price often behaves like a balloon underwater. Learning
to use the Delineator in this fashion will identify these "set-ups"
a couple of times a month. It's another effective strategy
to use if you learn to identify them as they happen. And typically
these ranges offer 2-5 point potentials. Of course,
you must have the software running on your computer to have access
to the computational windows that determine this information.
Jan 16th:
2pm
Signal
weight improved again and SPY resolved back up in the direction
of the Primary (which is the point). At 2pm signal weight was +450.
Signal weight ranges from -1500 to +1500 and occasionally
rises to +-2300 which is considered extreme and typically identifies
periods where the maximum change in SPY occurs. The Delineator
colors turn darker when this condition is present which can be seen
below during 1/14-1/15. If signal weight today were to rise
back to +1500 (where it was this morning) we would expect to see
SPY close the gap on 1/14.
Jan 16th:
Noon
The
opening gap today has been filled. Also notice that the orange
line has flattened and is turning negative. It is an indication
that signal weight has reversed itself. At noon, the signal
weight is -202. The Primary cannot turn over today as indicated
previously. As far as the trading model is concerned, with
the slope change this morning and the Primary turning gray, it's
time to go do other things as no new trades can be signaled today.
Have a nice long weekend.
Jan 16th:
Signal
weight started the day very strong, but after 2 hours it has declined
from +1700 to +955. The Primary is rising and will continue
to rise as it is impossible for it to turn over today. The
opening gap from this morning is nearly filled as of this writing.
For those new to these pages, the gray color of the Delineator
indicates the trading model is neutral because the current slope
of the Primary is not confirmed by the Secondary.
Jan 16th:
Opening Read
After
an extended down cycle, reaching -17,647, the Primary will
change slope this morning regardless of the signal weight. Since
the Secondary is negatively sloped, a long signal cannot be issued
because direction must be confirmed by the Secondary. From the perspective
of the trading model, the plus a buck strategy, no enter long signal
can be issued. However, from the extended decline, a bounce
will most likely carry the Primary at least to zero which would
equate to a move on SPY to 86.60 to close the gap from a few days
ago. It is unlikely the Secondary will change slope back positive
today, but if it did, a middle long signal would be generated.
Jan 15th:
Closing Read
Today
was a wonderful day to watch the behavior of the Delineator while
it was at an extreme. We have said many times to expect reversals
when the Primary is either extended at a positive or negative extreme.
Yesterday's short signal into an already extended Primary
showed just how much energy was needed to push the Primary
lower. That energy is signal weight and is continually monitored
on the software. So while signal weight was extremely negative
all day, the fast was telling us (orange line) that further moves
down would be unsustainable and to expect new lows NOT to hold.
Experienced users would have used the lows to take profits
on shorts knowing that the Primary has to rise.
Jan 15th:
3:30pm Early slope change
An
early slope change up has been issued. This signal cannot confirm
until 9:45am tomorrow morning.
3pm:
The
Primary is attempting to change slope. There may very well
be an early slope change signal this bar or next.
Jan 15th:
2pm
The
Primary reached -17,500. At 2pm, the change on the fast is
+58 with signal weight at -1735 an improvement from -2600 a few
hours ago. The signal made its buck target earlier in the
day. Any bounce should reach to at least 85.
Jan 15th:
12:00pm
At
noon the Primary is at -16,000. The change on the bar
is +9.75. Even a modest improvement in signal weight, currently
at -2600, will result in a very quick rise in the Primary.
1:00pm:
Primary now at -16,900.
Jan 15th:
Here's
a longer time view of the Primary showing the November low and how
low the Primary can go. Currently, the Primary's value is
-14,800. The low in November it was -18,500 (it was only this
low back during the 2000 tech bubble). Typically, such moves
are unsustainable and lead to large reversals as we saw from the
opposite side on Jan 5-7 when the Primary was at an opposite extreme
(+14500). The key to determining when such a reversal is possible
is in watching the signal weight and the corresponding change on
the Primary, both of which are presented on the software if
you were running it on your machine.
