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Master Quant Trader Fari Hamzei was scheduled to contribute a chart to this week’s installment of Chart Junkie, however he offered us a special proprietary treat we had to bring to you all alone:
SPX
This is our coveted SP1-MoMo Chart. We have THREE components in an extremely overbought condition screaming a SELL to us all at once.
On the DAILY S&P-500 Cash Index (SPX) Chart (above), we see:
1) CI Diff, in the lowest subgraph, is now RED (crossed below 0);
2) CI reading is 27.5 !! This is an extremely high reading. This is due to a very high ramp-up rate the market has traded at since Meredith Whitney woke us on that faithful Monday (July 13th) to remind us all that “in GS she trusts” — at least for this quarter; and,
SP1
3) Divergence between long-term [modified] Advance-Decline Line on the subgraph SP1 (above) and its short-term sister MoMo. THESE DIVERGENCES always work out. Note the previous three divergences: two bullish and one bearish, in mid-June, early March, and late November.
Bottom line: A pause is in order. In our humble opinion, at minimum to 954 (38% retracement) or down to the 937 area (50% retracement).
For more on-the-run market commentary, click here to follow Fari and his team on Twitter.
If you are interested in real-time market analysis, click here to follow Wall St. Cheat Sheet on Twitter.
Click here to read my Review of Fari’s excellent book Master Traders.
Or, read Fari’s recent explanation of High Frequency Trading.
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Thanks for the cheat sheet.. None better than Fari Hamzei; as a savvy analyst and as a man- a rare find in this crazy business.
Great charts… looks like the jaws of death..
Agreed, Wizard!
Glad you put a Bottom Line cause Fari’s charts are too smart for me. Very cool stuff!
I couldn’t read it without a quant in the room …
does not mean that the market will go straight down, just means that there is a probability of going down is higher. Fari pulled out all his long term money at the end of May. . . his longer term models might not be as robust as his shorter term models. . . such as Ned Davis’s longer term models, who gave a long term buy all clear signal in June.
sportsguy
You cannot blindly trade your market timing call — ever. Market Timing is a take on the “most probable” Road Map. There is no guarantee the bid/ask will follow that.
Hi, I am amazed that you would fawn over Mr.Hamzei’s work. Look at his track record trading options. Performance is on his site and it is currently -24%. Am i missing something?
That performance includes the insane markets from last year — and being options, they are leveraged and returns are much more volatile (both ways) versus stocks or indexes. Please contact Fari for his longer term performance. He is highly regarded within the Quant community — which I admit I am not an expert in.
9500 on dow super strong number if penetrated we are moving a lot higher,if not we are pulling back,i see giagantic sell signal after a down and then another top out, then complete move down in place, for octoberish
Where did Fari explain about his CI diff indicator and its calculation?