Short Term Cycle Update

The following was posted on January 15&17,2016
Today's comments are in Blue

Short term details:(every date is +/-)

The DJIA fell into Jan 4th which was one day after the Sunday Jan 3rd cycle date.  The market then tried to rally, but, made a high on Jan 5th and then continued down into a low on Jan 11th.  The DJIA then tried to rally and made a high on Jan 13th then again resumed it's fall.  As this post is being written the DJIA Futures are down -150.00 points.  If this continues on Friday Jan 15th, the possibility for another drop into the next cycle date of Jan 18th - 20th will increase.

The Jan 20th bottom, so far, occurred on a cycle date forecast weeks ago.

 

The chart below, nicknamed "Picasso", shows the new forecast cycle dates.

 

The chart above is a suggestion of potential future moves in the market.

Always use  other indicators to CONFIRM the cycles suggested market trend.

 

Intermediate Cycles suggest  some sort of correction in the first half of this year.  

This is still the forecast.

More on both the short term and intermediate term cycles as we get through some of these dates...

 

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Past performance is not indicative of future results

Evidence of a Bottom ?

There have been several indications of an over sold market, but, is it a bottom or just a place from which a bounce will occur and then we go lower?

Indicator Review
1) RYNVX - Rydex Nova Fund Investor Class (Long Fund) - This fund hit a high on 12/29/15 of $189Mil and just today hit a low of $36Mil.  Tha is a very big swing in a short period of time.
2) The short term cycles have been suggesting a low on Jan 20, 2016 for several weeks
3) The Fear & Greed Index (from 0 to 100) is currently in Extreme Fear territory at "9"
4) % of DJIA Stocks Above 10 DMA is 6.67% out of 100% and over sold
5) ChaikinAnalytics.com charts of the DIA, IWM, QQQ, SPY are all in an over sold area
6) A/D Oscillator is deeply over sold
7) Volume Oscillator is deeply over sold
8) SPY Buying Pressure displays positive divergence

Many of these and other indicators have been looked at currently and historically.  Comparisons were made and the weight of evidence suggests that a bounce is likely with another leg down into the mid February period +/-.

On September 4,2015 there was a post calling for a Major Sell Signal.  This signal is still in force and nothing has caused it to change.  Based on this, rallies should be used to lighten up on stocks that are relatively weaker than the market.  For some, raising 100% cash might be in order.   Review your tolerance for risk before making any decisions.

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Past performance is not indicative of future results

RYNVX Another Extreme Reading

Last posted on January 17,2016
Updates in BLUE - RYNVX inched closer to another extreme reading

RYFXX - Rydex US Government Money Market
RYNVX - Rydex Nova Fund Investor Class (Long Fund)
RYURX -  Rydex Inverse S&P 500® Strategy Fund Investor Class (Inverse Fund)

RYFXX   3-10-09   $1,367Mil   3-10-15   $655Mil   9-9-15   $1,434Mil
                                                                                   9-14-15  $1,451Mil    
                                                                                 10-26-15    $862Mil
RYNVX    3-11-09  $22Mil     5-14-15  $177Mil      9-4-15       $53Mil 
                                                                                    9-14-15      $52Mil
                                                                                  10-26-15    $140Mil
                                                                                  11/27/15     $182Mil
                                                                                  12/10/15     $187Mil
                                                                                  12/29/15     $189Mil
                                                                                   1/15/16        $51Mil

                                                                                   1/19/16        $37Mil
RYURX   3-9-09        $353Mil   5-4-15   $58.34Mil   9-9-15    $148Mil
                                                                                    9-14-15   $172Mil
                                                                                  10-26-15   $117Mil

Note  The RYNVX is now near another potential extreme.  It is currently at $37Mil which is $12Mil less than the $49Mil recorded on 9/29/15 on the retest of the 8/24-25/15 low and $15Mil more than the $22Mil recorded on 3/11/09...

*If this hint that a turn in the market is near turns out to be correct, we then understand why the Buying Pressure chart has been giving a positive divergence indication.  Looking for a buildup of evidence.

This displays fear in the market...

