11/26/2008 Market Recap: One more strength test

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According to the statistics in the past 56 years, the probability of rally two days before or after Thanksgiving is about 80%.  Tomorrow the market will open a half day, hopefully there is no surprise.  In the short term, the market is very close to overbought, and in the intermediate term there are three buy signals already, while we still need to see if the pullback can form a higher low.

0.0.2 SPY Short-term Trading Signals.  This chart has given several overbought signals, but the most accurate one NYADV is not there yet.  Based on my simple strength judgement which compares up days and down days, if the high tomorrow can be above 92.06, we will confirm that the up strength is stronger.


1.4.0 S&P/TSX Composite Index (Daily).  Very close to oversold.  On the Tuesday report, the statistics shows that VIX breaking out of ENV 10 is actually bullish, however it will be over bullish if ENV 20 is broken.  Take a look at the ENV 20 (red curve at the bottom), VIX is not very far from breaking it.


1.0.3 S&P 500 SPDRs (SPY 60 min), 1.1.5 PowerShares QQQ Trust (QQQQ 60 min).  The pattern on the 60-min chart is likely a head and shoulders bottom, and a bigger head and shoulders bottom might be forming.  The theoretical target of QQQQ is 32.23.  By the way, RSI on the stop of chart is almost overbought.  If you look more carefully at the 60-min chart, overbought/oversold of RSI is quite accurate on the 60-min chart.


On T21122 of Telechart, as  discussed previously, 4 week new high / low index is very useful.  It is not in the overbought region at 90 yet.


As a summary, a few short-term overbought signals, NYADV, VIX ENV 20, RSI on 60-min chart, and T2122, are not in place yet.  The reason of listing them here is for your attention, it is not a bad idea to lock a part of profit.  The second reason is that, although I believe the pullback can happen at any time (in fact recently the market pulled back significantly in the middle of the day), I will not short at the current level because the short-term sell signals are not ready yet.  My strategy is to buy dip first if there are many mid-term buy signals, and will only go short when many short-term signals are pointing to pullback.

0.0.0 Signal Watch and Daily Highlights.  Here is the overview of all signals.  If the market rallies for two more days, most likely all short-term signals will be oversold, and mid-term signals will be buy.


3.0.3 20 Year Treasury Bond Fund iShares (TLT Daily).  I have been worrying about bond recently.  The stock market is going up while the bond rallied too.  However candles in recent two days on TLT have high likelihood of reversal, maybe I need not to worry about it?  If tomorrow the market goes up and the bond goes up again, considered so many close-to-overbought signals aforementioned, I will feel quite bearish.


1.1.6 PowerShares QQQ Trust (QQQQ 15 min). MACD and RSI negative divergence.


1.4.3 S&P/TSX Composite Index (15 min), On the Canadian market, Bearish Rising Wedge, MACD and RSI show negative divergence, not a good news.


1.5.0 Shanghai Stock Exchange Composite Index (Daily).  Although China cut the rate but it didn't break out,  What a pity.


1.3.7 Russell 3000 Dominant Price-Volume Relationships, Dominant Price-Volume Relationships on Wednesday was 1719 stocks price up volume down.  This might be affected by the holiday, so a series of bearish reading may not mean anything.

1.0.6 S&P 500 Bullish Percent Index, the buy signal on SPX bullish percent index has been confirmed by all major indices.

  • dave
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