Closing  Mar 27, 2009

Primary Trend=Up

Age of current cycle=12 days

1st target level=78.30 Achieved 3/17 (78.29)

2nd target level=80.76 Achieved 3/18

3rd target level=86.87

PM Update Mar 27:  The Secondary lost 148 ticks to close at +197.  Two more days of -2000 signal weight will turn the Secondary's slope down.

AM Update Mar 27: At the opening, strongly negative signal weight of -1426 has the Secondary losing 114 ticks to +230.  For the Secondary to turn over, it will take several days of strongly negative signal weight.  

PM Update Mar 26:  Very strong positive signal weight has continued all day, the Secondary picking up 54 ticks to +319.  It will take several days of extremely strong negative signal weight to turn the Secondary's slope down.  There is just a hint of negative divergence being shown on the orange line, the opposite of late Feb-early March.  While it is way too early to predict an end to this up cycle on the Secondary, it's something we need to put in the back of our minds for now and see how it plays out over the next cycle on the Primary.

AM Update Mar 26:  Signal weight just after the opening is strongly positive at +1270, the Secondary picking up 36 ticks to +299.

PM Update Mar 25:  The Secondary gained 31 ticks today to close at +265.  A long signal was issued on the Primary that has not yet achieved its profit target.

AM Update Mar 25:  Just after the opening, the Secondary is gaining 34 ticks to +269. A slope change up and long signal is expected on the Primary today as long as signal weight remains positive.

PM Update Mar 24:  The Primary changed slope this morning and should remain negatively sloped for 1-2 days before turning back up again.  The Secondary cannot change slope during this period unless very strongly negative signal weight persists for several days.  Hence, we can expect the Secondary to continue higher pulling SPY along with it toward the 3rd target level of 86.87.  The Secondary lost 113 ticks to +233.

AM Update Mar 24:  The Secondary cannot turn over for several days even with strongly negative signal weight.  It's losing 112 ticks at the opening to +236.

PM Update Mar 23:  Excessively strong signal weight of +3058 at the close has the Secondary gaining 133 ticks to close at +346.  The Primary issued a long signal today that achieved its profit targets.  The first two targets on the Secondary were achieved last week.  The next target on the Secondary is 86.87 on SPY.

AM Update Mar 23: Positive signal weight of +1740 after the opening has the Secondary gaining 69 ticks to +282.  A slope change and long signal is expected today on the Primary.

Secondary Study: Positive Divergence

NOTE:  (posted 03/08/2009)  Shown in the chart above is the positive divergence (A) that we mentioned last week that was developing on the daily chart.  Note that the slope of the orange line (Slope) is generally positively sloped in contrast to the strong downward trend in price, SPY.  Seeing positive divergence develop while SPY made new cycle lows suggests that a strong reversal in the daily trend is possible.  This pattern typically is accurate, both at major tops and bottoms.  The motion of the Primary is the key to whether we are at a turning point on the daily chart.  As the Primary is -10,000 and nearly over extended, unless affected by exogenous events, a move back to 78-80 on SPY over the next few weeks is possible.  Of course, the Secondary would need to change slope up first.

The last time this pattern played out was in late December of last year, also seen above.  During that period, negative divergence was seen.  Notice the pattern (B) that developed then.  It's subtle, but as Price made slightly higher lows and higher highs (chevrons up/down) the orange line was making lower lows and lower highs suggesting a reversal of trend was possible.  Once the final push was made on the Primary during that period, price collapsed and SPY fell 25% over the next two months.

Hence, since a slope change up is expected Monday on the Primary, increased volatility on the upside may well define the character of this coming week's price action.  Signal weight, as always, will be the key.

UPDATE 03/15/2009:  Last week's prediction on the 8th of "increased volatility on the upside" certainly proved accurate.  For the coming week, we can expect the Primary to complete a downcycle that began mid day on the 13th.  For the Secondary to turn back down this week, strongly negative signal weight for two days will be needed that would put the Slope of the Secondary near zero or slightly negative.  If only average to modestly negative signal weight is seen (-1300 to -800), then the Slope will continue to be positive and the next signal on the Primary should be another long signal.  The Primary's downcycle should complete mid day Wednesday.

UPDATE 03/22/2009: The Primary downcycle began later than expected last week.  It started on the 18th and continued lower for the rest of the week. If one looks at the charts below, one can see that price continued higher after the slope change down on the 18th.  The FED induced rally failed and price resolved back down in the direction of the Primary.  This week we can expect the downcycle to end, and depending on signal weight, a new long signal should be issued this week.