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Past performance is not indicative of future results

RYDEX (RYNVX) Decrease in Market Cap

Last posted on December 15,2015
Updates in BLUE - RYNVX inched closer to an extreme reading

RYFXX - Rydex US Government Money Market
RYNVX - Rydex Nova Fund Investor Class (Long Fund)
RYURX -  Rydex Inverse S&P 500® Strategy Fund Investor Class (Inverse Fund)

RYFXX   3-10-09   $1,367Mil   3-10-15   $655Mil   9-9-15   $1,434Mil
                                                                                   9-14-15  $1,451Mil    
                                                                                 10-26-15    $862Mil
RYNVX  3-11-09   $21.96 Mil  5-14-15    $177Mil   9-4-15       $53Mil 
                                                                                    9-14-15      $52Mil
                                                                                  10-26-15    $140Mil
                                                                                  11/27/15     $182Mil
                                                                                  12/10/15     $187Mil
                                                                                  12/29/15     $189Mil
                                                                                   1/15/16        $51Mil
RYURX   3-9-09        $353Mil   5-4-15   $58.34Mil   9-9-15    $148Mil
                                                                                    9-14-15   $172Mil
                                                                                  10-26-15   $117Mil

Note  The RYNVX is now near another potential extreme.  It is currently at $51Mil which is only $2Mil more than the $49Mil recorded on 9/29/15 on the retest of the 8/24-25/15 low.

*If this  hint that a turn in the market is near turns out to be correct, we then understand why the Buying Pressure chart has been giving a positive divergence indication.  Looking for a buildup of evidence.

This displays some fear in the market...

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chart: SPY 4min Signals

Courtesy of TradeStation.com

Green circles are buy signals.  Two things must happen.  You need a cross over in the bottom window or the histogram to be positive and you also need a price bar to close above the cyan MA and the purple MA to cross the cyan MA in the top window.
Red circles are sell signals.  Two things must happen.  You need a cross over in the bottom window or the histogram to be negative and you also need a price bar to close below the cyan MA and the purple MA to cross the cyan MA in the top window.

Of course it is wise to use additional tools for the best confirmations and do not forget to always use protective stops.

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Past performance is not indicative of future results.

chart: Short Term Cycle Update

The following was posted on January 4,2016
Today's comments are in Blue
CORRECTION dated Jan 17,2016  in Red 

Short term details:(every date is +/-)

From Dec 24th the cycles have an upward bias into December 29th to January 7-14   Dec 29th was another direct hit as a high did come on exactly that date.  There was a bias up into Dec 29 to Jan 7-14 and that is still the cycles forecast.  The traction that the market had into Dec 29th did not continue into Jan 7-14 as the cycles suggested.  The market does not go either straight up or straight down and therefore some counter trend moves do occur in these periods.  The big moves seen on the last days of 2015 and the big down open this morning was much more volatile than the cycles suggested.  Cycles do suggest turning points and direction, but, they are not to be used for amplitude.  This was proven when the cycles chart below suggested a small drop and we actually had a large drop and it kept on going down.  Other tools must always be used including the use of stops on all positions as part of your trading plan.

Below is a pic of the current cycles described above.

The Short Term Cycle dates have been highlighted.   On the way up into the Jan7-14 suggested highs, the cycles did suggest a low on Jan 3rd which was Sunday.  The cycles don't know from weekends and Holidays so a carryover to the next day or a "+/-" interpretation is always prudent.  It is possible that today "MAY" be a short term low.   

The DJIA fell into Jan 4th which was one day after the Sunday Jan 3rd cycle date.  The market then tried to rally, but, made a high on Jan 5th and then continued down into a low on Jan 11th.  The DJIA then tried to rally and made a high on Jan 13th then again resumed it's fall.  As this post is being written the DJIA Futures are down -150.00 points.  If this holds continues on Friday Jan 15th, the possibility for another drop into the next cycle date of Jan 18th - 20th will increase.

Refer to the chart above for a potential future move in the market.

Always use  other indicators to CONFIRM the cycles suggested moves.

