10/20/2010 Market Recap: Reversal of Reversal


Cobra's Market View Private Messaging System shows:


  TREND MOMENTUM COMMENT
Long-term 2 of 2 are BUY  
Intermediate 3 of 3 are BUY 3 of 5 are NEUTRAL SPY ST Model in BUY mode; Non-Stop in BUY mode.
Short-term Model is BUY but not confirmed yet. 6 of 6 are NEUTRAL The trend is up but not confirmed so I hold no long position overnight.
GANN DAY MOON:SOLAR CYCLE CONCLUSION
10/26 10/22 : 10/23 Next pivot date: 10/21 – 10/22, 10/25 – 10/27, 11/04
BULLISH 0.1.1 SPX Intermediate-term Trading Signals: Head and Shoulders Bottom breakout, target 1242.
09/27 Market Recap: 9 POMO within 20 trading days means 14%+ up in 3 months.
10/01 Market Recap: Positive September plus mid-term election means 11%+ up to year end.
10/05 Market Recap: 16 more trading days upswing?
BEARISH *1.0.6 SPY Unfilled Gaps: 20 unfilled gaps, the max was 20.
10/15 Market Recap: AAII bull ratio (4-week average) too bullish.
10/15 Market Recap: Commercial (smart money) short Nasdaq 100 heavily according to COT Report.
10/08 Market Recap: Up off-season usually means down earning season.
10/15 Market Recap: Institutions are selling into strength.
6.2.3 VIX:VXV Trading Signals: Record low.
0.2.2 Extreme Put Call Ratio Watch: CPCI too high, topped?
6.2.2a VIX Trading Signals (BB): Short setup triggered on 10/13.
10/13 Market Recap: % SPX stocks 1 std dev above MA(50) is too high.
6.1.9a Extreme ISEE Index Readings Watch: SPX will close below 1176 within 2 days?
10/15 Market Recap: ISEE Index is way too high.
10/19 Market Recap: AAPL is way too stretched.
10/15 Market Recap: Euro may retreat which may cause US$ carry trade unwind.
6.4.2c Extreme TICK Readings Watch: TICK too low, lower low or lower close ahead?
1.0.0 S&P 500 SPDRs (SPY 60 min): Double Top, target $114.77. Failed! 
10/19 Market Recap: IBM dropped after ER may mean SPX will be red in 5 weeks.
SPY SETUP ENTRY DATE STOP LOSS INSTRUCTION: Mechanic signals, back test is HERE, signals are HERE.
TRADING PLATFORM:
SSO/SDS, UPRO/SPXU
Non-Stop 09/07 L N/A Partial profits on 09/24.
ST Model 09/24 L 10/07 Low

P.S. No After Bell Quick Summary today as I really don’t have much to say other than wait for tomorrow.

SHORT-TERM: REVERSAL OF REVERSAL IS COMMON ON A MARKET TOP, SO LET’S SEE TOMORROW

The rebound today may mean nothing because it’s common to see a reversal of the previous reversal of the previous reversal whenever the market is in a topping process. So whether we’ll see a reversal of reversal of reversal tomorrow, we’ll have to wait. At least in the SPY 60 min chart below I cannot exclude the possibility of a typical bearish Rising Wedge breakdown then kiss channel goodbye pattern. So again, let’s see tomorrow.

 SPY60min

Also the statistics about extreme low TICK reading almost guarantees an immediate lower low or lower close ahead still applies today. See chart below, relative to yesterday’s chart, I now keep only the 2nd day rebound cases, still there’re far more red dashed lines than green dashed lines. In another word, a huge rebound the next day after an extreme low TICK reading like today was normal.

1 

The chart below is just to follow up the back to back unfilled gap I mentioned yesterday. The gap didn’t get filled completely today so if there’s a gap down open tomorrow, bears better not hope that gap could hold. Well, I guess no bear expects any bear gap could hold anyway. LOL

2 

INTERMEDIATE-TERM: BEARISH BIASED, PIVOT DATE EITHER AROUND 10/22 OR 10/26 OR 11/04

Maintain the intermediate-term bearish view, the pivot date could be either around 10/22 or 10/26 or 11/04, see 10/15 Market Recap for more details. Below are summaries of all the arguments supporting my intermediate-term bearish view:

  1. As mentioned in 10/15 Market Recap, commercial (smart money) holds record high short positions against Nasdaq 100.
  2. As mentioned in 10/15 Market Recap, AAII bull ratio (4-week average) is way too bullish.
  3. As mentioned in 10/15 Market Recap, institution selling keeps increasing.
  4. As mentioned in 10/08 Market Recap, statistically, a strong off-season could mean a weaker earning season.
  5. As mentioned in 10/11 Market Recap, statistically VIX at 1 month low going into October was not a good sign.
  6. As mentioned in 10/15 Market Recap, US$ may rebound which is not good for the broad market.
  7. As mentioned in 10/19 Market Recap, IBM dropped after ER may mean SPX red in 5 weeks.
  8. As mentioned in 10/19 Market Recap, AAPI MACD is now too stretched which could mean a top for QQQQ.

SEASONALITY: NO UPDATE

For October Seasonality chart please refer to 10/01 Market Recap.

HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST

  1. The market appears a little stretched as lots of ETFs weekly %B are way too high.
  2. With possible Euro pullback, watch potential weakness on commodity related ETFs like XLE, XLB and XIU.TO.
TREND COMMENT
QQQQ *LA
NDX Weekly NDX to SPX ratio too high. %B too high. Neither had any edges though.
IWM DOWN
IWM Weekly %B too high.
CHINA Rejected by downtrend line, watch…
CHINA Weekly Extremely high %B.
EEM DOWN
EEM Weekly EEM to SPX ratio too high, %B too high. Neither had any edges though.
XIU.TO *LA TOADV MA(10) too high.
XIU.TO Weekly Fib 61.8% plus %B too high with negative divergence.
TLT UP 1-2-3 trend change? So TLT could be in an intermediate-term downtrend. Be careful.
TLT Weekly
FXE *UP
FXE Weekly Stalled at Fib confluences area, %B too high with negative divergence, too high above MA(40).
GLD DOWN
GLD Weekly %B too high.
GDX DOWN On support, BPGDM sell signal though.
GDX Weekly GDX to SPX ratio too high, %B too high with negative divergence.
USO *UP
WTIC Weekly
XLE *LA
XLE Weekly %B too high with negative divergence.
XLF *UP
XLF Weekly Head and Shoulders Top in the forming?
IYR *UP
IYR Weekly Home builders are lagging.
XLB *UP
XLB Weekly %B too high with negative divergence.
  1. Please make sure you understand how to use the table above. The purpose of this report is to provide info so contradictory signals are always presented.
  2. Position reported in short-term session of the table above is for short-term model only, I may or may not hold other positions which will not be disclosed.
  3. Conclusions can be confirmed endlessly, but trading wise, you have to take actions at certain risk level as soon as you feel the confirmation is enough. There’s no way for me to adapt to different risk levels therefore offer no trading signals will be given in this report except the mechanical signals such as SPY ST Model.
  4. * = New update; Blue Text = Link to a chart in my public chart list; UP/DOWN = Short-term trend; L A = Lateral Trend
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