Systematic Trading Strategies and Next Level Trading Setups

What will Make or Break this V Reversal?

What will Make or Break this V Reversal?

Stocks plunged into early April and surged into early May, suggesting that a “V” reversal is in the making. There are two parts to the V reversal. First, there is the V, which is the plunge and the rebound. Second, there is the breakout move that completes the reversal. SPY fulfilled the V part, but has yet to actually reverse the long-term downtrend.

The chart below shows SPY falling 20% from late February to early April and then surging some 14% into early May. This move created the V as SPY nears the 200-day SMA and the March support break. The blue-pink shading marks broken support turned resistance in the 575-580 area. We also have the 200-day SMA marking resistance here. Thus, SPY is clearly at a moment of truth. A push through 580 would break the 200-day SMA and negate the March breakdown. This would be bullish price action.

There is more to a V reversal than price action. TrendInvestorPro went back and studied four V reversals over the last 11 years. They all feature capitulation and a sharp V-shaped recovery. However, it is upside participation that holds the key to moving from bear market to bull market. We need to see a significant increase in upside participation and key breadth indicators cross specific thresholds. These indicators include the percentage of stocks above their 200 and 150 day SMAs, and High-Low Percent.

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V Reversals – Capitulation – The V – Interesting Levels vs Bull Markets – Relative Risk

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Stocks plunged into early April and surged into early May, suggesting that a “V” reversal is in the making. With the recent gains, SPY is back near the 200-day SMA and 61.8% retracement, which puts this key benchmark at an “interesting” juncture. Interesting? Yes. Bull market? No. What does it take to go from an interesting juncture to a bull market?

V Reversals – Capitulation – The V – Interesting Levels vs Bull Markets – Relative Risk Read More »

Market-ETF Report – Upswings Hold – Defensive ETFs Lead – Updates for GLD, IBIT, UNG, DBA

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SPY and QQQ are in a short-term uptrend that include a Zweig Breadth Thrust on April 24th. Even though the long-term trends and breadth indicators remain bearish, this short-term uptrend remains in play as long as the wedges rise in SPY and QQQ. As noted in these first charts, I am looking for confirmation from S&P 1500 Percent Above 50-day SMA ($SUPA50R) as the

Market-ETF Report – Upswings Hold – Defensive ETFs Lead – Updates for GLD, IBIT, UNG, DBA Read More »

Market/ETF Video – Long-term Breadth vs Thrusts – Wedges and Overbought in Downtrends

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The weight of the evidence is mixed, at best for the stock market. Our long-term trend and breadth indicators are bearish, but we did get short-term thrust signals towards the end of April. These signals remain in play so we will update the key levels to watch. Despite a record rebound the last few weeks, the March breakdowns remain and the short-term upswings look like counter-trend bounces. Stocks are also short-term overbought. Strategically, the long-term downtrends and bear market are negative. Tactically, upside could be limited as resistance levels come into play and short-term conditions become overbought.

Market/ETF Video – Long-term Breadth vs Thrusts – Wedges and Overbought in Downtrends Read More »

Market Regime – Bear Market Bounce – Spreads Narrow – TLT Holds Breakout

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This market regime report weighs the evidence to determine the state of the stock market. Are we in a bull market or bear market? We start with the long-term trends for three major index ETFs (SPY,QQQ,RSP). Attention then turns to breadth indicators to measure the percentage of stocks in uptrends/downtrends and the percentage hitting new highs/lows. These indicators

Market Regime – Bear Market Bounce – Spreads Narrow – TLT Holds Breakout Read More »

Market-ETF Report – Long-term Down + Short-term Overbought = Not Ideal

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The weight of the evidence is mixed, at best for the stock market. Our long-term trend and breadth indicators are bearish, but we did get short-term thrust signals towards the end of April. These signals remain in play so we will update the key levels to watch. Despite a record rebound the last few weeks, the March breakdowns remain and the short-term upswings look

Market-ETF Report – Long-term Down + Short-term Overbought = Not Ideal Read More »

Bottoming Process – Capitulation, Short and Medium Term Thrusts, Regime Change

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The market does not always follow the same script or sequence, but bear markets end with a bottoming process that often goes in stages. First, there is the capitulation phase, which suggests that selling pressure reached extremes and a bottom may be close. There was a capitulation setup in early April. Second, short-term thrust indicators mark a sharp recovery after an

Bottoming Process – Capitulation, Short and Medium Term Thrusts, Regime Change Read More »

Trend Trio Signal for ITA – Few Uptrends – GLD Remains Frothy – Software Breaks Out

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Chartists can also use the 200-day SMA and the direction of the 200-day SMA to compare performance. ETFs trading above their rising 200-day SMAs are performing better than those trading below their falling 200-day SMAs. Overall, 23 of the 72 core ETFs are trading above their rising 200-day SMAs.