Jan 15th:
Opening Read
The
current short signal is still active. However, as mentioned
yesterday, the Primary will want to rise as indicated by the rising
orange line despite the negative signal weight. We may see
a slope change up on the Primary today but not a chance for a long
signal as the Secondary is down. The value of the Primary
is -13,800.
9:48am:
The Plus a Buck strategy just earned its buck at 83.09. That
strategy is now flat.
Jan 14th:
Closing Read
The
Primary's value at the close was -13,374 and while it has been lower,
it will want to rise over the next few days. The current short
signal is still in effect but due to the extreme negative value
of the Primary, any further declines from current levels will be
unsustainable until the Primary has gone through an up cycle and
then turns over again.
Jan 14th:
2:30pm
The
Primary is barely declining with signal weight at -2126, the Primary
is now at -12,300. Even without any decrease in signal weight,
the Primary will begin to rise by itself very shortly.
Jan 14th:
Enter Short Issued at SPY 84.10
An
enter short signal has been issued at 84.10. As mentioned
on previous posts in prior weeks, signals generated when the Primary
is extended either at a positive or negative extreme carry more
risk than a typical signal when the Delineator is not hyper-extended.
12:30
update: The primary is currently -10,383 and is declining
although at a small rate. Given any improvement in signal
weight, currently -2088, the Primary will rise at a rapid rate and
change slope back up, weakening the current signal. This is
why the risks at extreme levels are higher than when it would be
impossible for the Primary to change direction. With this
knowledge, and the program running on your machine, you will learn
to distinguish those signals that have a high degree of confidence,
just as this signal has a low degree. This signal may very
well work, but we have a choice on which signals to take. [and I
think I've fixed the email problem...sorry for so many tests this
morning]
Jan 14th:
Exit Long Confirmed at 84.66, EARLY ENTER SHORT
A
dual signal was issued at 10:30, exit short at 84.66 and an early
enter short.
Jan 14th:
EARLY EXIT LONG ISSUED
The
Primary issued an Early Exit long signal that may confirm at 10:30
but certainly by 11am. Signal weight is excessively low at -2490. Last
week I stated that the opening gap on 01/07 at 92.21 was a break-away
gap. If this morning's opening gap isn't filled within a few
days, it will represent the measuring gap which typically represents
50% of the distance to the ultimate low on the move suggesting a
break of SPY 75 later in the month.
Jan 14th:
Opening Read
Yesterday's
long signal at SPY 87.62 is still intact but will fail by 11am due
to excessively negative signal weight. There is some support
at 85.58 which represents the lows from late December. While
it is rare that we would see a second downturn in the Primary from
such extended low levels of the Delineator (-9078), when it happens
it typically is due to exogenous events.
Jan 13th:
Closing Read
Signal
weight stayed quite low today but overall spent more of the day more
negative than positive. This translated into a low range day
compared to the previous couple of weeks. The Primary cannot
reverse slope tomorrow unless there is excessively negative signal
weight for an extended period of time. Also notice that the Primary
has again turned green indicating the Secondary is back in confirmation.
Given the fact that
the Primary is still at a negative extreme (-9400), this suggests that a
break of today's lows should not be sustainable and would be caused
by an exogenous event. All things being equal, the Primary
should continue to move up from its current -9400 value to at least
zero, but more likely to +5000 which should take 2-3 more days.
The long signal at 87.62 is still active and cannot end until
there is a slope change on the Primary.
Jan 13th:
Secondary Turned Down Again
Signal
weight has turned slightly negative but enough to turn the Secondary
back down causing the current signal to go out of confirmation (gray
dots). The signal is still active and cannot end until there
is a slope change on the Primary which isn't likely today.
Jan 13th:
12:00pm ENTER LONG SIGNAL CONFIRMED AT SPY 87.62
If
you were running the software, you would have seen the signal weight
needed to confirm the signal and would have been prepared to enter
your trade at the 12o'clock bar change as the required weight was
achieved. As long as signal weight remains positive, the Primary
will continue to rise and any counter trend move back toward the
lows of the day will be an opportunity to add to your trading position.
If
you are using the Plus a Buck strategy, after filling a long purchase
of SPY, enter a GTC limit sell at 88.62 and wait.
