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Daily Quant | 2015 | February
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2015 February

Thursday, February 26, 2015

Posted by | The Daily | No Comments

2015-02-25.2

Market remains quiet…

Yesterday’s action continued to trade between the 2109/2119 levels. This has been the range for the last couple sessions. The configuration suggests that the market must close above the 2121.20 level today to resume the upward momentum. Failure to do so could set the tone for a minor decline down toward the 2104/2096 level.

Volatility continues to be quite low. The three-day average range is just below 10. This usually suggests that there will be some downside volatility before the market will be able to resume the upward trend. The critical level is 2096.80. A penetration of this level would suggest a decline down to 2081.65. Currently, there is only a 30% probability for that to occur.

If the market closes above the 2121.65 level today then we should see a continuing move toward 2131 to the 2138 levels over the next 3 to 5 sessions.

Expect to see volatility pick up slightly today with the bias still to the upside.

The market should open higher, with a 60 percent probability to close higher, should the market remain above the 2109.05 level today.  

Today’s Key Levels

  RX 2123.45
  R3 2121.20
  R2 2118.70
Resistance R1 2116.15
Prior Close   2113.86 -1.62
Support S1 2111.60
  S2 2109.05
  S3 2106.50
  SX 2104.25

Wednesday, February 25, 2015

Posted by | The Daily | No Comments

2015-02-24.2

Yellen speaks…

As expected Janet Yellen’s comments triggered further upside movements in stocks as she continued the dovish commentary. Overall, expectations are still for short-term rates to start to rise somewhere around June. Meanwhile, the markets continued their historic run as the S&P closed at the all-time new highs yet again, inching closer toward the minimum objective of 2121/2133.

The pattern has signaled that a further expansion in prices is possible with a new objective of 2180/2196. As I have discussed over the last several days, if the market can remain above the 2100 level for this week and close above 2123.80 on Friday, which will be a weekly close as well as a monthly close, this will trigger an acceleration to the upside in momentum.

With momentum accelerating, combined with the new emergence of intermediate trends as illustrated by the 3700+ buy signals, this suggests that we are beginning a next leg up. While the thoughts that the market could accelerate at these levels seems somewhat unrealistic, the probabilities all point toward a surging market.

Should we close above 2123.80 on Friday, it is possible that we will see a further acceleration in the number of buys coming out of VPM. Should this be the case then we could see the beginning of a parabolic rise in prices toward the 2200/2300 levels over the next 6 to 8 weeks.

I will develop more of the potential scenarios that are likely to emerge around this pattern as this pattern is revealed.

The market should open flat to lower, with a 60 percent probability to close higher, should the market remain above the 2108.10 level today.  

 

Today’s Key Levels

  RX 2130.25
  R3 2126.75
  R2 2122.90
Resistance R1 2118.95
Prior Close   2115.48 +5.82
Support S1 2111.90
  S2 2108.10
  S3 2104.20
  SX 2100.70

Tuesday, February 24, 2015

Posted by | The Daily | No Comments

2015-02-23.2

Markets begin the week on a quiet note…

Yesterday’s action continued in a quiet sideways pattern as it remained above the key support of 2102.40 with an intraday low of 2103.00. The configuration suggests that the market will move higher in the pattern toward the minimum targets of 2121/2133 over the next 3 to 5 sessions.

It will be critical that the market remains above the 2102.40 level for the next two sessions to keep the pattern intact. However, should this level be penetrated, the market would likely decline toward the 2095.15/2088.40 level. There currently is only a 30% probability for this to occur.

The markets are likely to remain in a quiet mode ahead of Janet Yellin’s speech on Wednesday as most market participants are waiting to see what type of rhetoric she has for the potential of higher rates. As I mentioned in the Market Thunder show Monday, I believe the most significant event will be the GDP release on Friday. Any number greater than 2.6% on the upside will be significant.

All indications are that the market will continue higher toward the minimum a target of 2121/2133 with intermediate targets of 2168/2189.

