February 13, 2014
Daily signals remain bullish. Synthetic volatility was later than some other studies in turning bullish but it was solidly bullish for the past three days. The interesting thing to note, however, is that the study is drooping today when price action was strong. The signal is still bullish, but its current position invites being watchful of the potential of a top forming.
Signals remain bullish, but some are starting to setup for reversal
The discretionary/staples study anticipated the bottom nicely on 4 February and remains bullish today. However, the relative strength of staples and discretionary goods may be shifting. Note the way the study is setup to penetrate down through its moving average – a bearish signal.
Important signals turned bullish today
Some daily signals remain bearish, but two important ones turned bullish today. The volatility spread and the SPY/TLT spread. You might go long SPY and short TLT at this juncture or the shares and bonds of your choice.
Signals are setting up to change course
The volatility spread is turning up. Crossing its moving average would trigger a bullish signal.
The synthetic volatility spread that is calculated for this particular chart is turning up too, although it appears farther from a bullish signal.
The discretionary/staples spread turned bullish on 4 February. I am not quite ready to adopt a fully bullish outlook, but I did establish some deep in-the-money call spreads in honor of market strength today.
Financial markets are predictable because segments of price action fit together in a limited number of patterns that are not random. Markets are unpredictable too because there is enough variability in the patterns to hide the trend at some stages of development. I am fascinated by the market and spend a lot of time working to identify price trends so I can exploit them for profit.