Tom McClellan noted recently, the
“14-day Choppiness
Index,” which tracks the path of a short-term trend,
suggests Wall Street’s
“uptrend is getting
tired.” As McClellan notes, the very linear path for
the index implies that the trend is likely to come to an end soon,
while more volatile, or choppy, action suggests the opposite. A low
reading in McClellan’s index signals a fairly straight-line, or
linear, move.
And presently, his
choppiness index is at its lowest level in two
decades.
“At 11 [in the VIX] you are
really close to the floor. chances are higher that you won’t go
lower on VIX and will instead pop up on some risk-off day,”
Posted by frtaylor on 22nd of Jul 2016 at 02:09 pm
I wonder why he thinks "the current setup is extremely weak,"
and why he seems to be expecting a big pullback. I'm more in Matt's
camp - we've broken out to all-time highs and the MA's are
bullishly aligned, which is a strong setup. Any 2-3% pullback is
very likely going to be bought, which would confirm market
strength. Neither has happened yet, but the former seems less
likely. Would love to hear more on why he's so skeptical of this
breakout (probably volume or breadth etc.).
yep - and the systems will be buying dips. Not that the
systems are smarter than we are, but when MA's are pointing
straight up on daily charts, you don't get major gut wrenching
crashes from that, baring some catastrophe out of left field.
All the huge market sell offs occur when the MA's have
flattened out some for a while. Yes you can get get exhaustion
tops, but what happens is you get a pullback initially and another
bounce to form a lower high, some sideways action that causes the
MA's to flatten out, then you big pullback.
Not everyone is a short term day trader, Steve is not managing
swing long term positions in SPY and SSO etc and he never will,
I don't either.
However at times I do try to be definitive when I think the
evidence is there and it's appropriate. Still you can't just
take my words as gospel and not use stops and throw caution into
the wind. You have to manage what you're trading and your
time frame.
I know some of you would like us to give our opinion more often
on the bigger picture and I think I was pretty definitive over the
last few weekend newsletters my thoughts on the bigger picture. To
me when the markets broke the May highs a few weeks ago that was
significant, as the sideways consolidation has lasted 14 months,
that builds up energy. Lots of folks were on the sidelines,
also bears were willing to take shorts here, but when those levels
were taken out, from a technical perspective it was significant.
Yes I know the arguments about how the market wouldn't be
here if it wasn't for the easy money Fed and central banks around
the world, but to me I just focus on the charts. What I'm not
going to do is be bearish or try to tell you the market is
overbought while sitting on the sidelines while the SPX goes up 300
points or wherever it goes to. I've know ultra bears who have
been bearish for 7 years missing the whole uptrend In a 5th
wave move it can extend or be a shorter move, basically anything
goes.
Now it remains to be seen how long this bull market will last.
If you asked me for my opinion, that that it matters, my
guess would be sometime into 2017, spring time maybe.
Obviously I don't expect it to go up and up and up, there
will be some nice pullbacks and scares along the way.
Could you please define "soon". Also Matt - if you see
S&P500 getting to 2200 where would you see $VIX. Can
S&P move up happen on relatively flat $VIX ?
mulisko..my advice is to trade/manage what's in front of you
versus prognostications. Simply put, adhere to your plan by
trailing up stops on existing longs. Your plan should coincide with
your objectives and risk tolerance. As always, we will adjust
to the message of the market. These comments apply to swing
positions or trades.
Yeah I can't speculate on what where the VIX would be, right now
is had a nice pop out of that 60 min wedge, has a hgher low in for
now, that either holds if the market doesn't ramp to new highs, or
if the market does ramp then the VIX will work lower to a new low.
why does that matter about the VIX, are you trading it?
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Choppiness Index and VIX level
Posted by sbaxman111 on 22nd of Jul 2016 at 12:23 pm
Tom McClellan noted recently, the “14-day Choppiness Index,” which tracks the path of a short-term trend, suggests Wall Street’s “uptrend is getting tired.” As McClellan notes, the very linear path for the index implies that the trend is likely to come to an end soon, while more volatile, or choppy, action suggests the opposite. A low reading in McClellan’s index signals a fairly straight-line, or linear, move. And presently, his choppiness index is at its lowest level in two decades.
