Tag: Adaptive Dynamic Learning (ADL)

While we have recently suggested the US stock market is poised for further upside price activity with a moderately strong upside price “bias”, our researchers continue to believe the US stock market will not break out to the upside until the Russell 2000 breaks the current price channel, Bull Flag, formation. Even though the US stock markets open with a gap higher this week, skilled traders must pay attention to how the Mid-Caps and the Russell 2000 are moving throughout this move.

As we continue to advise our clients that the upside pricing cycle in the US stock market is being underestimated, see this research post: we also believe that increased volatility and price rotation will continue to drive larger rotations in price before the final breakout upside move takes place. We want to continue to warn traders that we still don’t have any confirmed upside breakout with price continuing to stay within this price channel in the Russell 2000. Eventually, when and if the price does breakout to the upside, we will have a very clear indication that continued higher prices and a larger upside move is happening. Until then, we need to stay cautious about the types and levels of rotation that continue within the markets.

Recently, volatility has started to increase as can be seen in this VIX chart. If the Russell 2000 is not able to break this trend channel with this current upside price move, then we fully expect continued price rotation in the US stock markets and another increase in the VIX as this rotation takes place. The NQ recently rotated downward by nearly 4% while historical volatility continues to narrow. When volatility diminishes in extended price trends, we’ve learned to expect aggressive price rotation can become more of a concern. We expect the VIX to spike above 16~18 on moderate volatility as we get closer to the cycle inflection date near June/July 2019. Continue reading "Waiting For The Next Big Move" →

With so much news hitting the wires regarding the Treasury Inversion level and the "potential pending recession", we wanted to shed a little insight into this phenomenon and what we believe the most likely outcome to be going forward. Our researchers, at Technical Traders Ltd., believe the Treasure inversion is a reactionary process to overly tight US Fed monetary policies, consumer demand factors and outside cycle forces. There is very little correlation to inverted Treasury levels and causation factors other than the US Fed and global central banks. We believe consumers and consumer sentiment also play a role in setting up the conditions that prompt yield inversion. The one aspect we believe everyone fails to consider is the uncertainty that is associated with major US election cycles.

The US Fed is obviously a driving force with regards to yields and consumer expectations. In the past, the US Fed has rotated FFR levels up and down by enormous amounts (in some cases 200 to 500%+ over very short spans of time. Consumers, you know those people, the ones that are the actual driving force of the local and state level economies, have been the the ones having to deal with wildly rotating FFR levels and the consequences of their debt rotating from 4~7% average interest rates to 8~25%+ average interest rates over the span of just a few years.

Take a look at this chart that highlights the current and previous US Federal Reserve FFR rate changes. It is quite easy to see that consumers and business, on the receiving end of these changes, often swing from one extreme to another as the US fed makes these dramatic moves. And, yes, that last 2400% number is correct. The FFR went from 0.06% to 2.4% over the past 3+ years – do the math yourself if you don't believe us. Continue reading "Treasury Inversion And Political Fed Cycles" →