Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Markets Rally Hard: Is The Volatility Over?

By Chris VermeulenMarket OverviewMay 17, 2019 05:34PM ET
www.investing.com/analysis/markets-rally-hard-is-the-volatility-over-200422705
Markets Rally Hard: Is The Volatility Over?
By Chris Vermeulen   |  May 17, 2019 05:34PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Many traders are watching the recent 3-day rally thinking “this is the end of the downside price move” and targeting new entry positions for the eventual upside price breakout. We're here to warn you that our ADL predictive modeling system is suggesting we could see more volatility over the next 45+ days before a price breakout sets up.

Our Adaptive Dynamic Learning (ADL) predictive modeling system is something we like to keep away from public view for the most part. It is not something we share with the public often because it tends to show quite a bit of information about the future to skilled eyes. Today, you are going to get a glimpse of the ADL system on Weekly and Monthly TRAN charts to help you understand what to expect over the next 45+ days.

The ADL predictive modeling system is capable of learning from past price action and modeling “price DNA markers” based on a custom inference engine we created for this utility. That means it is capable of learning from any chart, any interval, any price data and any type of price activity while mapping the price data, technical data and corresponding future price activity into what we call and DNA price chain. After that mapping process is complete, we are able to ask it to show us what it has found and how current price bars align with the DNA mapping to show us what is likely for the future.

This Monthly TRAN ADL chart shows two ADL DNA Marker data points. The first data point, April 2018, consisted of 12 unique ADL price instances and suggests a moderate upside price bias may continue until near the end of July or early August 2019. August 2019 appears to be a “price anomaly” setup with a target price level near 10,000 for that month. Thus, August 2019, or any time +/- 30 days from that month, could be very volatile. The second data point originates from June 2018 and consists of 4 unique ADL price instances. The lack of ADL price instances (4 vs 12) is not as important as the predicted outcome of this DNA marker. ADL instances with small numbers of matching instances tend to be unique price data – something that is not seen in price that often and somewhat rare. This ADL data point is predicting a moderate upside price bias until June/July 2019, then the DNA marker is telling us that a downward price bias should start and that these future predictions do not have a strong probable outcome. This means August through November 2019 could be very volatile and result in unexpected price actions.

Monthly Dow Jones Transportation
Monthly Dow Jones Transportation

This next chart is a Weekly TRAN ADL chart that suggests 2 or 3 more weeks of moderate upside price bias before a big decline in prices headed into June 2019. If we follow the DASH lines on this chart and count the weeks going forward, it appears June 2019 will result in a moderate price decline toward the recent lows – possibly a bit lower. Then it appears the TRAN will stall near 10,200 – possibly moving a bit higher near the middle/end of July. After that, the ADL predictive modeling system is suggesting that the TRAN will break down below the 10,200 level and potentially head much lower – toward the 9,600.

The timing of this is interesting because it suggests the current US/China trade issues will not result in more price decline for the next 30+ days. Yes, we'll like to see more price rotation, but the potential for a massive price decline over this span of time is rather muted. We may see a retest of the 10,200 level near Mid-June, but price should find support at that time and recover towards the 10,400 to 10,500 level near early July. Mid to End July looks very weak – where price may break aggressively lower, below 10,200 and attempt to target the 9,600 level.

This next chart is a Weekly TRAN chart showing our Adaptive Fibonacci price modeling system. The Fibonacci price modeling system is one of our standard analysis tools. This utility is suggesting that price weakness may set up a Descending Flag formation over the next few weeks/months. This type of pattern suggests that a breakout move will result after the apex is reached. The YELLOW trend line on this chart may become a downside price target if our ADL predictions are correct and the TRAN price breaks down toward the 9,600 level or lower.

Weekly Dow Jones Transportation
Weekly Dow Jones Transportation

Take another look at the end of the first, Monthly ADL chart. See those YELLOW upside ADL arrows on the right side of the chart? Those are the current ADL predictions for October, November, December 2019. This prediction suggests that the Apex Breakout move at the end of the Descending Flag formation will be an upside price breakout sometime near the end of 2019.

Weekly Dow Jones Transportation
Weekly Dow Jones Transportation

Be prepared for another increase in volatility in Early June and Early/Mid July. Our predictive modeling systems are suggesting a breakdown in price will happen near these dates and this downside move should result in increased VIX/Volatility when the breakdown happens.

This does not appear to be the BIG CRASH that everyone is talking about. It appears to be a normal price pattern setup as weakness settles in and the TRAN appears to retest the 10,000 level (support) with the potential of moving slightly below this level.

Markets Rally Hard: Is The Volatility Over?
 

Related Articles

Markets Rally Hard: Is The Volatility Over?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email