ACE: Summation Index weak! TICK at 2008 lows! US stocks headed for correction!

Mike Carleton Has Had Over 50 Followers Rank: 21 Followers: 83 Votes: 74 Years Member: 7 Last Update: 5 July 2015, 17:05 Categories: Momentum Stocks
Trend Analysis
Ratio Analysis

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Three (3) new features of my Chart List are the IBD 50 Stocks, the Spyder Sector ETFs and the 11 Wonders known as the Internet of Things stocks!

The first two pages contain charts that measure perceptions of the overall markets. The main equity indexes (S&P500/ Dow Industrials/ Nasdaq) and key measures of bond markets, the TED Spread, Gold, Currencies, and special ratio charts in the special 'Ace way' that makes things clear and simple to see.

The 9 major Sector SPDR ETFs are tracked with Ace's favorite trend indicators and oscilators! If one understands the trends and cycles of these charts, then they will have a very good grasp of the major rotations of the smart money traders. These charts show up on Page 14 of my Chart List and their symbols begin with the letter 'X'.

The second new feature is a hand-picked selection of the IBD 50 stocks. I use many of my favored indicators on these DAILY charts, including the dynamic 13. 50, 100 and 200 MA lines. (IBD usually shows WEEKLY charts-- you can see DAILY here!) I show the proper bases on these charts as base theory is critical in the IBD 50 stock selection and CANSLIM systems. Of course, IBD 50 and CANSLIM are successful trading systems developed by Investor's Business Daily. These charts start on Page 10. I am not associated or affiliated with the IBD in any way and my charts are interpretations based on IBD theory, Please visit their website to learn more at www.investors.com .

Finally, as of May 24th, I have added a section known as 'the Internet of Things.' These are the 11 wonders identified by many investors as the key stocks leading the internet revolution as we enter the middle years of the 21st century. Cisco's John Chambers has predicted the Internet of Things to be the most profound tech revolution in our lives in the next several years.Now, you can track these stocks with me beginning on Page 11.

Finally, I thank you for YOUR VOTES!

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-0.1 aa - NYSE Summation Index (Ratio Adjusted) (EOD) ($NYSI)

May 31, 2015: UPDATE - The RSI double dip on $NYSI is a rare and ominous occurrence. Note that NYSI continues to move lower and form a divergence against the stock markets, but for how long can this charade last?
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The Summation Index ($NYSI) is an accumulation of McClellan Oscillator readings which helps to smooth out the volatile swings found in the McClellan. The Summation Index is popular with sophisticated traders for spotting significant tops and bottoms in recent trends.

For me, the key graph on the Summation has always been the RSI(14) oscillator...as you can see, the oscillator tends to call tops and bottoms off of significant multi-day trends.

I watch for readings under 30 (oversold) and over 70 (overbought) and the confirmation is usually provided by a break back toward the middle as the RSI line crosses over the 30 or under the 70 mark. Keep in mind that the NYSI can remain overbought (or oversold) for a very long time. This is because major TRENDS can over-ride the cyclicality of the markets, which is what RSI tracks. When trend continues higher (which reflects herd trading), a mistake that some amateur chartists make is to assume a long or short position as soon as the overbought or oversold position is reached on the RSI. The proper time to go long or short is when the RSI begins to climb back toward the middle space (between 30 and 70), at least with the $NYSI chart, imho! That's why I watch for the confirmation signal (again, over 30 or under 70) to confirm the move out of the extremes. Often, the NYSI moves can mark a divergence from the actual movement of price on the New York Stock Exchange (NYSE), thus offering an early warning system.

-0.1 aaa - NYSE - Tick ($TICK)- Weekly 40 Week Channel

May 16, 2015 Update: TICK 40 week lag line hits a multi-year low! The last time it did this was only 3 months before the 2008 Financial Crisis threw its full fury at the markets. We are there again, according to this measure? Does history repeat??? or is this time different? One should never look at one signal in isolation, but this 40 week bottom does make one think twice! Keep in mind you won't hear or see about this signal anywhere else but here! -ACE
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This is another ACE exclusive. You won't find a chart like this anywhere else. The NYSE TICK 40 Week Channel and Line has proven to be a forecast model of market tops and bottoms by up to 2 to 6 months in advance. Tops in the Channel predict market tops--Bottoms in the Channel predict bottoms. The 4-40 crosses can show shorter term trading trends within these larger secular trends.

Ace discovered several years ago that the 40 week lag line of the weekly $TICK index tends to be quite predictive of future stock market action in the major US stock indexes with about a 2 to 6 month window of prediction. What the 40 week lag line does is capture the overall LONG-TERM movement of tick price action. TICK measures the number of trades that go off at the ASK price versus the BID price. Generally speaking, TICK moves higher when the markets are bullish, and TICK moves lower when the markets are getting bearish. This is because buyers tend to chase the ASK price, while sellers tend to chase the bid price.

The 40 week lag line tends to trade in a rather narrow lateral band over many months of time which Ace calls 'the 40 week channel.' Most of the time, the lag line moves through the middle of the channel and the US stock market (NYSE in this case) tends to be mildly bullish to slighthly bearish, but rarely is it in any extreme mode. However, when the lag line gets near the top of the channel, the markets can be said to be reaching a peak %6

-0.1 aaa NYSE - Tick ($TICK)-Daily View with 18 Month Perspective

This is another ACE exclusive. You won't find a chart like this anywhere else. Ace discovered that the daily $TICK chart can be extrapolated into an EKG-like chart when applying the Percentage Price Oscillator (PPO) graph to TICK. Normally, the markets trade in an orderly fashion, and the EKG of the PPO will look like a flat line.