Intermediate Cycles suggest  some sort of correction in the first half of this year.  Recent similar intermediate cycles suggested corrections occurred during April 1992 - Oct 1992 & Feb 2004 - Oct 2004.  The new dates are from Jan/Feb 2016 - May/June/July 2016.   This is still the forecast.

More on both the short term and intermediate term cycles as we get through some of these dates...

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chart: Back to the Average Election Years

Courtesy of chartoftheday.com

The DJIA is down 1.5% and the DJT is down 3.5% at the time of the writing.
So far the YTD DJIA is down 6.7% into mid January.  Sentiment is bearish, a contrarian indicator.  Indicators/Oscillators are over sold and in buy areas.  So what is going on?   Why does the market keep going down?
One reason is momentum and the fact that bull markets last longer than bear markets so we experience bull markets for a longer period of time than we experience bear markets.   At the beginning of a bull market there is momentum, a thrust, and as the bull gets under way the momentum starts to fade.  Sometimes indicators/oscillators will generate sell signals, but, they will  not even work and the bull just keeps going up.  
That might just be what is happening now, in reverse.  Maybe we are in a bear market?

The buying pressure has been showing positive divergence and the market keeps going down.  What is probably happening is that the patten developing is not a short term pattern but a larger pattern that will take much more time to complete.  If you take a close look at the buying presure chart you will see that this has happened before.

Short term cycles also have not been able to forecast turn dates and market direction recently as well as it had in the past.  Dec 29th was the last cycle high that was forecast well.  Then the short term cycle low of Jan 3rd was off by one day when the DJIA had a low on Jan 4th.  But then, the market kept falling.  Short term cycles are pointing down from Jan 13-14 into Jan 18-20, so let's see if the short term cycles get back on track again.

The intermediate cycles have been looking for a market correction in the first half of 2016.   There is other information also suggesting a 2016 correction. 
1) The pattern of the Average Election Years, see chart at the top of this page.
2) The 7th year of a two term President.  2015 was the first time since 1939 that the DJIA was down in the 7th year of a Presidency.  The DJIA fell about 1/3 in 1940-1941.  Note that 1940 was also an election tear.
3) The final year of a two term Presidency.  In 5 of the last 6 times, the DJIA dropped and average of 13.9%.
4) No Santa rally this year.  Yale Hirsch said, " If Santa Claus should fail to call, bears may come to Broad and Wall".

So back to the chart for a moment.  The market does not go straight up or straight down.  Even in the chart above there were several changes in trend.  Be nimble and be careful.  The market always tries to shake out as many investors/ and traders as possible.  This is nothing new.

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Past performance is not indicative of future results

chart: SPY 4min

Courtesy of TradeStation.com

This SPY 4min chart has been good at giving buy and sell signals.
Green arrows bullish and red arrows bearish.
These signals are used along with the cross overs of MA's.

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Past performance is not indicative of future results

chart: SPY Buying Pressure

Here we have again the SPY Buying Pressure.   Only the bottoms were looked at in this chart.  As we saw recently on Jan 7th, when the SPY Buying Pressure was last posted, the Buying Pressure showed positive divergence and it still does today.  Since Jan 7th the Buying Pressure has not showed any sign weakness even though the SPY has been going lower.
There is no guarantee that the stock will rally from here, but, this chart does make some kind of rally seem promising.  

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chart: Today's open on SPY 4min

Courtesy of TradeStation.com

This is the SPY 4min chart of today's market open.  As you can see the OBV histogram has not been able to get above zero on any of the rallies.

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chart: DIA by Chaikin Analytics

Courtesy of ChaikinAnalytics.com

Red circle - Price is below the lower band
Green circle - the sell off has not produced any significant red below zero in the CMF
Yellow circle - OBOS is in the OS area
White rectangle - RS is still green and above zero relative to SPY

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chart: Fear & Greed Index

Courtesy of CNN/money

Courtesy of CNN/money

 
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chart: %DJIA stocks above 10DMA

Courtesy of IndexIndicators.com

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China's Stock Regulator Said...

The Wall Street Journal

China’s stock regulator to restrict major shareholders’ sales

By Yifan Xie

Published: Jan 6, 2016 11:12 p.m. ET

New rules aimed at ‘stabilizing market expectations’

China’s stock market is down 12% just four trading days into the year.