Mar 27: Closing Read

Very strong negative signal weight persisted most of the day.  The Change is already near zero with signal weight at -2094, so we know the Change will turn positive with any moderation in negative signal weight.  However, with the Slope at -734, it will take at least another day or more before the Primary can turn back up.  The Secondary should remain positively sloped for the next two trading days making another long signal on Tuesday the next most likely signal.

Mar 27: 1:00pm

This is the last post for today. I will update the DJ pages for the close Saturday morning.

Strong negative signal weight continues, the trading model is neutral (gray color).  We can expect the down cycle in the Primary to continue until at least late Monday to Tuesday.  Signal weight, when negative, doesn't stay there long and evidenced by the upside bias in signal weight since March 12, the day the Secondary changed slope up.

Mar 27: 11:30am

Strong negative signal weight of -1817 continues, the Change is -94.  The Primary cannot turn back up today.  I've removed the orange line from the chart below to show the double chevrons up over the past 5 days.  These chevrons identify the most likely downside price targets for the current unconfirmed downcycle.  It's unconfirmed because the direction of the Primary is not confirmed by the direction of the Secondary.  So why know any downside levels?  Because the Secondary is up and we can expect that the next signal will be a long signal sometime Tuesday or Wednesday of next week.

Looking at the chart we see downside levels of 80.58, 79,66, 79.25 and a nice big gap at 77.53.  

Mar 27: 10:30am  Exit Long /Slope Change Down Confirmed at SPY 81.94

The exit long/slope change down has confirmed.  The trading model is neutral and for users following it I recommend you turn off your computers and play golf or otherwise ignore the market today and have a nice weekend.

Mar 27: 10am  EARLY EXIT LONG / EARLY SLOPE CHANGE DOWN  signal issued

An Early Exit Long / Early Slope Change down signal was issued as expected at 10am.  The signal will confirm at 10:30 provided that signal weight is -1620 or more, else the slope change will confirm at 11am for sure.  

If, for example, the profit target had not been reached yesterday and the trading model were still long, it would close out the long trade at the exit long/slope change down signal at the end of the bar.  An exit long or short is a slope change by definition.

Mar 27: Opening Read

Strong negative signal weight of -1730 has the Change at -180.  We can see that there will be an early exit long / early slope change down next bar as the Change is larger than the Slope.  As the Secondary is up, no short signal will be issued.

Mar 26: Closing Read

Signal weight at the close is now at +2153, the Change +20.  The value of the Primary is +8682  and is not over-extended.  The Primary can continue to rise as long as signal weight remains above +1850, else it will decline.  This is the normal cycle we see over and over and this is what is so dependable about the Delineator.  We know it leads price unless exogenous events (aka: randomness) are present.  This past signal is a perfect example of this. The continued rise in the Primary from mid day yesterday, in the face of a rapid counter trend move in price, is what makes the Delineator something you can depend on over time.  It won't work this well every time, certainly, and we get whipped and lose money like everyone else from time to time.  

To be successful in trading you need to base your decision making on a repeatable, measurable and well defined strategy.  Entering or exiting a trade based on how you feel about the transaction may be repeatable, but it is not measurable or well defined.  There are many ways to use the Delineator, if you're interested in some of the other strategies, drop me an email.

Mar 26: 3pm

Signal weight has remained very strongly positive during the last half of today.  With one hour to go, the trading model is flat having achieved (finally) its price target earlier today.  Notice that signal weight is +1564 but the Change is now negative at -5.5.  To keep the Change a positive number, strong and stronger signal weight is needed.  Hence, this move in the Primary is in that phase where slope changes begin to play themselves out, probably tomorrow.  It will be several days before another signal can be issued.  As the Secondary is strongly up, and would need several days of very strongly negative signal weight to turn it over down, we can expect another long signal sometime next week.

If you've been watching these pages for the last several week, there is a free trial of the software available.  Just send me email and I'll tell you how to get started running the Delineator on your own computer. (advertisement)

Mar26:  2:15pm  SPY ACHIEVES +.80 PROFIT TARGET at SPY 82.90

SPY achieved its profit target during the 1:30 bar.  The trading model is now flat. For the week, two successful signals each achieved its 80 cent profit target. It is somewhat unusual for the Primary to issue two signals in one week.  The fact that both of these worked indicates the signal weight strength behind the Secondary.  Users who got scared out of the signal yesterday need to stop watching price and keep focused on the motion of the Delinator.  It's hard, but after you work with the Delineator and see this pattern repeat over and over again, you will learn to trust the Primary and ignore price movements.

