05/28/2010 Market Recap: Rebound Not Dead Yet


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 SELL 5 of 5 are NEUTRAL Non-Stop Model is in SELL mode
Short-term 1 of 1 are SELL 6 of 6 are NEUTRAL SPY ST Model is in SELL mode
MOON PHASE SOLAR TERM DATE GANN DAY CYCLE
06/12 New Moon 06/06 06/05-06/07, 06/11-06/14 Week of 06/04, 07/31, 08/20-08/23
BULLISH 0.2.1 10Y T-Bill Yield: Bottomed?
0.1.1 SPX Intermediate-term Trading Signals: CPC MA(10) too high.
0.2.2 Extreme Put Call Ratio Watch: CPC MA(5) too high.
8.1.1 Normalized NATV/NYTV: Bottomed? 
6.3.2c Major Distribution Day Watch: Bottomed?
05/20 Market Recap: Intermediate-term Indicator Score from sentimentrader is too low.
8.1.0 Normalized NYTV: Bottomed?
6.3.1 Major Accumulation Day Watch: Bottomed?
*05/28 Market Recap: II survey shows too many people are expecting a correction.
BEARISH 0.1.1 SPX Intermediate-term Trading Signals: Ascending Broadening Wedge? Target: 1008 to 1019.
0.2.3 NYSE McClellan Oscillator: Positive divergence missing, so one more down leg ahead?
CONCLUSION  
SPY SETUP ENTRY DATE STOP LOSS INSTRUCTION: Mechanic signals, back test is HERE, signals are HERE.
TRADING VEHICLE:
SSO/SDS, UPRO/SPXU, RSP
ST Model Last trade: Shorted at 05/06 close, covered at 05/21 close with gains.
Reversal Bar    
NYMO Sell    
Non-Stop 05/11 S N/A *Partial profit on 05/28.
Others    
OTHER ETFs TREND *DTFMS COMMENT – *New update. Click BLUE to see chart if link is not provided.
QQQQ DOWN
IWM DOWN
CHINA DOWN *Bearish reversal bar rejected at MA(20), be careful, could rest the low.
EMERGING DOWN *BUY
EUROPEAN DOWN *BUY 4.1.7 Vanguard European VIPERs (VGK Weekly): Bearish 1-2-3 formation, target $35.54. *The price is now too low below MA(200) though.
CANADA DOWN *Bearish reversal bar rejected at important MA, be careful.
BOND UP SELL
EURO DOWN *Breakout trend line then pullback to test the low then rebound, bottomed?
GOLD UP 4.3.0 Gold Trust Shares (GLD Weekly): Head and Shoulders Bottom, target $129.99.
GDX UP
OIL DOWN
ENERGY DOWN *potential bearish 1-2-3 formation setup triggered, target $50.51.
FINANCIALS DOWN *BUY
REITS DOWN
MATERIALS DOWN  

*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.
*DTFMS = Dual Time Frame Momentum Strategy. The signal is given when both weekly and daily STO have the same buy/sell signals. Use it as a filter, don’t trade directly.

CHANGE NOTE: I’ve removed all the cycle related charts in my public chart list because it’s a little bit difficult to maintain the cycle chart in stockcharts, besides stockcharts doesn’t have the calendar day mode. So from now on I’ll use other software to do the time analysis (Screenshot below to tell you that I’m very serious in time analysis as it’s just one piece of my many time analysis charts). For your convenience, I’ve added time related rows in the table above. The benefit for doing this is if the date deduced from various angles happens to be the same date, then it could be highlighted to imply its importance. For example, now, 06/06 (+-) is shown simultaneously via different method, so it should be very convincing that it’s a date of some importance.

TimeAnalysisChart

SEASONALITY: THE FIRST TRADING DAY IN JUNE IS BULLISH AND THE MEMORIAL DAY WEEK IS BULLISH 

According to the Stock Trader’s Almanac, the first trading day in June, Dow up 9 of last 11.