The market should open flat to lower, with a 60 percent probability to close higher, should the market remain above the 2102.40 level today.  

Today’s Key Levels

  RX 2124.20
  R3 2120.75
  R2 2116.90
Resistance R1 2113.10
Prior Close   2109.66 -0.64
Support S1 2106.25
  S2 2102.40
  S3 2098.55
  SX 2095.15

Monday, February 23, 2015

Posted by | The Weekly Brief | No Comments

Market Overview
2014-08-25 YTD

YTD Performance S&P 500 Pacing2014-08-25 YTD

VPM database indicates more to come…

As I’ve been discussing over the past several weeks, In order for a new bullish trends to be signaled, it is necessary for the VPM database to get over 42% bullish. Last week the database was at 39.1%. Now it is at 51.01%. This event suggests that we are likely to see another 8 to 12 weeks of higher prices with the potential of running into the end of Q2. We saw a broadening of participation across the board in most sectors.

On a recent Market Thunder broadcast, I mentioned that the short-term or daily bullish percent has been over 65% for nearly 3 weeks which has suggested that the intermediate database would follow. Furthermore, if the intermediate database were to cross the 42% bullish, this event would be significant if it were to happen. This is one of the more substantial events to happen as we are seeing a continuation of a rotation occurring across a broad base of financial sectors. VPM monitors over 18,000 symbols and to see the database continue to rotate as we have over the last three years has been an unusual occurrence. But this indicates that the rally that began in 2012 is yet again recycling.

Looking to this week there’s a substantial amount of news coming out. On Monday we are going to see Existing Housing Sales and PMI. Tuesday has the Case-Shiller Home Index and Consumer Confidence.  Wednesday Janet Yellen will speak to Congress following the release of the New Home Sales. Thursday is the heaviest day of reports for the week with Jobless Claims, CPI, Durable Goods, and some other minor indexes to be released. Finally, on Friday we will see GDP expected to show a positive 2.1% growth rate, Consumer Sentiment, and Pending Home Sales will also be released.

On the international front, it appears that Greece, at least for now, has an extension of their loans and tensions in the Ukraine remain but no one seems to care at least from a financial viewpoint. This week is likely to see an increase in volatility but the bias continues to the upside.

By the Box

YTD Performance

2014-08-25 StyleBoxes1

Performance Divergence

2014-08-25 StyleBoxes2

SP 500 for the week of 02/16/2015

2014-08-25 PriorWeek

2014-08-25 PriorWeekLevels

Tuesday

Markets were closed for Presidents’ Day on Monday as the holiday shortened week began with very low volatility in a sidewise trading range. Most of the session was spent along the flat line as the markets seemed not to be concerned at all over the developments in Europe. Most of the activity was focused on gyrations in crude oil as the S&P finished up 0.16% on the session.

Wednesday

The Markets continued to trade in a very flat pattern as the market started on a minor down tick. However, the market recovered toward the end of the session to move near unchanged territory with the S&P finishing down -.03%. The FOMC meeting minutes were released from the January meeting but it had very little material affect in any market movement. Most market participants are expecting that the Fed will not raise rates until late Q2 or in Q3.

Thursday

The markets remained range bound after a continuation of a very low volume trading as the S&P finished down 0.11%. Once again the action was focused on crude oil which tested the $50 per barrel level early in the morning but moved back to $51.83 at the close. Oil rallied back in spite of the report that the inventory buildup that continues is now at the largest levels recorded.

Friday

The market began with some fairly heavy pressure early on in the session with the main focus on Greece after reports suggested there would not be an agreement at the group conference which had already been delayed twice. Around midsession it was reported that the two sides were able to reach an agreement to extend funding for Greece. This triggered a sharp rally into the close with the S&P finishing up 0.61%. This event pushed the treasury yields higher as they printed to the 2.12% level. Nine out of the 10 sectors posted gains with healthcare (up 1.0%) and industrials (up 0.9%) leading the way higher. In the end, we saw the week led by the NASDAQ (up 1.3% on the week) with the S&P finishing up 0.61% as Friday’s action represented the entire gains for the week.