Furthermore, with volatility levels at extremely low levels the probability of a further advance, without a pullback first, is extremely limited. My friend, Salil Mehta made a great comment on this recently noting that at current levels of volatility there is only about a 20% probability of further declines.
As I stated in last week’s missive, the safest course of action for those more “bullishly” inclined is to wait for a pullback in prices to further increase equity allocations in portfolios. However, as I also noted, the current setup is extremely weak and the potential for a sharp pullback in August/September could quickly extinguish the bullish exuberance.
Caution remains highly advised.
I wonder why he thinks
Posted by frtaylor on 22nd of Jul 2016 at 02:09 pm
I wonder why he thinks "the current setup is extremely weak," and why he seems to be expecting a big pullback. I'm more in Matt's camp - we've broken out to all-time highs and the MA's are bullishly aligned, which is a strong setup. Any 2-3% pullback is very likely going to be bought, which would confirm market strength. Neither has happened yet, but the former seems less likely. Would love to hear more on why he's so skeptical of this breakout (probably volume or breadth etc.).
yep - and the systems
Posted by matt on 22nd of Jul 2016 at 02:24 pm
yep - and the systems will be buying dips. Not that the systems are smarter than we are, but when MA's are pointing straight up on daily charts, you don't get major gut wrenching crashes from that, baring some catastrophe out of left field. All the huge market sell offs occur when the MA's have flattened out some for a while. Yes you can get get exhaustion tops, but what happens is you get a pullback initially and another bounce to form a lower high, some sideways action that causes the MA's to flatten out, then you big pullback.
Not everyone is a short term day trader, Steve is not managing swing long term positions in SPY and SSO etc and he never will, I don't either.
However at times I do try to be definitive when I think the evidence is there and it's appropriate. Still you can't just take my words as gospel and not use stops and throw caution into the wind. You have to manage what you're trading and your time frame.
I know some of you would like us to give our opinion more often on the bigger picture and I think I was pretty definitive over the last few weekend newsletters my thoughts on the bigger picture. To me when the markets broke the May highs a few weeks ago that was significant, as the sideways consolidation has lasted 14 months, that builds up energy. Lots of folks were on the sidelines, also bears were willing to take shorts here, but when those levels were taken out, from a technical perspective it was significant. Yes I know the arguments about how the market wouldn't be here if it wasn't for the easy money Fed and central banks around the world, but to me I just focus on the charts. What I'm not going to do is be bearish or try to tell you the market is overbought while sitting on the sidelines while the SPX goes up 300 points or wherever it goes to. I've know ultra bears who have been bearish for 7 years missing the whole uptrend In a 5th wave move it can extend or be a shorter move, basically anything goes.
Now it remains to be seen how long this bull market will last. If you asked me for my opinion, that that it matters, my guess would be sometime into 2017, spring time maybe. Obviously I don't expect it to go up and up and up, there will be some nice pullbacks and scares along the way.
anyway back to trading or working basically
Could you please define "soon".
Posted by mulisko on 22nd of Jul 2016 at 01:30 pm
Could you please define "soon". Also Matt - if you see S&P500 getting to 2200 where would you see $VIX. Can S&P move up happen on relatively flat $VIX ?
mulisko..my advice is to trade/manage
Posted by steve on 22nd of Jul 2016 at 02:04 pm
mulisko..my advice is to trade/manage what's in front of you versus prognostications. Simply put, adhere to your plan by trailing up stops on existing longs. Your plan should coincide with your objectives and risk tolerance. As always, we will adjust to the message of the market. These comments apply to swing positions or trades.
Yeah I can't speculate on
Posted by matt on 22nd of Jul 2016 at 01:59 pm
Yeah I can't speculate on what where the VIX would be, right now is had a nice pop out of that 60 min wedge, has a hgher low in for now, that either holds if the market doesn't ramp to new highs, or if the market does ramp then the VIX will work lower to a new low. why does that matter about the VIX, are you trading it?