Jan 13th:
11:30am: SLOPE CHANGE POSITIVE CONFIRMED EARLY ENTER LONG SIGNAL
ISSUED
The
slope change back up on the Primary has confirmed and an Early Enter
Long signal has also been issued which may confirm at noon if signal
weight remains above +350 (likely).
Jan 13th:
11am
Signal
weight has remained positive and the Primary has issued an early
slope change positive which should confirm at 11:30. Assuming
signal weight remains positive, a new long signal should be issued
by 12pm.
Jan 13th:
10:30am
Signal
weight flipped negative briefly last bar generating another early
enter short signal which did not confirm at 10:30. The change
for the 10:30 bar is +78 and if it remains this way at 11am, it
will generate an Early Slope Change Positive on the Primary. For
now we just wait and watch. But with the Primary so close
to changing slope a short signal here should be ignored.
Jan 13th:
10:15am
If
signal weight remains positive for the next hour, we'll get an early
enter long in the next hour.
Jan 13th:
10am
The
signal will not confirm and signal weight has reversed. We
may see a slope change up on the Primary within the next hour IF
signal weight remains positive. If you were running the program
on your computer you would be seeing this in real time. As
signals can only come at the half hour we have time to allow the
trend to establish itself.
Jan 13th:
Potential Reversal Day
Today
will be interesting. We have the Secondary in a position to
change slope. The Primary is nearly fully extended in its
down cycle and a possible middle short signal may be issued. From
-10,000 the Primary will want to rise creating a potential for a
reversal up and a reinstatement of the main trend. Normally,
the Delineator's signals are fairly cut and dry. But when
the Primary gets fully extended up or down and coupled with a possible
slope change on the Secondary, things get a bit more interesting.
Stay tuned.
Update
9:37: Most likely the middle short signal will confirm at
10am. I will NOT take the signal as I do not take signals
that come from such extended levels on the Delineator.
Jan 12th:
MIDDLE SHORT SIGNAL--cannot confirm until 10am Jan 13th.
Middle signals occur when a signal is generated by the primary indicator but
not confirmed by the secondary (indicated by the line being gray).
Instead, secondary confirmation comes 1 or more days after the initial signal
is generated caused by the Secondary changing slope in the direction of the
Primary. This has happened today. Historically, middle
signals are only 50% as reliable as pure signals and I typically
avoid them especially if the current Primary cycle is nearly fully
extended. SPY has filled the gap at 86.64 and near the close
the Primary is at -10500.
Jan 12th:
The
Primary is now at -9151 and nearing its negative extreme. Still
no chance for a slope change within the next hour or two unless
the orange line begins to rise rather than fall as it has now started
to do. There's a gap at 86.64 from 12/30/08 on SPY that may
finally get filled.
Jan 12th:
After
a couple of hour's trading we can see that there's no chance for a slope
change within the next several hours on the Primary. Since
the trading model is currently flat, no positions, we frankly don't
care where the price action goes. At some point later in the
day the Primary will reach its maximum negative value and when it
does, any further price action lower will be unsustainable. The
important point here is that the bottoming process on the Delineator
has begun but until the slope of the Primary is within an hour of
a slope change up, there's nothing to do but wait.
Jan 12th: Opening Read:
The
Primary continues to decline. Its value is now -6100 and it
is beginning to flatten. If you were running the program on
your computer, you would see that the Delineator's actual change
this morning is +26.9 indicating that the amount of decline is lessening.
But we are still not yet near a potential slope change on
the Primary. As we do not care where SPY is at the time of
a signal, we are simply watching and waiting for the signal to come.
There is small support at 88.35.
At
the close on Friday, the Primary was -5760 and continuing lower. At
the time of the last slope change (1/7), the Primary was +13800.
A typical cycle ranges between -5000 <> +5000 with up
to 2x that range during periods when VIX is changing rapidly. Reading
the Delineator Stats window indicates that within a day the Primary
will flatten, as it did from 01/05-01/06 when it was at the other
extreme. When it's in this state, any price action to the
direction of the Delineator is unsustainable and will reverse. These
opportunities, or "Set-Ups" are predictable and another
application of the Delineator. The potential for one of these
SetUps may be coming up on Monday.
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