03/19/2010 Market Recap: Bearish Engulfing means bullish Monday?


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 6 of 6 are NEUTRAL  
ATTENTION 2.4.4 NYSE McClellan Oscillator: Negative divergence.
1.1.0 Nasdaq Composite (Daily): Non confirmation between SOX and COMPQ.
BULLISH 1.0.2 S&P 500 SPDRs (SPY 60 min): Head and Shoulders Bottom, target 119.42.
2.4.4 NYSE McClellan Oscillator: NYHGH new high means SPX new high ahead.
BEARISH 1.0.2 S&P 500 SPDRs (SPY 60 min): *15 unfilled gaps. (max was 16)
1.1.0 Nasdaq Composite (Daily): *9 unfilled gaps. (max was 10)
0.0.9 Extreme Put Call Ratio Watch: Top signal triggered. CPCE MA(5) too low.
0.0.3 SPX Intermediate-term Trading Signals: CPCE MA(10) too low.
4.0.4 Dow Theory: Averages Must Confirm: NYHILO too high.
03/17 Market Recap: Dumb money confidence too high.
03/17 Market Recap: Too many bearish extremes among all sentimentrader indicators.
CONCLUSION Bearish signals are accumulated enough to justify a short sell. for aggressive traders only.
*03/19, Bearish Engulfing, could be another short sell chances, 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 *03/09 low *Adjust Stop Loss.
Reversal Bar 02/26 L *03/19 low *Adjust Stop Loss.
NYMO Sell     *Short if Open > Close on Monday.
VIX MA ENV    
OTHER ETFs MID TERM SHORT TERM COMMENT – *New update. Click BLUE to see chart if link is not provided.
QQQQ UP ? 0.0.5 QQQQ Short-term Trading Signals: *Bearish Engulfing.
IWM UP *DOWN *Bearish Engulfing.
CHINA DOWN ?
EMERGING ? *DOWN
CANADA UP DOWN 4.1.5 iShares CDN S&P/TSX 60 Index Fund (XIU.TO Weekly): *2 Doji under important resistance. Lots of negative divergence plus BPTSX is overbought which had led to a 2 weeks pullbacks in the past.
FINANCIALS UP ?
REITS UP ?
MATERIALS ? *DOWN
OIL & ENERGY ? *DOWN
GOLD & GDX DOWN *DOWN
DOLLAR UP UP Head and Shoulders Bottom, target $24.28.
BOND DOWN UP *Could pullback soon as it hits resistance and ChiOsc is too high.

*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.

SEASONALITY: WEEK AFTER TRIPLE WITCHING, DOW DOWN 15 OF LAST 22

According to the Stock Trader’s Almanac:

  1. March historically weak later in the month;
  2. The next week Dow down 15 of last 22. Please refer to 03/12 Market Recap for the March seasonality chart.

About seasonality, I want to emphasis that March is famous as a turning month. As mentioned above, March is historically weak later in the month while the recent rally has already accumulated lots of top signals (see table above), therefore we must be prepared for the possibility of the market forming an intermediate-term top right here, even though it may sounds unbelievable right now. As illustrated on the chart 6.5.0 March Pivot Watch below, interestingly, since year 2000, all but 2006, there’s at least a 6.5% swing started in every March!

MarchTheTurningMonth 

CYCLE ANALYSIS: COULD BE A CYCLE TOP WITH MINIMUM 6.5% DOWN SWING

As the seasonality above says there’s a chance that March could be a turning month, the cycle analysis seems to agree either.

As mentioned in 03/12 Market Recap, Gann Days range from 03/16 to 03/21, so far the SPX new high was on 03/17 which may eventually prove that Gann day is correct.

1.0.7 SPX Cycle Watch (Daily), still looks like a cycle top. If it turns out to be true, then there’ll be at least 6.5% down swing ahead, which happens to coincide with the chart 6.5.0 March Pivot Watch posted above.

 SPXDailyCycle

4.1.9 SPX Cycle Watch (Weekly), also says either this week or the next week could be a turning week.

SPXWeeklyCycle 

INTERMEDIATE-TERM: EXPECT ROLLER COASTER AHEAD

The intermediate-term view is still based on II Survey, since there’re too many people expecting a correction, the market should rebound huge before any meaningful corrections. So far what the Market did, conforms the pattern, therefore at least you cannot say that I’m wrong now. The chart below is the most recent II survey chart, pay attention to vertical red lines, these are patterns I’m talking about.

IICorrection 

4.0.4 Dow Theory: Averages Must Confirm, overall, I believe the market will repeat year 2004 (see red cycle) roller-coastering for several months . The main reason is that the current resistance is of historical importance therefore should not be easily broken. Besides, the NYHILO above is way too high, see dashed red lines, the previous 3 times when it’s this high the pullbacks thereafter weren’t small.

SPXWeeklyLarge

4.1.3 Volatility Index (Weekly), VIX sits on a strong support, should not easily broken too, which confirms with the 4.0.4 Dow Theory: Averages Must Confirm chart above.

VIXWeekly 

SHORT-TERM: EXPECT MORE PULLBACKS BUT MAY SEE HUGE RALLY ON MONDAY

For short-term, everyone should’ve seen the Bearish Engulfing pattern formed on all the indices’ daily chart. The candlestick pattern has 79% chances of leading to the downside. However, please take a look at 0.0.5 QQQQ Short-term Trading Signals, see blue cycles, what had happened every time a Bearish Engulfing was formed? Considering the famous very very bullish Monday (6.5.2 Weekday Seasonality Watch), so there’s a good chance that bears will be shocked on Monday. Of course, if the past patterns hold true then bulls will be shocked equally on Tuesday. Interesting? Well, we’ll see.

QQQQShortTerm 

6.4.0 SPX and NYMO Divergence Watch, a short sell signal was triggered on Friday. It’s almost identical to the NYMO SELL setup. Just the NYMO SELL setup requires Open > Close on the next Monday to confirm the entry. The winning rate for the NYMO SELL setup is 65%, the gain/loss ratio is above 5, which is very good.

SPXandNYMO 

If indeed we see a pullback the next week, then my guess is the target is no less than 40 points. The reason, comparing with the July rally, so far the rally nowadays is weaker. Since a strong rally like the last July even had 40 points pullback, so logically, at least a 40 points pullback nowadays should be expected.

JULY RALLY NOW
TRADING DAYS FROM LOW TO HIGH 23 28?
TOTAL POINTS GAINED 149 125?
PULLBACK AT N TRADING DAYS 28 29?
TOTAL PULLBACK POINTS 40 ?

PullbackTarget 

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.

Looks like it’s too late to long stocks now as the market is way too overbought. Waiting for a better chance.

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