Mar 26:  12:30pm

Signal weight continues to build and is now +1827, the Change +29.  I'm off to the gym, the next post will be at 2:30pm.

Mar 26: 11:30am

Signal weight remains very strongly positive at +1427, the Change is +18.65.

Mar 26:  11:00am

The current signal, and the gyrations in price yesterday, serve an important lesson:  DON'T WATCH PRICE, WATCH THE DELINEATOR.  Did the Delineator change slope yesterday issuing an exit signal?  NO.  Should you get into a trade more if price declines? ONLY IF THE CHANGE IS A LARGE NUMBER AND THE SLOPE OF THE DELINEATOR CANNOT TURN OVER.  This is the "balloon under water scenario"; was this the case yesterday?  NO.  Do you get into a long signal late because you were away at the time of an enter signal and price is now lower? NO NO NO!.  If you're not comfortable with an enter trade signal, do you still make the trade?  The honest answer here is I don't know.  You'll have to track your own instincts and determine if they're reliable.  We never can really tell whether any one signal is a loser or a winner.  The important thing to remember is that consistency of decision making is the key to success.  

At 11am, signal weight is again building and the signal continues on.

Mar 26: 10:30

Signal weight thus far today has ranged from +1600 to +800, currently at +1223 as of 10:42am.

Mar 26: 10:15am

Signal weight has turned only modestly positive and the Change is now a small negative number.  Another good rule of thumb to use when trading is "never compound one error with another error."  If you've come out of a trade for fear of losing, never get back into the trade again.  Wait for the next Delineator cycle, there will always be one.

Mar 26: 10:00am

Signal weight has moderated somewhat but is still strongly positive at +1058, the Change however is only +7.6 meaning that more and more signal weight will be needed to keep the Primary rising.  To turn the Primary down this bar, negative signal weight of -1240 is needed.  BUT UNTIL THE SLOPE ACTUALLY CHANGES, THE SIGNAL IS STILL VALID.  The purpose of the Delineator is to focus your attention on its movement, NOT PRICE.  How does one stay in a position when our emotions tug at our resolve?  Try pushups or situps or any other physically taxing activity and leave the trade button alone.  Fear of losing is as bad as greed.

Mar 26: Opening Read

Pre-Opening comment:  Yesterday's long signal is still active at 82.10.  Turns out my program crashed before the Enter Long signal was actually issued and emailed, only the Early Enter Long signal was sent out.  An "Early" signal is not a signal, it's a warning that a signal may confirm at the end of the current bar (30-minute period).  Some users have sent in emails about this so I wanted to make this clear.  An early slope change or early enter or exit are not "suggestions" to make a transaction prior to the actual Enter or Exit signal.

9:40am:  Strongly positive signal weight of +1400 just after the opening  has the Primary continuing yesterday's long signal and upcycle.  The GTC exit of 82.90 is still active (typo corrected in yesterday's comments).

Mar 25: Closing Read

The Primary changed slope up and then issued a long signal at 12:00 at SPY 82.10.  Signal weight was very strong all morning until approximately 2pm when signal weight turned modestly negative, with SPY falling from 81.50 to 79.20.  There were several periods throughout the day when it looked like a slope change down might have been issued, however signal weight never got strongly negative enough to turn the Primary down.  At the close, the long signal is still valid as the profit target has not been achieved and the slope of the Primary is still up.  Signal weight at the close is once again strongly positive at +1118, but the Change is only +15.  

NONETHELESS, until there is an early exit, followed by an exit long, the signal is still valid.  As we are only concerned by the motion of the Primary, changes in price against the signal are not in itself a reason to bail on the signal.  Looking back at the numbers during the decline in price, there wasn't enough support within the numbers to have bought the lows of the day as a secondary trade.  There was also no reason to take a loss on the signal.  The trading model is still long at 82.10 with a GTC exit at 82.90 (plus 80 cents which we're still using due to the low value of SPY).  

There are only two ways for a signal to end: 1) the profit target is reached, 2) An exit signal is issued.  Bailing on a trade because price has declined while the Primary is still rising, is a breach of the trading discipline.   An emotional response to price must be avoided.

Mar 25: 10:30am

Signal weight is now very strong at +2228.  Notice that the Change +116 is greater than the Slope -35?  This means that a slope change next bar is a certainty as is an early enter long provided that signal weight stays about where it is.

