Update 12/17/2015 4PM EST: Official System Neutral Signal with bearish bias at SPX 2042. However, hourly indicators are not extremely oversold or extremely overbought, so the System is flat with no trade entered. If SPX drops for a couple hours tomorrow, I suspect it will get oversold enough to justify a long entry and if it bounces for much of the day or possibly into Monday, the hourly indicators will likely get overbought enough to justify a short position. Perhaps both will occur and the System will make a long and short trade in the next trading day or two.
Daily TRIN ended at 3.37. Looking back at the last year at TRIN values near 3, it nearly always leads to an immediate sizable bounce or a next-day reversal. August 24th was a bit of an exception although there was a significant intra-day reversal the next day and after a bottom retest SPX rallied back above the close with the large TRIN within a couple days. Having said that, virtually every instance also led to a large retracement and usually a retest of the lows in days or weeks. So, I expect a reversal up tomorrow either at the open or mid-day bouncing to yet another lower high over a couple hours or days and then lower lows (perhaps the 1950s finally?) before we get a short-lived Santa Claus rally to lower highs one final time. In any case, the System should sniff out the majority of the moves. Good fortune.
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The System remains long. Below SPX 2043 without exceeding 2077 would generate a new System Neutral Signal at the close. Otherwise, the signal would have to wait for another day. A neutral signal allows for trading in either direction as hourly indicators get extremely overbought or oversold. However, the weekly trend is down and the daily technical configuration is bearish, so trading would be neutral with a bearish bias meaning longs would be more conservative to enter and exit.
Dow, Nasdaq and Russell 2000 all made clear new rally highs today which would normally delay any new signal which I've based on a modified daily swing candle strategy. So, there is a conflicting situation between indices which will need keeping in mind and potential backtesting. This is one place my detailed trading rules will need to evolve. Plus, even when a new signal occurs, I use an hourly indicator score to determine when to enter and exit.
Currently, the hourly score is trending back to neutral from extremely overbought. My System allowed for a couple long entry opportunities at SPX 2043ish and got extremely overbought as SPX went into the 2070s which calls for a large reduction in position size (~50%) until hourly indicators reset. Those indicators have reset enough to justify re-entering long as SPX back-tests the 2040s and I think a late-day or early-morning bounce is likely. But remember a new neutral signal could be generated in which case longs might be exited. If so, I will post as soon as possible. Good fortune.
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