Sunday, August 23, 2015

Is the Market Ripe For a Bounce?

technical indicator SP500 bounce

On my last market timing post, I called for a correction two days prior to the July top. Since then the Nasdaq ($QQQ), has had a 10% correction. The long term outlook on the Market is likely to be on the bearish side. However, I do believe that the Market is ripe for a bounce due to several oversold technical indicators, of which I will describe:

1)McClellan oscillator is currently at -228, were reading below -150 are interpreted as "oversold".
2)Both S&P 500 and the Nasdaq ($SPY, $QQQ), have spent two consecutive days in a row below the lower Bollinger band, which is another "oversold" reading.

Wednesday, August 19, 2015

A Quant's Take On The Market

By Dylan Johnson

The chart above is a monthly chart of the S&P-500. On the chart, is our proprietary market timing signals; mean-reversion bands & and inverse fisher transformation formula/indicator. The mean reversion bands are used in this fashion: when the data/price bar (candle stick) is above the blue line (top band) its over-bought and is over-sold when below the red line (bottom band)

As shown in the chart above the market has been over-bought for some time now, however bands are not enough to make a precise decision. In conjunction with the bands we use a digital signal processing formula - the inverse fisher transformation (IFT) as the trigger. The IFT is best used on a longer term chart or 5-10 minute chart, since its designed to compress values near extremes and filters out many extraneous & irrelevant wiggles so noise is removed from the calculation (John Ehlers "Cycle Analytics For Traders"). This acts as a "trigger" once you have realized the market is in the "over-bought zone" and will mean-revert, IFT just tells you when to take the trade. When IFT (white line) falls below its signal line (blue line) you would go short or exit long. As you can see I circled with a blue eclipse the period corresponding to the price bar when it shorted. The signal is very accurate, as every month after the signal occurred the market fell substantially for a time. We just got a signal this month from IFT and Mean-Reversion Band system. 

Sunday, July 19, 2015

Does The Market Need To Correct?

nasdaq technical analysis QQQ

The Nasdaq jumped to all time new highs on Friday. However, the manner which it did achieved this milestone is quite worrisome. As shown on the chart above, price gapped up above the upper Bollinger Band (which indicates that price is overbought). This is quite rare, were price actually OPENED above the upper Bollinger Band, rather than just piercing it with an end of day candlestick (April had a similar setup which the Market pulled back). This leads to very unstable price action, additionallyl the Market had ANOTHER gap up (gaps highlighted via red filled rectangles). In the chart above, there are four recent gaps. I believe that these gap ups must be filled or else the Bulls will have a tough time going higher. 

Tuesday, July 7, 2015

One Massively Oversold Chinese Stock

The Chinese Market has had a brutal crash over the last few weeks. I think this may of setup some possible buy opportunities (very high risk). One chart I really like is SINA, as it is massively below the the lower Bollinger Band for two consecutive days in a row (refer to chart above). What I really like about the stock is prior to the crash it had made recent new highs, which shows strength. I think this is probably worth a short term trade: for a nice oversold pop. However, be warned Chinese stocks are quite dangerous (always have been IMO).