An early warning, before my week-end update...
I wouldn't go home short today...
The Fed Funds spiked down yesterday.
As per this model, this is a setup for a rally thru April
16-19.
It's also indeed possible the model stopped working,
but, if the spike up is respected, we could say the market
was too strong, had too much liquidity,
and the correction down was "in time", sideways, not "in
price",
which could mean the next spike up could be really
impressive...
Good luck, Mike H.
Since 12-March-2010 the FED Spread had a "correction in price",
while SPX had a "correction in time".
Last week the yellow line had a sharp spike, going above
resistance lines and above the trend.
According to this model, this is a setup for a rally thru
April 16.
The FED ADS Index also had a "correction in price", while SPX
had a "correction in time".
Now the green line has started to turn up for the following
1-2 months.
The red line SSEC correlation indicates SPX is mostly sideways
for the next 2-3 months.
The PPS (monthly for trend, weekly for timing) is still on a
"buy" signal.
These kind of mechanical systems work well on trending
markets, but can whipsaw on ranging markets.
Posted by mhordila on 11th of Apr 2010 at 12:46 pm
Updates - Big Picture, SSEC Leading, FED ADS Index, FED Funds
Spread, PPS, KC24.
(charts using MultiCharts, TOS, Prophet).
The Big Picture is made up of Nasdaq (blue line) and Nikkei 225
(yellow line) shifted forward 10 years,
a very long term possible projection, covering 1995-2020.
The correlation failed for a couple of years (in 2004 and
2006) but seems to hold pretty well more recently.
The two main spikes up of the blue line are in 2000 and 2007.
As per this model we would see some kind of a decline between
mid 2010 and early 2013.
The red line SSEC correlation indicates SPX is mostly sideways
for the next 2-3 months.
After a "correction in price", while SPX had a "correction in
time",
the FED ADS Index (green line) has started to turn up for the
following 1-2 months,
but the larger timeframe trend for now is down.
The FED Funds Spread (yellow line) had a "correction in price",
while SPX had a "correction in time".
It had a sharp spike last week. Then a drop back to support
(at -0.08).
According to this model, this is a setup for some sort of top
around April 16.
The PPS (monthly for trend, weekly for timing), our conservative
mechanical system, is on a "buy" signal.
The KC24, our trend confirmation model, is bullish.
For now, the trend is up.
Thanks for the charts Mike. I don't know much about this
stuff, but do you think it has anything to do with the Fed's MBS
purchase slowdown? Where does April 16-19 come from?
Lots of indicators, traditional TA, almost everything seems
broken, except price.... and it just keeps going higher!
the yellow line is just the difference between the middle value
of the Fed Funds target rate (set by FOMC) and the Fed Funds
effective rate (set by market), and then shifted 11-12 trading days
to the right... I guess it can be construed as an
indirect measurement of FED liquidity available to the
markets...
Update - FED Spread, FED ADS Index, FXI Leading, KC24.
Updates - FED Spread and KC24 Weekly, and FXI Leading.
Posted by mhordila on 1st of Apr 2010 at 11:26 am
An early warning, before my week-end update...
I wouldn't go home short today...
The Fed Funds spiked down yesterday.
As per this model, this is a setup for a rally thru April 16-19.
It's also indeed possible the model stopped working,
but, if the spike up is respected, we could say the market was too strong, had too much liquidity,
and the correction down was "in time", sideways, not "in price",
which could mean the next spike up could be really impressive...
Good luck, Mike H.
Updates - FED Funds Spread, FED ADS Index, SSEC Leading, PPS, KC24.
Posted by mhordila on 3rd of Apr 2010 at 02:34 pm
Updates - FED Funds Spread, FED ADS Index, SSEC Leading, PPS, KC24.
(New charts, using MultiCharts instead of Excel).
Since 12-March-2010 the FED Spread had a "correction in price", while SPX had a "correction in time".
Last week the yellow line had a sharp spike, going above resistance lines and above the trend.
According to this model, this is a setup for a rally thru April 16.
The FED ADS Index also had a "correction in price", while SPX had a "correction in time".
Now the green line has started to turn up for the following 1-2 months.
The red line SSEC correlation indicates SPX is mostly sideways for the next 2-3 months.
The PPS (monthly for trend, weekly for timing) is still on a "buy" signal.
These kind of mechanical systems work well on trending markets, but can whipsaw on ranging markets.
The KC24 is bullish.
For now, the trend is up.
Good luck, Mike H.
Updates - Big Picture, SSEC Leading, FED ADS Index, FED Funds Spread, PPS, KC24.
Posted by mhordila on 11th of Apr 2010 at 12:46 pm
Updates - Big Picture, SSEC Leading, FED ADS Index, FED Funds Spread, PPS, KC24.
(charts using MultiCharts, TOS, Prophet).
The Big Picture is made up of Nasdaq (blue line) and Nikkei 225 (yellow line) shifted forward 10 years,
a very long term possible projection, covering 1995-2020.
The correlation failed for a couple of years (in 2004 and 2006) but seems to hold pretty well more recently.
The two main spikes up of the blue line are in 2000 and 2007.
As per this model we would see some kind of a decline between mid 2010 and early 2013.
The red line SSEC correlation indicates SPX is mostly sideways for the next 2-3 months.
After a "correction in price", while SPX had a "correction in time",
the FED ADS Index (green line) has started to turn up for the following 1-2 months,
but the larger timeframe trend for now is down.
The FED Funds Spread (yellow line) had a "correction in price", while SPX had a "correction in time".
It had a sharp spike last week. Then a drop back to support (at -0.08).
According to this model, this is a setup for some sort of top around April 16.
The PPS (monthly for trend, weekly for timing), our conservative mechanical system, is on a "buy" signal.
The KC24, our trend confirmation model, is bullish.
For now, the trend is up.
Good luck, Mike H.
Interesting charts
Posted by kalinm on 1st of Apr 2010 at 11:59 am
Thanks for the charts Mike. I don't know much about this stuff, but do you think it has anything to do with the Fed's MBS purchase slowdown? Where does April 16-19 come from? Lots of indicators, traditional TA, almost everything seems broken, except price.... and it just keeps going higher!
Updates - FED Spread and KC24 Weekly, and FXI Leading.
Posted by mhordila on 1st of Apr 2010 at 02:27 pm
the yellow line is just the difference between the middle value of the Fed Funds target rate (set by FOMC) and the Fed Funds effective rate (set by market), and then shifted 11-12 trading days to the right... I guess it can be construed as an indirect measurement of FED liquidity available to the markets...
http://www.newyorkfed.org/markets/omo/dmm/fedfundsdata.cfm