However, in periods of volatility, the PPO graph will spike upwards and downwards, sort of like a heart beat would look on an EKG. Most of the time, the spike periods are mild, but even mild spikes with downward momentum can lead to minor market corrections (as measured by the NYSE index). And in periods of extreme volatility, the PPO graph will look like a heart attack on and EKG with huge spikes. Also, these spikes can be an indicator of instability and can sometimes precede a sharp sell-off.

-0.1 aaaa - NYSE - Tick ($TICK) 5 minute chart (intra-day)

TICK is a market pro's tool for monitoring the under-lying strength in the US stock market. $TICK specifically measures the number of up-tick trades against down-tick trades on the NYSE. By itself, the TICK patterns can be difficult to discern due to high volatility from minute to minute during the trading day. I have developed a smoothing mechanism which helps the viewer to see any trading strength patterns more clearly. From time to time, I have to adjust the trigger trip lines due to the amount of volatility in the markets. In May 2014, I had to adjust the lines inward (closer to the center) due to the lack of volatility (this can be compared to the low readings in the CBOE VIX index).

There are actually two lines to watch on this $TICK chart which updates every 5 minutes during the trading day (though the chart is on a 15 minute delay for viewers). The two lines to watch are the purple (thin) line which is the 8 EMA line and the other thicker line is the 21 EMA line (green). The purple 8 EMA line is the FAST LINE, and this line helps the trader to tease out fast movements within the TICK. The 21 EMA line is the SLOW LINE, though that is a relative term as the SLOW LINE is still capturing the fast rhythms of the market for many traders.

When the 8 EMA line touches either of the two thin dashed lines, then this means the market is either short term over-bought or over-sold. Day traders should focus more on the thin 8 EMA line.When the thicker 21 EMA line reaches either of the two solid horizontal lines, that is more broad market based signal of overbought or oversold. Swing traders and Investors looking for the ideal entry and exit points should focus on the thicker 21 EMA line. To learn more about sophisticated (and yet easy to understand) chart tools like this one, be sure to visit www.AceStockTrader.com where the retail trader and investor comes first!

-0.1 aaaab - S&P 500 - Ascending Triangle breakout May 18th

The S&P 500 chart shows a bullish ascending triangle breakout on May 18th, 2015. This could lead to a late spring rally in the US markets, before any possible top is reached.

Update: May 30th, 2015: Rebound from 50 day line is weak so far. Other market indicators seem to point to this latest rally attempt being questionable, at best. -Mike

-0.1 aaaabb ProShares Ultra VIX Short-Term Futures ETF (UVXY)

-0.1 aaabcde US Dollar Index - Cash Settle (EOD) ($USD)

The latest trading action in the US Dollar Index indicates that a possible top is in...also, the signs of a blow-off top. The huge volatile swing in the dollar index in mid-March is an early warning sign that the correction phase in the dollar has begun, imho. (posted March 28, 2015)

-0.1 aabcd- Russell 2000 Small Cap Index ($RUT)

The Russell 2000 attracts many traders for its high beta stocks, mostly small caps, and many in fast-growth sectors of the market.

-0.1 aabcdefg - Treasury - EuroDollar Spread ($TED)-daily

The TED SPREAD ($TED) -- sometimes affectionately called 'the TEDDIE'-- tracks the yield spread between the historically 'safe' 3 month US Treasury Note interest rate and the 3 month LIBOR Rate, which is the European base lending rate for banks around the world. Generally, when the spread is low, stock markets tend to perform well. In 2008, the Teddie rose dramatically which foretold of a significant and damaging credit event which eventually came to pass and led to a generational low in stocks in early 2009.

In mid-2012, we saw here that the TEDDY was falling dramatically, which led to the general call to get bullish in stocks. Since then, we have seen the US stocks (and other global stock markets) rally considerably in that time, even as many investors remained on the sidelines cubby-holed into US treasuries and other debt instruments.

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My stock charts are offered as an example of my current trade ideas and are intended for illustrative purposes only. Investing/ trading in stocks is speculation!

-0.1 aabce- Nasdaq 100 Index ($NDX)-Dynamic Buy-Sell INVESTOR Signals

This chart is designed for INVESTORS, not traders. Using the popular Nasdaq 100 Index, there are certain buy-sell signals I watch for in terms of LONGER TERM TRADES or INVESTMENTS. This Index should offer good clues as to when to be long in the market....and when to exit or go short the market.

The 13-50 moving average crossovers are one such signal--this crossover serves as the accleration signal on my Mo-celerator charts, but it is also an important buy signal for INVESTORS who don't want to chase every short term signal.

Also, I watch for the 13 day EMA line on the Chaikin Money Flow (CMF) Indicator with the CMF set at a 34 day lag on INDEX charts. I have found over time that when the 13 ema line on this graph crosses above the zero line, that this serves as confirmation of stronger, longer trend. It works especially well to the long (buy) side, and a negative crossover is often 'a final get out' signal if somehow you have not listened to earlier exit signals, which many investors do not do because they don't want to miss the next surge higher....I understand this as part of my portfolio is invested for the long term too.

Also, the Dynamic chart shows the Accumulation-Distribution (A-D) line with a 13 day EMA line...the crossovers on the 13-dma serve as an additional tandem confirmation along with CMF as to whether money is flowing into the momentum stocks of the Naz 100....or flowing out. Often, the 13 ema crossover of the A-D line will occur before action shows in the CMF, because CMF captures heavy money moves, while A-D captures the early trend setters whose cash flows are not easily detectable. The CMF then serves as a confirmation of the early trend-setters' A-D signals.

Finally, my charts always include the ADX graph, which is 'the holy grail' graph for me. For investors, the signal to watch is at least a 5-pt move of the black ADX line in the direction of the new trend...once you have a 5-pt move, the trend is considered solid and firm for investors. 7/14/12

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