Closing Read Aug 7, 2009

Primary Trend=Up

Age of Current cycle= 18 days

1st Target Level= 96.11  (96.13 achieved on 7/22)

2nd Target Level=100.86 (100.84 achieved on 8/4)

3rd Target Level=110.49

PM Update Aug 7:  The Secondary gained 65 ticks to +121.  So what of this negative divergence for those who may want an insight into future market behavior.  Traditionally, divergence gives way to a retracement to the point where the divergence begins.  Looking at the daily chart above, it suggests that when this up cycle on the Secondary completes, price will retrace back to 95.77 which is the low of the day where the divergence began--July 23rd.  Again however, for those of us who trade the signals on the Primary, this is all just a bit of entertainment because this knowledge is of no consequence to the trading model.

AM Update Aug 7:  To turn down today, negative signal weight of -520 is needed.  At the open, the Secondary is gaining 24 ticks to +80

PM Update Aug 6:  So does the negative divergence that is clearly visible mean anything to us?  From the perspective of the trading model, it certainly does NOT.  Why?  Because the only thing that matters from that perspective is the slope of the Secondary and which signals it will confirm on the Primary.  And, frankly, that's all I want my users to really consider because we are not trying to predict what's going to happen over the next month.  We're only interested in the signals the Primary generates and the signal weight that would be required to affect either Delineator.

At the close, the Secondary lost 104 ticks to +56.  It will be possible for the Secondary to turn down on Friday with strongly negative signal weight.

AM Update Aug 6:  To turn down, negative signal weight of -2300 is needed.  At the open, the Secondary is losing 8 ticks to +153.  What's that you say?  Negative divergence showing on the Secondary?  Humm.....(does it really matter?)

PM Update Aug 5:  The Secondary lost 79 ticks to +160.

AM Update Aug 5:  To turn down, negative signal weight of -3660 is needed.

PM Update Aug 4:  Despite the slope change down on the Primary today, positive signal weight prevailed, the Secondary losing 28 ticks to +239.  The 2nd target level defined at the origination of the current up cycle was achieved today at 100.84.

AM Update Aug 4:  The Secondary is losing 111 ticks to +156.  To turn down, negative weight of -4180 is needed.

PM Update Aug 3:  Extremely strong positive signal weight has the Secondary gaining 79 ticks to +269.  

AM Update Aug 3:  The Secondary is gaining 22 ticks to +210 continuing the up cycle.  To turn down, negative signal weight of -2860 is needed.

Aug 7:  Closing Read

Signal weight closed extremely positive at +1928, the Change +6.7.  The trading model is long SPY at 101.51 with a GTC exit at 102.51.

Aug 7:  12:30pm

Signal weight continues extremely strongly positive at +2080, the Change +70.  The trading model is long per the previous comment.  There's no possibility of a slope change down today so I'm off to the golf course.  Enjoy your day, I'll update well after the close.

One little comment though:  I am sure that most of you saw the opening and the level of signal weight and knew we'd for sure get a long signal today.  Opening gaps typically give you an opportunity to utilize a pullback, and if you know a signal is coming and the level of signal weight supports it, taking positions ahead of a signal describes a confident trader.  Just be sure to stick to the profit taking discipline and get your exit limit in after you have entered a trade.  The single biggest source of trading errors is NOT ENTERING YOUR EXIT LIMIT.  Always trade with a defined profit target or else you'll more likely to see a gain turn into a nice big fat loss.  This is the single biggest source of loss for undisciplined traders.    Have a great weekend.

Aug 7:  12pm   ENTER LONG SIGNAL CONFIRMED AT SPY 101.51

As expected, the enter long signal has confirmed at 12pm at SPY 101.51.  The trading model is long at 101.51 with a GTC exit at 102.51.  If you're using X, the enter long confirmed at 44.77, the exit price is of your own choosing but the last several trades on X have worked well by exiting at the next slope change down on the Primary.

Aug 7:  11:30   SLOPE CHANGE CONFIRMED, EARLY ENTER LONG SIGNAL ISSUED

As expected, the slope change up has confirmed and an early enter long signal has been issued that will confirm at 12pm.

Aug 7:  11am    EARLY SLOPE CHANGE UP signal issued, Early Enter Long expected shortly

An early slope change signal has been issued that will confirm at 11:30.  An early enter long signal may also be issued this bar that will confirm at 11:30 as well if signal weight is greater than +2100, otherwise it will be issued at 11:30 and confirm at 12pm.  Signal weight continues to build.

