03/12/2010 Market Recap: Will the 3rd time be the charm?


Cobra's Market View Private Messaging System shows:


  TREND INDICATOR MOMENTUM INDICATOR COMMENT (Click link to see chart)
Long-term 3 of 3 are BUY    
Intermediate 3 of 3 are BUY 3 of 6 are OVERBOUGHT SPY ST Model is in BUY mode
Short-term 1 of 1 are BUY 5 of 6 are NEUTRAL  
ATTENTION 2.4.4 NYSE McClellan Oscillator: Negative divergence.
03/11 Market Recap: AAII too few bears. Bulls are rising rapidly.
1.1.0 Nasdaq Composite (Daily): *Non confirmation between SOX and COMPQ.
1.2.0 INDU Leads Market: *Non confirmation among TRAN, INDU, SPX and CRB.
BULLISH 1.0.2 S&P 500 SPDRs (SPY 60 min): Head and Shoulders Bottom, target 119.42.
BEARISH 1.0.2 S&P 500 SPDRs (SPY 60 min): 15 unfilled gaps. (max was 15)
1.1.0 Nasdaq Composite (Daily): 9 unfilled gaps. (max was 9)
2.3.4 Nasdaq Total Volume/NYSE Total Volume: Topped?
2.4.4 NYSE McClellan Oscillator: NYHGH too high.
03/08 Market Recap: Institutional Distribution is too low.
0.0.1 Market Top/Bottom Watch: NYDNV too low.
0.0.6 Nasdaq 100 Index Intermediate-term Trading Signals: NAADV MA(10) too high.
0.0.9 Extreme Put Call Ratio Watch: Topped?
0.0.3 SPX Intermediate-term Trading Signals: CPCE MA(10) too low.
4.0.4 Dow Theory: Averages Must Confirm: *NYHILO too high.
CONCLUSION Could short after seeing a daily reversal bar (Open > Close), for aggressive traders only.
*Reversal bar triggered on 03/12, good luck bears!
SPY SETUP ENTRY DATE STOP LOSS INSTRUCTION: Mechanic signals, back test is HERE, signals are HERE.
TRADING VEHICLE:
SSO/SDS, UPRO/SPXU
ST Model 02/26 L *03/01 low *Adjust stop loss.
Reversal Bar 02/26 L *03/11 low *Adjust stop loss.
NYMO Sell      
VIX MA ENV    
OTHER ETFs COMMENT – *New update. Click BLUE to see chart if link is not provided.
QQQQ NAADV MA(10) too high.
IWM *Bearish reversal bar.
CHINA Big red bar usually means more pullback ahead.
EMERGING *Bearish reversal bar.
CANADA *Black bar at new high doesn’t look good.
1.5.2 TSE McClellan Oscillator: *A little bit negative divergence, be careful.
FINANCIALS *Bearish reversal bar.
REITS
MATERIALS
ENERGY Broadening Top in the forming, the breakout direction is unknown. *2 reversal bars, could pullback.
OIL
GOLD
DOLLAR Head and Shoulders Bottom. *ChiOsc too low.
BOND 2 reversal bars in a row, could rebound.

*Please make sure you understand how to use the table above. The main purpose of this report is to provide information so contradictory signals are always presented.
*Skip the SEASONALITY and CYCLE ANALYSIS sessions below if you think they’re superstitious.

SEASONALITY: THE NEXT WEEK ARE GENERALLY BULLISH

According to Stock Trader’s Almanac: Monday before March Triple Witching, Dow Up 16 of Last 22. March Triple Witching Day however is 50-50.

According to Sentimentrader: The first 3 days of the next week are bullish.

Seasonality

According to Bespoke: SPX March Expiration weeks are generally bullish.

 SPXMarchExpirations

CYCLE ANALYSIS: MOON, CYCLES AND GANN DAYS ALL MEET NEXT WEEK, LOOKS LIKE A CYCLE TOP

This week’s Gann Day and cycles turn date worked miserably, however they’re not over yet, reasons:

  1. Cycle usually have several days error. In 03/11 Market Recap, I said 03/12 Gann Day could be a turning point, at least now cannot say it’s failed because on Friday the SPY formed a potential reversal bar so it could reverse down the next week.
  2. There’re still lots of Gann Days due next week, plus the New Moon and FOMC and Triple Witching, all could be a potential turning point.