The chart below is from Bespoke, looks like the next week (Memorial Day week) is bullish.

memdayweek

Again the chart below is from Bespoke, June has been the 2nd worst month of the year over the last 20 years.

JuneThe2ndWorstMonth

The June seasonality chart below is from sentimentrader.

JuneSeasonality 

INTERMEDIATE-TERM: MAIN PULLBACK TARGET AROUND 1008 TO 1019, II SURVEY MAY MEAN A HUGE REBOUND AHEAD

Temporarily maintain the intermediate-term target around 1008 to 1019 (See 05/21 Market Recap for more details).

Why “temporarily”?  Because the II Survey below again shows too many people are expecting a correction. I hope you still remember that in the January correction, also because II Survey shows there’re too many people expecting a correction, so my guess at that time was we might see huge rebound, even new high before the real correction. So far the II correction pattern worked amazingly (see red vertical lines). So will it work again this time – a big rebound ahead? Well, I have no idea, I just want you to know that it’s possible especially there’re so many bottom signals pilled up in the table above.

IICorrection 

Trading wise, because SPY ST Model and Non-Stop Model are still in sell mode, so the strategy is still to sell the bounce. However since now we know it’s possible that the market may rebound huge, so don’t be too aggressive in selling the bounce. Personally, I’ll add into or initial a new position only when my first position is profitable, with absolutely no average down. In this way, if the selling bounce is wrong, I won’t lose too much.

 

WARNING: If you don’t understand the true meaning of overbought/oversold, please skip the session below. Generally, you should try your best not to trade against the trend. Trading purely based on overbought/oversold while against the trend is lethal to the health of your account. Before going further, please make sure you understand how to use the table above.
SHORT-TERM: COULD REBOUND TO AROUND 06/06 (+-), SPY TARGET $114.40

Still expect a short-term rebound. Maintain the time and target mentioned in 05/27 Market Recap. The chart below uses the Fib confluences area to calculate the possible target. Both time and target also fit what I’ve mentioned in 05/27 Market Recap.

ReboundTarget 

I’ve found as much as 7 EXCUSE to expect a rebound:

1. As mentioned in the seasonality session above, the first trading day in June and the Memorial day week are bullish.

2. Table above has accumulated too many bottom signals. All those signals have survived a lot of market extremes and proven to be reliable.

3. 1.0.0 S&P 500 SPDRs (SPY 60 min), as mentioned in 05/28 After Bell Quick Summary, could be a Bull Flag in the forming.

SPY60min

4. 0.1.0 SPY Short-term Trading Signals, for 3 times in a row, white bull bar is larger than the red bear bar which means bears are weaker because they couldn’t recover whatever has lost to the bulls in the previous day. Besides, a general rule of thumb, the market often makes 2 attempts to do something. If it fails 2 times (05/21 and 05/25), it often does the opposite, so we see the market rebounded after 05/25. Now if the market will turn down, most likely it will try 2 times to breakout above. If 05/27 is the very first try, then at least there’ll be a second try to retest the 05/27 high before rolling over.

SPYShortTerm

5. In 05/24 Market Recap, I mentioned “beware of VIX weekly STO sell signal”. Now the STO sell signal is confirmed, see red dashed lines, the signal even worked  in the 2008 crash.

VIXWeekly

6. 3.1.0 Currency Shares Euro Trust (FXE Daily), this is a typical breakout then pullback to kiss the channel good bye pattern, it’s a long setup, so euro could rebound which is good for the stock market.

FXEDaily

7. If interested, click the links to take a look at some weekly charts. Lot’s of weekly Hammer formed which means bullish reversal 60% of the time: 4.1.1 Nasdaq 100 Index (Weekly), 4.1.2 Russell 2000 iShares (IWM Weekly), 4.1.6 iShares MSCI Emerging Markets (EEM Weekly), 3.4.1 Real Estate iShares (IYR Daily), 3.4.2 Materials Select Sector SPDR (XLB Daily).

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