Trend Trio Signal for ITA – Few Uptrends – GLD Remains Frothy – Software Breaks Out Read More »

Market/ETF Video – Bear Market vs ZBT – SPY/QQQ Resistance – ETFs with Leading Breakouts

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Today’s video starts with the long-term trend and breadth indicators to define the broad market environment. We then turn to the Zweig Breadth Thrust and show the key SPY levels to watch going forward. Stocks are all over the place in April, but a handful of leaders emerged with uptrends, relative strength and breakouts. Elsewhere, the Bitcoin ETF extended on its breakout and GLD is still looking extended.

Market/ETF Video – Bear Market vs ZBT – SPY/QQQ Resistance – ETFs with Leading Breakouts Read More »

Market-ETF Report – ZBT Update – Key SPY/QQQ Levels – XLK Resistance – Breakouts in Play

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Stocks are all over the place in April with a breakdown at the beginning and a Zweig Breadth Thrust towards the end. April price action seems to dominate, but it was the March breakdowns that reversed the long-term uptrends. The weight of the evidence also turned bearish in mid March as long-term breadth indicators also triggered. Currently, the long-term

Market-ETF Report – ZBT Update – Key SPY/QQQ Levels – XLK Resistance – Breakouts in Play Read More »

Thrust Signals using %Above SMA Breadth – Theory, Practice, Reality

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Besides the Zweig Breadth Thrust, chartists can identify bullish thrusts using short-term breadth indicators, such as the percentage of stocks above their 20 and 50 day SMAs (simple moving averages). Breadth thrust signals reflect a sharp turnaround in participation that can foreshadow an extended uptrend. Thrust signals start with a setup that shows very few stocks

Thrust Signals using %Above SMA Breadth – Theory, Practice, Reality Read More »

Zweig Breadth Thrust – NYSE Original – Modern Version AD%

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Developed by the late great Marty Zweig, the Zweig Breadth Thrust uses advance-decline data to identify material shifts in participation. This indicator sets up with when the advance-decline data becomes oversold and triggers when there is a sharp broadening in upside participation (advancing stocks). It is a time sensitive indicator that must trigger within a 10 day window.

Zweig Breadth Thrust – NYSE Original – Modern Version AD% Read More »

Market & ETF Report – Thrust Shortfall – SPY Resistance – Defensive Groups Lead

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Today’s report starts with the Zweig Breadth Thrust, which failed to trigger for the S&P 500, but remains a possibility for the S&P 1500. Follow through in the coming days is needed to trigger. We then turn to detailed analysis of SPY, which is below its falling 200-day SMA and near short-term resistance. Stocks are still broadly out of favor with eight of the eleven sectors

Market & ETF Report – Thrust Shortfall – SPY Resistance – Defensive Groups Lead Read More »

Market & ETF Video – Bounce Targets – Thrust Indicators – 2 Tech ETFs – Bitcoin Breakout – Gold Warning

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The weight of the evidence remains bearish, but stocks are currently experiencing an oversold bounce. This video will show upside targets and show what it takes to go from a bear market bounce to a bullish breadth thrust. Attention then turns to nine equity ETFs that are holding up the best, including two tech-related ETFs. In the alternative asset group, Bitcoin broke out and the DB Agriculture ETF is making a move. Gold is going parabolic and getting dangerous.

Market & ETF Video – Bounce Targets – Thrust Indicators – 2 Tech ETFs – Bitcoin Breakout – Gold Warning Read More »

Stocks Surge, but Was it Enough for a Breadth Thrust?

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Short-term breadth became oversold on April 4th and stocks surged on April 9th with SPY gaining 10%. SPY then fell 6.5% into Monday and became short-term oversold again. Stock rebounded on Tuesday with SPY gaining 2.6%. Trading is very choppy, but SPY is currently experiencing an oversold bounce. This is still considered a bear market bounce because the market regime indicators are net bearish and we have yet to see a bullish breadth thrust.

Stocks Surge, but Was it Enough for a Breadth Thrust? Read More »

Equities? Fuhgeddaboudit! Alternative Assets are Leading

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Trading is all about the odds. Trade when the odds are in your favor. Exercise patience and stand aside when the odds are NOT in your favor. Stocks are in a bear market and the vast majority of names are trading below their 200-day SMAs. Clearly, the odds are NOT in our favor for equities and equity ETFs. Traders need to look elsewhere. Today’s report will highlight some non-equity leaders and analyze Bitcoin as it sets up.

Equities? Fuhgeddaboudit! Alternative Assets are Leading Read More »

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