1.0.7 SPX Cycle Watch (Daily), this is an improved version. The major changes are the cycle tools are now applying only on movements that are larger than 6.5%. In this way, the smaller whipsaws are eliminated. I believe this can make the cycle prediction work better. The chart below has removed all the other cycles that are not related to nowadays so that you can see clearly that there’re 2 cycles due this week and the next week. They both look like a top.

SPXDailyCycle

The chart below is the Calendar Day based cycle (since some people don’t believe trading day based cycles), the results are almost identical to that of chart 1.0.7 SPX Cycle Watch (Daily), if not better. Noticed that the rebound since 02/05 contains 2 waves, each so far lasted 17 calendar days with the same magnitude around 67.28. This complies with the Elliott Wave A = C.  

CalendarDayCycle

1.0.8 SPX Cycle Watch (Moon Phases), the New Moon is on the next Monday. This time it’s less ambiguous than that of the last two times, it clearly argues for a top for now, unless a big big down gap open the next Monday.

Moon

03/16, 03/17, 03/18 the next week are all Gann Days, so the market could turn down on those days.

GannDays

To summarize above, from the cycle point of view, chances are good that the next week could be a top of some kind. If the cycle due date on chart 1.0.7 SPX Cycle Watch (Daily) is proven to be true, then the pullback could be no less than 6.5%.

INTERMEDIATE-TERM: EXPECT CORRECTION TO CONFORM THE PAST II PATTERN NOT SURE WHEN IT WILL START

As for the intermediate-term forecast, still according to the past II pattern (see red lines), since too many people were expecting a correction, the market should rebound huge even to a new high before a real correction kicks in. So far, the huge rebound and the new high have conformed what the past II pattern says. Now the question is that if indeed there is a big correction ahead? Overall, I believe there’ll be a big correction ahead, just now I don’t know when it’ll happen.

IICorrection

Two additional reasons to expect a correction:

From the SPX longer history chart, the current resistance area is historically very important, so should not easily be broken through. Especially since the NYHILO (10 day MA of Record High Percent Index) above is too high now. There’re only 3 times this happened before, every time the pullback happened thereafter was not small. By the way, see red cycle, I’m expecting the market to repeat what happened in year 2004.

SPXWeeklyLarge

Options Speculation Index, way too high (means too much call buying and put selling). The last time this high was before the big correction in January. This time it’s even higher than that of January. 

OpetionsSpeculationIndex

The charts below show a little bit non confirmations, not necessarily bearish since as time passes by the problem may be fixed eventually. Just want your attention to them. Also in the table above, I added an “ATTENTION” row to list all those need further attentions for your conveniences.

1.2.0 INDU Leads Market, non confirmation among INDU, TRAN, SPX and CRB.

INDULeadsMarket

 1.1.0 Nasdaq Composite (Daily),  non confirmation between COMPQ and SOX.

 COMPQDaily

SHORT-TERM: COULD SEE A PULLBACK SOON

Still expect a short-term pullback. See table above for reasons, there’re too many of them.

0.0.2 SPY Short-term Trading Signals, for the 3rd time a black bar (Open > Close) was formed. It however failed to work the last 2 times. The question now is if the 3rd time is the charm?

SPYShortTerm

The chart below shows what happened in the past when a black bar was formed on the QQQQ daily chart.

 QQQQBlackBar

1.0.3 S&P 500 SPDRs (SPY 30 min), too much negative divergence.

 SPY30min

STOCK SCREENER:  For fun only, I may not actually trade the screeners. Since SPY ST Model is in BUY mode, only LONG candidates are listed. For back test details as well as how to confirm the entry and set stop loss please read HERE. Please make sure you understand the basic risk management HERE.

Since the intermediate-term direction is not clear, so no stock screeners from now on until the dust settles.

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