Emini S&P 500 close to breaking out or will it fade?

Emini S&P 500 close to breaking out or will it fade?

A birds-eye view of the last 36 months of trading with the last 6 months colour-keyed and linked into a candlestick chart. Overlaid we have Quantlogic’s Distribution levels for the previous 6 months. (Visual A)

Over the last six months…(1st April-13th September ’19)

As you can see above the trading has been rangebound between circa 2730-3030.  The 6-month candlestick chart above right provides us with some useful information- for example, we have made one significant higher high followed by a higher low.  However, the real meat of the information is available on the Speedo.

Our Edge Speedo provides multiple unique insights into the Emini S&P 500

The Trading Activity speedo is showing us all the trading activity for 36 months with the last six months in colour.  Immediately, you can see that all the trading for the last six months has been on the East side of this  36m longer-term bell curve.  You can also see that from the circled QTAPs (that highlight the most traded areas by time period) that the market has been trading around all the consensus areas up to 36 months.  Let’s take a closer look at some of the key information.

 

Interesting points to note:-

  • The low of the Trading range marked as fig A is 2728.75.  This is just below the 24m-W/36m-W QTAP at 2737  meaning that this is where the market traded most over 24 and 36 months. (See figs C)    Interestingly, the third standard deviation low (99%) is at exactly the same price  (2737) and has been marked as fig B as well.

The market has been building consensus over the last six months on the East side of the longer-term bell curve.  The sell-offs in May and August were halted at either at or close to the centre of the bell curve as you can see from the visual above.  Many speculated that given the size of the moves that this may be the start of a major sell-off.   Let’s look at the 6 month view:-

The importance of normal distribution and Standard Deviation highlighted here!

All reversionary markets conform in some form or other to Normal distribution.  These bell curves become evident over and over again and understanding the relationship of these consensus areas is a key part of price discovery.  As significant is Standard deviation.  More often than not very significant levels in the market are a function of key Standard Deviation levels.  Last month was a case in point.

All the Standard Deviation levels in context:-

Wouldn’t it be great to see all the Standard Deviation levels over different time periods?  Well, now you can.  Here is our visual that shows all the SD levels going back 5 years.  Note where they correlate:-

 

In our last research back in August, we highlighted that lst SDH over 6 months was an important level because it correlated with many other time periods. The Markets reacted off that level over again. It’s logical really. You can see from the above Standard distribution visual on the right that the 1st SD 68% level correlates with a number of time periods including 36M. Here is a look at 36m chart with the distribution levels showing. (Visual D)

 

Emini S&P 500 close to breaking out or will it fade?

For the last 36 months, the Emini S&P 500  has been oscillating around a 36m bell curve.  Clearly, the direction of the market is up with the shorter-term QTAPs (most traded areas) being above the longer-term consensus areas.

This provides a good foundation for a significant breakout to the upside.  BUT we would not discount further consolidation to the centre of the Bell curve.  Markets, as we have seen in the last six months, are capable of making significant moves through all of the consensus areas.  We do not believe this phenomenon is over but we keep our bias firmly to the upside.

Alternatively, if we do see a  move beneath the centre of the bell curve we would expect increasing support on the West side of the bell curve.  We would not switch our upward bias unless there was a material close below 2500.

admin

nscarr@quantlogic.com

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