S&P 500 for 02/20/2015

2015-01-30.2

As I mentioned earlier, the VPM database has printed over the 42% level with a bullish percent of 51.01%. We saw the S&P 500 close at new historical highs on Friday at 2110.30, up 12.85 on the session. This was enough to confirm higher prices toward the short-term price objectives of 2121.65/2133.40. The intermediate objectives are now 2168/2189.

As I mentioned earlier, this type of action is likely to last into June or July before a major top will be reached. Both the daily and intermediate charts have seen an acceleration of the underlying trends which correspond with the long-term trend that has remained bullish for some time. These momentum levels are likely to continue to broaden for at least one or two more weeks.

From a VPM database viewpoint, typically the 62 to 68% bullish is where the next expansion point will stall. This suggests that we are likely to see a broader participation as the NASDAQ and the mid and small-cap indices are likely to reassert themselves as leaders. It is likely that the S&P 500 will continue to lag for the next several weeks.

We will dig into the hypothesis of the mid and small-cap indexes leading us higher on the Market Thunder show today.

One event that did occur this month was the spike down to 1980 which negated the longer-term targets of 2245/2350. This suggests that the intermediate targets of 2168/2981 will represent a major resistance point until a new longer-term pattern unfolds suggesting there will be higher prices than the intermediate projection.

The market should open flat to lower, with a 60 percent probability to close higher, should the market remain above the 2102.85 level today.  

 

This Week’s Key Levels

ER 2167.60
R3 2154.05
R2 2138.95
Resistance R1 2123.80
Prior Close   2110.3 +13.31
Support S1 2096.80
S2 2081.65
S3 2066.55
ES 2053.00

Today’s Key Levels

ER 2125.15
R3 2121.65
R2 2117.75
Resistance R1 2113.8
Prior Close   2110.30 +12.85
Support S1 2106.8
S2 2102.85
S3 2098.95
ES 2095.45

Friday, February 20, 2015

Posted by | The Daily | No Comments

2015-02-19.2

Volatility lowest in five weeks…

So far this week we’ve only had a 12 handle range for the entire week. The previous three weeks the average has been 72 handles. This contraction in volatility is also happening at a very interesting point. For the market trading just above the 2100 level for the first time, the lower volatility suggests that we could see a minor decline before moving higher in the pattern. The underlying intermediate and long-term patterns continue to be bullish while the short-term momentum is flattening slightly.

Other than earnings reports coming out today, there is no significant economic news to be released. The market will be driven by sentiment alone. So far not even Greece can move the markets up or down. Looks like we could have another quiet day ahead.

However, as long as the market remains over 2084.60 for the next two sessions, we should see a resumption to the upside and a move toward the minimum target of 2113.65/2133.40. Should a close be rendered above 2133 then we will see a continued advance toward 2168.35/2189.90.

The critical level on the downside is the 2080.05 level. A penetration would suggest a minor pattern failure and a further decline toward 2061/2042. There currently is only a 30% probability for this to occur.

Not only has the weekly volatility contracted substantially, so has the daily as the three-day range indicator which is now just above 10. This also suggests that there could be a minor correction before the market moves forward. It will take a close today over 2107.75 to trigger further acceleration to the upside.

The market should open flat to lower, with a 60 percent probability to close higher, should the market remain above the 2092.30 level today.  

Today’s Key Levels

RX 2107.750
R3 2105.350
R2 2102.600
Resistance R1 2099.900
Prior Close 2097.45 -2.23
Support S1 2095.000
S2 2092.300
S3 2089.600
SX 2087.150

 

 

 

Thursday, February 19, 2015

Posted by | The Daily | No Comments

2015-02-18.2

Volatility contracts…

The three-day range indicator has continued to decline from a high of over 40 just two weeks ago to now printing a value of 10. Typically when this happens during a rally, there is a downward reversal about to occur. This being the case, a penetration of 2089.70 will be necessary to signal a decline. As I mentioned in the last several days, the critical level for the week is 2080.65. A penetration of this level would signal a minor pattern failure. However, there is only a 30% probability for that to occur.