Users might find X a better trade today than SPY.

Aug 7:  10:30am

With the current level of signal weight, an early slope change up will be triggered at 11am with a possible double signal--slope change confirmation and early enter long at 11:30.

Aug 7:  10am

Signal weight continues extremely strongly positive at +1458, the Change +115, Slope -148.  An early slope change up is now 1.2 bars away (Slope/Change=# of bars).

Users should consider using X (US Steel) as part of their trading vehicle strategy for this signal.

10:05--Looks like price is trying to fill the opening gap.  Users should carefully monitor signal weight during this period.

Aug 7:  Opening Read

At the open, very strongly positive signal weight of +1381, the Change +130, Slope -271.  You know the drill...an early slope change up signal is expected in 2 bars, and an early enter long shortly thereafter assuming signal weight remains strongly positive.

9:48AM:  signal weight continues to build, now at +1565, Change +140, Slope -262.

Aug 6:  Closing Read

With the Change now zero with -1100 signal weight, we know that only strongly negative weight tomorrow can keep the Primary declining.  Strongly negative signal weight will also most likely turn the Secondary down and generate a middle short signal as well.  Otherwise, strongly positive signal weight will turn the Primary back up and generate another long signal.  Either way we can expect a trading signal tomorrow.

Aug 6:  3pm

Signal weight more strongly negative at -1267, the Change -4.7.  Price continues to test the lows, following the direction of the Primary.  The value of the Primary is now -247.  The trading model is neutral (gray color).  It may be possible for the Secondary to turn down tomorrow, which if it did would generate a middle short signal.

Aug 6:  12pm

Signal weight remains modestly negative at -858, the Change +5.  The down cycle on the Primary continues.

Aug 6:  11am

Signal weight remains modestly negative as price has retested the lows from late Wednesday.  The value of the Primary is now +3000 and should cross zero later today.  Most likely another day off for Delineator users and it's Fiesta in Santa Barbara (the entire city including the banks close on Friday).

Aug 6:  10am

After the initial pop, signal weight has turned modestly negative at -515, the Change +20.  Unless signal weight turns strongly positive today, any slope change will be slow in coming if at all today.

Aug 6:  Opening Read

At the open, moderately positive signal weight of +819, the Change +90, Slope -412.  An early slope change up signal is expected in 4.5 bars (Slope/Change=# of bars) at the current level of signal weight.

Aug 5:  Closing Read

Signal weight spent most of the day between -1000 and -1600, yet closed at -458, the Change already a positive +27.  Tomorrow we may very well get a slope change up with a new long signal if signal weight is strongly positive, otherwise a slow moving slope change.  Notice that the value of the Primary is now +4881, down from +12k yesterday.  The strength of the Secondary continues.

Aug 5:  10am

Signal weight has turned more negative at -773 as one would expect given the youth of the current down cycle.  Continue to expect price to resolve in the direction of the Primary and enjoy the next day or so off.  I'm playing golf today so this is my last posting until after the close.

Aug 5:  Opening Read

Signal weight is flat at the open.  The trading model is neutral.

Aug 4:  Closing Read

Signal weight closed at +616, the Change -1.6, Slope -178.  The down cycle on the Primary should last at least several days but may very well develop the same pattern as during the previous down cycle where there was little total price change over a 4 day down cycle.  Time will tell but obviously the most likely next signal will be another long possibly late Thursday or Friday.

Aug 4:  1pm

Signal weight back at +975, the Change -2, Slope -76.  The trading model is neutral (gray color).  The next update will be near the close or unless something worth reporting happens.

Aug 4:  12:15pm

Signal weight is +563, the Change -26, Slope -82.  For the Primary to turn back up today, signal weight will need to rise to +2200 this bar; otherwise it would need to hold +1000 for most of the rest of the day to turn.  A new long signal is not likely today even if the slope turns positive again.  The trend in strongly positive signal weight which is reflected in the Secondary continues.

Users are encouraged to revisit using X (US Steel) as a substitute for SPY for the next signal (see yesterday's Closing Read).  Using enter long/exit long signals generated a 4 point profit (10.3% gain) on this last signal.

Aug 4:  11:30am   Exit Long Signal/Slope Change Down confirmed at SPY 100.38

As expected, the Exit Long signal has confirmed at SPY 100.38.  The trading model is now flat.  The signal did not achieve its profit target, but it did earn 63 cents nonetheless.  The trading model is now neutral and will not issue a short due to the fact that the Secondary is up and will not confirm a short signal.