SHANGHAI -- China’s stock regulator said Thursday it will curb major shareholders from selling more than 1% of total shares outstanding within three months, after markets closed early when the circuit-breaker mechanism was triggered for a second day this week.
The China Securities Regulatory Commission has ruled that large shareholders -- those holding 5% or more of shares in listed companies -- won’t be allowed to sell more than 1% of total shares outstanding within the next three months, according to a statement on the regulator’s website.
The agency also ruled that large shareholders must disclose their share reduction plans to the exchanges 15 trading sessions in advance.

The new measures came before the six-month share reduction ban on large shareholders is set to expire Friday. The new rules are aimed at “preventing concentrated share reduction” and “stabilizing market expectations,” the statement said.


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Goldman Sachs Rethinks Outlook

Click on this link for the full article
read.bi/1PNtyu1

By BusinessInsider.com

Goldman Sachs rethinks its stock market outlook because of something that hasn't happened in at least 48 years

Just a few weeks ago, analysts were comfortable assuming that oil prices would finally stabilize and perhaps begin to recover in 2016. But that once reasonable assumption on Wall Street is turning into a disaster.
Goldman Sachs is the latest firm to warn its clients that tumbling oil prices are bad news for stocks.
"We lower our S&P 500 [earnings per share] forecast by $3 to $106, $117, and $126 for 2015, 2016, and 2017, reflecting annual growth of -7%, +11% and +8%, respectively," Goldman Sachs' David Kostin said. "Energy is the leading driver of our reduced profit outlook."
Kostin follows Deutsche Bank's David Bianco and RBC Capital's Jonathan Golub in issuing this type of alert to clients.
"This seemed reasonable several weeks ago," Bianco said regarding his assumption that oil prices would average $55 a barrel in 2016. "But now it doesn't."
It's a remarkable turn of the tide when you consider that many of these forecasts were published just weeks ago. Kostin's was published November 23.
These warnings speak to the challenge of forecasting markets, especially the energy markets. Indeed, what's happening in the oil business has been unprecedented in at least the past five decades.
"We expect Energy will post a $2 per share loss in 2015 EPS, the first time that [last-twelve month] Energy EPS has been negative since our data series began in 1967," Kostin said. "The write-down in Energy company assets has exacerbated the earnings hit from the 35% fall in Brent crude oil prices in 2015 following a 48% plunge in the commodity price in 2014."
Kostin noted that the sector accounted for 12% of S&P EPS back in 2014.
Oil was trading near $40 a barrel a month ago when Wall Street's strategists were rolling out their 2016 stock market targets. Now, it's trading near the low $30s. And the S&P 500 has significant exposure to oil prices. The energy sector has been the primary source of weakness in stock prices and earnings.
On Wednesday, Oppenheimer's Fadel Gheit warned 2016 could be a worse year for energy stocks than 2015.
Kostin, meanwhile, maintains his 2016 year-end target of 2,100.
FinVizWest Texas Intermediate oil prices.

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chart: SPY Buying Pressure

Above is a chart of the SPY & the Buying Pressure.
Orange = peaks in the Buying Pressure
Green = trough in the Buying Pressure
Yellow = positive divergence in the Buying Pressure
Blue = Probable bias up in the SPY as suggested by the Buying Pressure

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chart: Volume Oscillator

Above is the S&P500 and the Volume Oscillator (VO).  The VO is currently oversold and in a buy area as noted by the green horizontal line.  Use other indicators always as a confirmation.
This VO was an indicator used by the late Terry Laundry, may he RIP.  He attended MIT and graduated as an engineer, but pursued a successful career in the analysis of financial markets and also managed client accounts.  Much of his time was spent in researching the time symmetry in financial markets.  Terry had named his work "T-Theory". 

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chart: Worst Calendar Year Starts

Courtesy of @MktOutperform

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chart: Today's Open

Courtesy of TradeStaion

On today's BIG gap down open, the OBV histogram in the SPY 4min chart above, had green and yellow bars above the zero line.  No wonder the market is trading above it's low.   Buyers were coming in at the open and at 10:50am they are still there.  Normally the OBV histogram would be below zero in red and yellow bars and the selling would continue in the direction of the opening trend. 
It would not surprise me to see a counter trend rally develop at sometime and into the short term cycle dates of Jan 11-15.  More on the cycle dates soon.