News flow and economics continue to be quite slow. There seems to be nothing to trigger market sentiment in either direction.

The key level on the upside is the 2108.30 level. A penetration would suggest a move toward the 2113/2123 upward objectives. It will take a close over 2123 to confirm the upper end of their objectives which is currently at 2168.55/2189.90.

The short-term pattern is losing momentum quickly. It is critical that the market remains above the 2092.05 level for the next two sessions.

The market should open flat to lower, with a 60 percent probability to close higher, should the market remain above the 2092.05 level today.  

 

Today’s Key Levels

  RX 2109.65
  R3 2107.30
  R2 2104.70
Resistance R1 2102.05
Prior Close   2099.68 -0.66
Support S1 2097.30
  S2 2094.70
  S3 2092.05
  SX 2089.70

Wednesday, February 18, 2015

Posted by | The Daily | No Comments

2015-02-17.2

Market closes above 2100…

The market began the week as if it was destiny that it would move above the 2100 level for the first time in history. The configuration suggests that it should continue toward the 2113/2123 level over the next 2 to 3 sessions. During this time it will be critical that it remains above 2090.05. Penetration of that level would indicate a minor failure suggesting a test of 2080 which is the critical level for the week.

A penetration of 2080, which only has a 30% probability for this week, would indicate a further decline toward the 2065/2058 levels.

With a close above 2100 yesterday, the market has issued a new target of 2168.35/2189.90. It will take a close above the 2123 level to confirm these higher projections.

The market will get a substantial amount of fundamental data today along with some earnings reports. This could keep market sentiment moving higher. Expect prices to move higher as long as we stay above 2090.05.

The market should open flat to higher, with a 60 percent probability to close higher, should the market remain below the 2090.05 level today.  

Today’s Key Levels

  RX 2113.80
  R3 2110.65
  R2 2107.65
Resistance R1 2103.50
Prior Close   2100.34 +3.35
Support S1 2097.15
  S2 2093.60
  S3 2090.05
  SX 2086.90

Tuesday, February 17, 2015

Posted by | The Weekly Brief | No Comments

Market Overview
2014-08-25 YTD

YTD Performance S&P 500 Pacing2014-08-25 YTD

Greece remains defiant but who cares…

As the markets begin a holiday shortened week, we continue to get reports out of Europe that there is no deal with Greece. Just a couple weeks ago this actually meant something. Now it’s back on page 43 of the Wall Street Journal. The market continued to climb during the week as it reached an all-time historical high once again.

As I have discussed on the Market Thunder show, we’ve seen this story before. Each time we get toward 2000, 2100, or any of the even numbers we’ve seen quite a bit of volatility as the markets have to digest these intervals as they come. The question is since we printed 2093.55, was that good enough to qualify for a test of 2100 several weeks ago? The answer is probably not. We are likely to continue to see some volatility at these level.

When looking at the economic and geopolitical backdrop very little has changed. The economics continue to be mixed and the geopolitical frame continues to be volatile. There seems to be very little that can stop this underlying trend that continues to unfold. As I mentioned the other day, we have seen an increase in the short-term daily VPM models to 65% bullish which has equated into about a 6% increase in the weekly models as the bullish percent has moved up to the 39% level. As I have discussed many times in the past, the key benchmark is 42%. A penetration of this level would suggest a resumption of the uptrend and a continuation toward some of the higher targets that I discussed above 2250.

As we move into this week, there are very little economic reports to be released. Wednesday is one of the bigger days with housing starts and industrial production which neither are likely to have a material effect on the markets. On Thursday we will see the jobless report along with the Philly Fed survey which also have very little material effect on market sentiment.

I remember not long ago thinking that the NASDAQ would never get over 5000. But as we continue to make these historical highs we are now at 4700 on the NASDAQ exceeding March 2000 highs. Certainly Apple has had a lot to do with that but there are other drivers as well. I’ve often thought, could it be that when the NASDAQ makes a new high that it will mark the beginning of the end of this market? Nonetheless, we continue to see very robust trends unfolding across the board.