This is the last post until a few hours after the close. Sorry.

Mar 25: 10:00am

Strongly positive signal weight continues at +1943, the Change now +117.  An early slope change up is expected during the 10:30-11am period.

Mar 25: Opening Read

Signal weight opened at +1190, the Change is now +97.  As long as signal weight remains positive, a slope change up and a long signal is expected this morning in about 3 bars (Slope/Change=# of bars: 316/97=3.2 bars). For new readers to the site, the sequence of signals are early slope change, confirmation of slope change, early enter long (when the Slope is greater than +80),confirmation of enter long.

NOTE:  I have appointments today that will take me away from the DJ pages starting at 10:30am.  The program will still be running and sending out emails.  If you're not signed up for the email signal alert, sign up using the link above.

Mar 24: Closing Read

A slope change down /exit long signal was issued by the Primary today.  The Primary is colored gray because the direction of the Primary is not confirmed by the direction of the Secondary, hence no short signal.  There was a brief period of time during the day that the Change was close to zero, however signal weight turned back more negative and the Primary continued lower.  SPY tested the highs yesterday, then resolved back in the direction of the Primary.  To keep the Primary moving lower tomorrow to complete the current downcycle, negative signal weight of -1300 or more will be needed, else the Primary will flatten.

Mar 24: 3:12pm

Signal weight has moved back to the strongly negative region at -1051, the Change -30.

Mar 24: 1:30pm

We can see that signal weight has turned only moderately negative at -653. Notice the Change is now only -26.  If signal weight turns more positive, the Change will turn positive and the process for a new slope change will have begun.

Mar 24: 1:00pm

Signal weight has become moderately negative at -937.  Signal weight ranges from -3100 to +3100.  Strong= +-1000, Very Strong=+-2000, Excessively Strong=+-2700.  Given the fact that the Secondary is up and cannot turn over within several days of negative signal weight, our expectations for the motion of the Primary should be a 1-2 day period when the Primary has a negative slope, then a slope change up with another long signal later this week.

Mar 24:  12:00  Slope Change Down / Exit Long signal confirmed

The slope change down has confirmed. It is also an exit long signal indicating that the long signal is over.  As readers know, the Delineator is not designed to trade from enter to exit.  The exit signal is generated to indicate that if any positions are still being held, that the long signal has terminated via the slope change.  It is assumed that exits from the original long signal will have been already been achieved.

Additionally, notice that the Primary is now gray in color.  This indicates that the direction of the Primary is not confirmed by the direction of the Secondary, hence, no short signal has been generated.  A major part of the trading model is only to trade in the direction of the Secondary.

Mar 24:  11:30am  Slope Change Does Not Confirm

Signal weight declined from -1771 to -1320 at the end of the last bar resulting in the slope change not being confirmed.  However, as seen in the data below, the slope change will confirm at the end of this bar (12pm) if signal weight is +360 or less.  Part of the Delineator program includes a STAT window that determines the amount of signal weight needed per bar to effect a slope change.

Mar 24: 11am  EARLY SLOPE CHANGE DOWN

An early slope change negative has been issued as expected.  The slope change will confirm at 11:30am if signal weight is -1700 or greater.  All signals on the Primary can only be confirmed at the conclusion of the bar in which they were generated.  If signal weight is -1450 for example, the slope change will not be confirmed this bar.  However, since the Change is -142 and the Slope -4.09, we know that a slope change will confirm the next bar as the Slope will be -120 or more.

Mar 24: 10:30am

Signal weight has turned a bit more negative at -1702.  We can now see that the Change is larger than the Slope, indicating that an early slope change down may be generated during the next bar (11am bar).  Since the Secondary is up, given a slope change down later today, no short signal will be generated.  The trading model is neutral.

Mar 24: 10am

Signal weight remains strongly negative at -1592, the Change -181.  If signal weight turns less negative, the timing of a slope change will be extended.

Mar 24: Opening Read

Strong negative signal weight of -1558 has the Change -209.  We knew at the close yesterday that the Change number would most likely turn negative today because signal weight was already at a maximum extreme (+3058) and the Change was only +29.  Signal weight opening simply at zero would have turned the Change negative as well.  We can now expect a slope change down today in 2.3 bars (Slope/Change=# of bars).  The trading model is neutral having achieved all its goals yesterday.