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Santa's Message !

See this link for the full article
http://www.cbc.ca/news/business/santa-claus-rally-1.3389411
January 5,2016
By Daniel Schwartz, CBC News

1) Seventh Year of a Two Term Presidency
Jeffrey Hirsch, editor of the Stock Trader's Almanac, notes that 2015 was the first time since 1939, the year the Second World War started, that the Dow Jones industrial average was down in the seventh year of a presidency. Over 1940 and 1941, the Dow fell by about one-third.

2) Final Year of a Two-Term Presidency
Hirsch also points out that in years like 2016 (the final year of a two-term presidency), the Dow averages a drop of 13.9 per cent, and the index has been down in these cases five of the last six times.

3) No Santa Claus Rally (Dec 23rd to Jan 5th = S&P500 down -47.58)
There's been lots of talk in the business press in recent days about the Santa Claus rally. Definitions vary, but since the term was coined by the founder of the Stock Trader's Almanac, Yale Hirsch (Jeffrey's father), we'll use his benchmark. It looks at the overall performance of the last five trading days of a year, plus the first two trading days in the new year.
This year's result will be known when markets close today, but it's not looking like a rally.
For a rally to materialize, the S&P 500 needs to surpass its Dec. 23 close of 2,064.29. The index's closing price on Monday was almost 52 points away, 2,012.66. On only one day in the last four years has the index risen more than 52 points.

'If Santa Claus should fail to call, bears may come to Broad and Wall.' That legendary Wall Street saying, coined by Yale Hirsch, means that if there is no Santa Claus rally, the outlook for U.S. stock markets becomes gloomy. (Seth Wenig/Associated Press)

Jeffrey Hirsch told CBC News the seven-day trading stretch is usually positive for stock markets because tax-loss selling has ended for the year, funds are busy with year-end padding of portfolios and the people still trading stocks during those days are "mostly professionals buying beaten-down stocks, so when you don't have that rally there, it's an indication that the pros are not really enamoured with the outlook for the market, and that's a negative indicator for the future."
His father coined the legendary saying, "If Santa Claus should fail to call, bears may come to Broad and Wall." And the last four times the Santa Claus rally was negative, Jeffrey Hirsch points out, Wall Street's year would go on to be either flat or have a bear market.

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charts: Worst Yearly Start Since 1932

Today, so far, is the worst start of a new year since 1932, -8.09%. 
1922 also had a bad start being off -2.35% on the first day of trading.
BUT 1932 was also an Election Year and 1922 was not.
1922 was different.  Jan 3,1922 came after a 46% correction from Nov 1919 to Aug 1921 which is very different than the market environment we are in today and have been in during the last couple of years.
Not that 1932 is similar to our current day market environment, but, the similarity is that 1932 was an Election Year just as 2016 is.
Below is a comparison of the 1932 price chart and the chart of Average Election Years since 1900.

Courtesy of chartoftheday.com

Courtesy of Worden Bros.

After bad first day in 1932 the market held up in a trading range until it finally broke down in April and continued into a July low.
What is very interesting is that the chart of the Average Election Years above shows a very similar price pattern.
"History doesn't repeat itself, but it rhymes" - Mark Twain
So if the above gives us any hints to the price pattern for 2016, look for a high in the 1Q2016 and a low mid year +/-.

Looking at longer term repetitive cycles for additional guidance.
The following are dates of very similar cycles. 
April/May1992 high    Oct 1992 low    DJIA lost  -8%
Jan/Feb 2004 high       Oct 2004 low    DJIA  lost  -9%
Forecast:
Jan/Feb/March 2016 high       June/July 2016 low +/-    =  ?

This is interesting because it suggests a similar price pattern as the Average Election Year chart.

Now that we addressed the first half of the year, what about the second half ?
The second half will be discussed at a latter time.