By the Box

YTD Performance

2014-08-25 StyleBoxes1

Performance Divergence

2014-08-25 StyleBoxes2

SP 500 for the week of 02/09/2015

2014-08-25 PriorWeek

2014-08-25 PriorWeekLevels

Monday

Monday

The market started the week in a very quiet sideways range. The market drifted lower and the S&P finished down 0.43% on the session. Trading volume continued to lag average levels as there seemed to be continued caution over the Greek prime minister’s comments as he spoke in front of Parliament. He reiterated his intention to push back against austerity measures imposed by Troika. While the markets traded in mostly a flat line, there was some selling into the end of the session to keep the market slightly negative.

Tuesday

The market was able to snap its two-day losing streak as the S&P surged to close up 1.07%. While the Russell 2000 lagged, up 0.6%, the NASDAQ lead the way up 1.3% on the session. Most of the market positive sentiment was driven by the rumors that there was a deal with the European commission to propose a six-month extension for Greece. The rumor mill was quite active and market participants bought into most of the positive statements.

Wednesday

Equity markets traded in a sideways range for most of the session as the S&P settled flat on the session with the NASDAQ completing up slightly 0.3%. Most of the session was spent watching the rumor mill as Germany’s finance minister continued to be a wet blanket on the Greece deal. Meanwhile, there was a meeting with France, Germany, and Russia on the Ukraine as they tried to come up with a cease-fire which they did, but it didn’t last for long. However, this had little or no effect on the markets.

Thursday

The market opened on a stronger note and continue to rally throughout the session as it closed up 0.96% on the S&P 500. Most of the positive sentiment was based upon positive reports from the France, Germany, Russia, and Ukraine situation as they had struck a cease-fire. Also rumors that Germany was willing to soften their stance on Greece helped keep a positive tone. Trading volume continued to be below normal, however the markets still moved higher.

Friday

The market open higher and continued to move into new historical ground as it was able to close at a record high of 2096.99, up .41% for the session and 2.02% for the week. Once again the US market was stronger on news out of Europe as the euro found Q4 GDP was positive 0.3%, better than expected, with Germany leading the expansion. While Greece was not on the focal point there were negative comments out of the euro group saying that they were very pessimistic that Monday’s meeting would be able to produce any concrete solution for Greece.

In the end, six of the 10 sectors finished in the green with the cyclical group setting the pace which was a case throughout the week. The energy sector jumped 2% to extend its weekly advance to 2.6% thanks to a continuing rally in crude oil. Crude oil has now rallied around 20% off its 44.08 lows, closing at 52.67 per barrel.

S&P 500 for 02/13/2015

2015-01-30.2

Friday’s action open higher and continued a sideways range but was able to penetrate the old high at 2093.55 as it rendered a new high of 2097.03 and closed at 2096.99 right at the highs of the session. While the closing at new highs was positive, there continues to be volatility in the markets as it appears they were unable to come to a material solution on the Greece situation. This has set the tone for the markets to begin on a weaker note today.

The configuration suggests that the market should hold the 2085.70 level today. A penetration would suggest a further decline toward the 2080.05 level. Should this level be penetrated, it would suggest a further decline to 2061.15. With little to no news coming out from an economic viewpoint, it is likely that the market sentiment will drive the market. We will need to get above the 2100.50 level to trigger further buying.

The short-term targets now are for a move toward the 2113/2123 level. Yet, intermediate targets now at 2132 to 2137. It will take a close above 2104.40 to confirm the higher target.

The weekly charts suggest that the market could move toward the 2132 to 2151 levels this week but it will be critical that the market does not penetrate 2080.05. If this happens, it will negate the upward targets of 2132/2151.

The VPM database did see some weekly buying as the percent bullish has moved up to 39% but it is still below the key benchmark to signal a sustainable rally.