Aug 4:  11:15am

Signal weight has turned weakly positive at +159 as price is making new highs on the day.  For the signal NOT to confirm, signal weight will need to be greater than +580.

Aug 4:  11am   Early Exit Long/Early Slope Change Down signal issued

The early exit long signal has been issued that will confirm at 11:30am if signal weight is less than +580.  The trading model is still long SPY at 99.75.  The model will exit at the confirmation because the profit target has not been achieved previously.

Aug 4:  10:30am

Signal weight -703, the Change -117, Slope +16.  Signal weight of -1040 is needed to generate an early exit long/early slope change down signal this bar, otherwise the early exit will be triggered next bar for sure (Slope will be -100 next bar).

Aug 4:  10am

Signal weight has moderated to -496, the Change -125, Slope +143.  At the current level of signal weight an early exit long/early slope change down signal will be issued in 1.1 bars (Slope/Change=# of bars).

Aug 4:  Opening Read

Signal weight has opened strongly negative at -1068, the Change -177, Slope +255.  An early exit long signal is expected in 1.4 bars with the current level of signal weight.

Aug 3:  Closing Read

Tomorrow, signal weight will need to be nearly +3000 to keep the Change a positive number.  The likelihood of that is rather slim.  Hence, we know that the Primary will want to begin a down cycle.  It is possible that in the morning we can still rise in price even if the Change is strongly negative with signal weight at +1000...but we all know the outcome of that opening (it will fail) and any further rises in price will be unsustainable within the current cycle.  Users should continue to watch after hour's trading today.

A week or so ago I mentioned US Steel, symbol: X, as a substitute trading vehicle for SPY.  I know some of my users have written in about it for additional info.  Any symbol that correlates or has a beta of 1 to the S&P 500 can be used instead of SPY.  While you are on your own to develop how you may trade X, the trading signals issued by the Delineator are valid and provide the same level of consistency of application as it does with SPY.  You'll need to first close the program, then restart it and load X instead of nyse:spy.  Run the signal generator and scroll down to see the last entry point as well as the previous set of trades.

ONE THING THOUGH--only trade on the long side of an individual equity.  There are many reasons why an individual equity can break its correlation, and, with good companies there's no reason to ever take a loss on a position. ( Assuming your bankroll is big enough and you maintain a cost basis near the most recent break down level (double chevron down), you can easily manage a losing position and turn it into a gain down the road.  But this is best explained over the phone. If you're interested, ask.) But just take it from me as a given and just trade long.  Bulls and bears....remember?

THIS CHART IS SPY

 THIS CHART IS X:  Last long on 7/30@11:30am  X=39.19.  Closed today 43.12

Aug 3:  2:30pm

Signal weight continues to build and now stands at +2523, the Change +12.5.  The value of the Primary is now +11,230.  Price has retested the highs of the day thus far but still stands below 100.75, the current profit target for the model.

Aug 3:  12pm

Signal weight continues to build more strongly positive at +2152, the Change +13.  The Primary is now at +9249 and rising by +356 per bar.  Continue to expect price to resolve in the direction of the Primary and test the highs of the day.

Update:  12:36:  Signal weight +2147, the Change +9.  We know that with any moderation in signal weight the Change will turn strongly negative and a slope change will ensue shortly thereafter.  With the Primary now above +9000, users following the trading model should carefully weigh their positions.  I'm off to the gym...back in an hour or so.

Aug 3:  11am

Signal weight continues extremely positive at +1890, the Change +7.  SPY has a high thus far today of 100.35 and should retest that level again as long as signal weight remains strongly positive.

Aug 3:  10am

Signal weight continues strongly positive at +1659, the Change +2.  The opening gap has been filled.  SPY 100 is somewhat of a milestone number and should provide some further rise once it has been exceeded.

Aug 3:  Opening Read

Very strongly positive signal weight of +1507, the Change -6.  The trading model is still long SPY at 99.75 with a GTC exit at 100.75.  While the value of the Primary is +7594 and will approach 10,000 today, there is obviously still legs in this up cycle as evidenced by the level of signal weight.  Don't expect the Change to become very large today as per Friday's comments, very strongly positive signal weight is needed to keep the up cycle intact.

July 31:  Closing Read

Pretty much a flatline all day long as signal weight remained near +1000.  On Monday, positive signal weight will be needed otherwise a slope change down / exit long signal will be issued sometime Monday morning.  The trading model is long SPY at 99.75 with a GTC exit at 100.75.

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