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Past performance is not indicative of future results

Short Term Cycles Update

The following was posted on December 23,2015
Today's comments are in Blue

Short term details:(every date is +/-)

Dec 16-19 could be a high and Dec 24th a low as suggested by the short term cycles.   This was a direct hit as the high did come in on Dec 17th in the middle of the forecast range of Dec 16-19.   So far, the Dec 24th +/- low was a little late as the market did bottom on Monday Dec 21st.  But if you follow this Blog you would have read that there was a shift in the SPY Buying Pressure and that indicator called the market turn.

These dates are always +/- 

From Dec 24th the cycles have an upward bias into December 29th to January 7-14   Dec 29th was another direct hit as a high did come on exactly that date.  There was a bias up into Dec 29 to Jan 7-14 and that is still the cycles forecast.  The market does not go either straight up or straight down and therefore some counter trend moves do occur in these periods.  The big moves seen on the last days of 2015 and the big down open this morning was much more volatile than the cycles suggested.  Cycles do suggest turning points and direction, but, they are not to be used for amplitude.

Here is a pic of the current cycles described above.

The Short Term Cycle dates have been highlighted.   On the way up into the Jan7-14 suggested highs, the cycles did suggest a low on Jan 3rd which was Sunday.  The cycles don't know from weekends and Holidays so a carryover to the next day or a "+/-" interpretation is always prudent.  It is possible that today "MAY" be a short term low.   Refer to the chart above for a potential future move in the market.

Always use  other indicators to CONFIRM the cycles suggested moves.

Intermediate Cycles suggest  some sort of correction in the first half of this year.  Recent similar intermediate cycles suggested corrections occurred during April 1992 - Oct 1992 & Feb 2004 - Oct 2004.  The new dates are from Jan/Feb 2016 - May/June/July 2016.

More on both the short term and intermediate term cycles as we get through some of these dates...

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Past performance is not indicative of future results

2016 After a Flat Year

Stocks in 2016: why I like what I see (Danny's Opinion)

Posted by Danny @LunaticTrader on December 31, 2015

It is the last trading day for 2015, a good opportunity for a little look at what has been and, more importantly, at what may be ahead…
It looks like the S&P 500 will end the year very close to unchanged, which is quite rare. More on that below. The sideways range made it a challenging year for most investors. But our lunar cycles did exceptionally well: grabbing 833 points of profits for Nasdaq in lunar green periods, while sidestepping 555 points of losses in the red periods. See our lunar cycle tracking page. That’s as good as it gets in a flat market year. It will be difficult to do better in 2016, but of course we will try.
What about next year? I have noticed that a lot of major banks are calling for another flat year for stocks in 2016. Big banks rarely ever call for a bear market in their new year prognosis, so this is as bearish as they get. And other talking heads are joining the bearish bandwagon. IMF director Christine Lagarde is calling for disappointing global growth in 2016 and warns that the medium-term outlook is also deteriorating. So, we better sell our stocks before all hell breaks loose, right? Hmm, maybe…, but let’s think twice and first ask: when was the last time anybody made money by listening to Goldman Sachs or Mrs Lagarde?
Flat years in the stock market do not happen all that often. Defining a flat year as a year in which the S&P 500 index changes less than 5% from the previous yearly close I found only 11 such years since 1950. So, the odds that we will indeed get a flat 2016 is 1 in 6 or about 15%. Back to back flat years have not happened in at least 65 years. Maybe Goldman Sachs has fired all its quants, but the odds that they will be proven right in calling for another flat year do not look very good. Here is what has happened historically after flat years:

In all but one of those eleven cases a flat year was followed by a double digit % move in the ensuing year. Nine times the market went up and only two times it went down. In the nine up years the S&P 500 gained an average 17%, which is well above the long term average annual return of 7%.
I know, with only eleven cases the law of small numbers applies. But maybe the explanation is simple: a flat year makes investors lose interest in the stock market, setting the stage for a bigger move the next year if anything starts pulling them back in.
And that’s why I like what I see. With expectations rather subdued, if not pessimistic, the stage is set for a big move in 2016. I am looking for 2350 on the S&P and even that may be too pessimistic.


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This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions.  
Past performance is not indicative of future results