The long-term charts continue to show that there is a robust underlying trend as the PPM #1 has rebounded back above 1% at 1.08. This suggests that the acceleration and maintenance of the long-term trend that has been in place since 2012 continues to move forward. This suggests that we are likely see a further expansion in bullish percent if we can get above 2100 on a closing basis on Friday. The market should open flat to lower, with a 60 percent probability to close lower, should the market remain below the 2100.50 level today.

 

This Week’s Key Levels

ER 2168.70
R3 2151.75
R2 2132.85
Resistance R1 2113.90
Prior Close   2096.99 +41.52
Support S1 2080.05
S2 2061.15
S3 2042.20
ES 2025.30

Today’s Key Levels

ER 2111.80
R3 2108.30
R2 2104.40
Resistance R1 2100.50
Prior Close   2096.99 +8.51
Support S1 2093.50
S2 2089.60
S3 2085.70
ES 2082.20

 

 

 

 

 

Friday, February 13, 2015

Posted by | The Daily | No Comments

2015-02-12.2

Weak economics’ and a Ukraine deal equals new highs…

Yesterday’s action continued to move higher as we closed just below the historical highs at 2093.55 with the close of 2088.48. The configuration suggests that the market should continue higher with the minimum objective now of 2109/2133. The daily graphs are generating expectations of an extended rally toward the 2168/2189 levels.

The critical level on the downside today is 2079.10. On the upside, a penetration of 2092.90 will suggest a move toward 2097/2102.

Intermediate graphs also are suggesting that the upward momentum is accelerating slightly, indicating the possibilities of the market moving above 2100 for the first time.

While the month of January was able to generate a close on PPM #1 below the 1% level, the action so far this month has put the indicator back above 1%. However, the configuration does suggest that a potential topping pattern is beginning. But as discussed before, it is likely that we will see at least four months of higher prices before a top will be signaled.

The markets are starting to see a broader advance as the daily models are now 65% long suggesting the possibility of some further buying from the VPM database should the market close higher today. With the current VPM database at only 33% long, there is a lot of potential for the market to rotate even at all-time highs.

Be sure to tune into Market Thunder today at noon for full details and reviews.

The market should open higher, with a 60 percent probability to close higher, should the market remain above the 2079.10 level today.  

Today’s Key Levels

RX 2107.25
R3 2102.80
R2 2097.85
Resistance R1 2092.90
Prior Close 2088.48 +19.95
Support S1 2084.05
S2 2079.10
S3 2074.15
SX 2069.70

 

 

 

Thursday, February 12, 2015

Posted by | The Daily | No Comments

2015-02-11.2

Greek deal or not?

Overnight the markets traded in a wild range. The S&P futures were up over 18 handles at one stage only to see them decline toward the unchanged level. This was largely due to rumors that a deal had been reached between Greece and the ECB.  While the talks are going well, there’s still no deal. Now they’re talking about the possibility of Monday which is a holiday here in the US. But in the end, what does a deal with Greece really have to do with corporate profits in America? The answer is nothing.

The market should get back to business as usual by looking at earnings and the few economic releases that come out today with jobless claims, retail sales and business inventories to be released. This will have a more material effect on the market sentiment then news out of Greece.

The configuration suggests that the market will continue toward the resistance zone between 2077 and 2085 over the next two sessions as long as the market remains above 2059.85.

The action yesterday continues to act as if we’re locked in the trading range even though we’re trading above the key level at 2065.70 on a closing basis. Momentum will start to decline sharply if we do not close above the 2077.20 level today. The failure to meet that mark would set the tone for a minor decline into Friday.

The overall volatility this week has been muted as there has been very little news or earnings that have driven the market either way.

The market should open higher, with a 60 percent probability to close higher, should the market remain above the 2059.85 level today.  

Today’s Key Levels

  RX 2085.90
  R3 2081.80
  R2 2077.20
Resistance R1 2072.65
Prior Close   2068.53 -0.06
Support S1 2064.45
  S2 2059.85
  S3 2055.30
  SX 2051.20

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