Mar 23:  Closing Read

The enter long signal issued this morning at 80.31 achieved its profit target, as did a secondary trade as described in previous posts today.  Excessively strong signal weight dominated all day.  At the close we can see that with signal weight of +3053, the Change is only +29, so most of the energy propelling the Primary higher is already spent.  We know that signal weight will moderate, and hence the Change will turn to a negative number indicating that the first stage of a slope change will be in progress.    

Today's mid-day action is what we as Delineator traders wait for:  counter trend moves during the first hours of a signal when the Primary cannot reverse slope.  Such periods always make for great trading.  Now that all profit targets have been met, the trading model is neutral and waiting for the next signal.

Mar 23: 3:16pm

The 80cent target price of 81.11 from the enter long signal level of 80.31 has been achieved at 3:16pm. 

Mar 23:  2:30pm

Excessively strong signal weight continues at +2924, the Change +41.  SPY has traded back to 79.60 and as of this posting is rising back near the highs of the day.  As long as signal weight remains very strong (+1000 to +2000) any downward move in SPY will resolve back in the direction of the Primary.

UPDATE 2:53:  The secondary trade identified at the 12:30 post was achieved.  An opportunity presented itself at 79.60, and SPY just traded to 80.92 exiting that trade at 80.75 for an .80 cent gain.  The original +80cent from the signal price of 80.31 has not yet been achieved.

Mar 23: 12:30pm

Excessively strong signal weight continues at +2910.  The Change is +90 and is slowly declining which is to be expected given the very strong signal weight.  A pullback to the 79.40-79.60 area would be an opportunity to create a secondary position or average down the existing long.  If a second purchase were to be made at 79.60, the average of the two would be 79.95 and an exit of 80.75 would then be used to net 80 cents (a possible 2nd strategy).

The next post will be at 2:30pm.

Mar 23: 12:00  Enter Long Confirmed at 80.31

The enter long confirmed as expect at SPY 80.31.  The Plus a Buck strategy is still using 80cents due to the low price of SPY; a GTC sell is entered at 81.11.

It is impossible for the Primary to change slope back down today.  Hence, any move back to the 79.40-79.60 area over the next several hours would be a spot to make an additional purchase for a trade back to 80.20 on that lot as long as signal weight remains positive and the Change number is greater than +50.

Mar 23: 11:30am  Slope Change UP confirmed, Early Enter Long signal issued

The slope change confirmed and an early enter long signal has been issued that will confirm at noon if signal weight is greater than +400.

Mar 23: 11am  Early Slope Change

An Early Slope change up has been issued that will confirm at the end of this bar.  An Early Enter Long will be issued if signal weight is +2900 or more this bar. Otherwise, an Early Enter long signal will be issued at 11:30am.

Mar 23: 10:30am

The Change is now greater than the Slope, hence we can expect an early slope change up next bar.  Signal weight is excessive at +2698.

Mar 23: 10am

Signal weight has risen to +2541, a slope change is expected during the 11am bar.

Mar 23: Opening Read

Strong signal weight has the Change at +174.  Estimating when a slope change up will occur: Slope/Change = # of bars.  442/174=2.5.  In about an hour and a half we can expect a slope change up on the Primary and a new long signal a bit after that assuming signal weight remains positive.

Mar 20: Closing Read

At the beginning of the week, the Primary was expected to turn down and complete a down cycle.  The motion of the Delineator is a function of signal weight and time.  As posted earlier in the week (scroll down), only extremely strong signal weight could prevent the Primary from declining.  Hence, any price gains during such periods are unsustainable.  Excessive signal weight eventually moderates and slope changes quickly follow.  Notice that the Primary's last signal was a slope change down prior to the highs that were made on the 18th.

The next most likely signal next week will be a long signal.  Looking at the numbers on the close, we see that with -1965 signal weight, the Change is only -25.  Any moderation in negative signal weight will move the Change to a positive number.  When this happens, the first part of a slope change is underway.

If you've been watching these pages, there is a free 30day trial including the free data feed.  Why not have the Delineator run in real time next week on your computer? (advertisement)

The purpose of the Delineator Journal is to introduce you to the Delineator Analytic so you may evaluate your level of interest. You are welcome to view these pages for that purpose.  The manner in which I present information does not purport to be investment advice or an advisory service.  The Journal and the "Plus a Buck" strategy described herein are intended to introduce you to the concepts and manner of application of the software so that you may evaluate its purchase for your own use.  There are many more applications of the Delineator than are described on these pages.

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