01/14/2011 Market Recap: January Expiration Week could be the bear’s best chance


Cobra's Market View Private Messaging System shows:


  TREND MOMENTUM COMMENT
Long-term 2 of 2 are BUY  
Intermediate 5 of 5 are BUY 4 of 5 are NEUTRAL SPY ST Model in BUY mode; Non-Stop in BUY mode.
Short-term 4 of 6 are NEUTRAL
GANN DAY MOON:SOLAR CYCLE CONCLUSION
01/19,01/26 01/19 : 01/20 Next pivot date: 01/19
BULLISH 09/27 Market Recap: 9 POMO within 20 trading days means 14%+ up in 3 months.
BEARISH 1.0.6 SPY Unfilled Gaps: 25 unfilled gaps, the max is 25.
12/20 Market Recap: Smart/Dumb money confidence spread too high.
0.2.1 10Y T-Bill Yield: ROC(30) >= 9, topped? (Due to Quantitative Easing, I’m not sure if it still works)
1.2.0 INDU Leads Market: INDU had a lower low, so SPX might follow eventually?
8.2.7b Record High ISEE Equities Only Index Readings 2010: Record high, top is close?
0.2.3 NYSE McClellan Oscillator: Hindenburg Omen confirmed.
*
0.1.1 SPX Intermediate-term Trading Signals: CPC MA(10) too high, so topped?
6.2.3 VIX:VXV Trading Signals: Too low, so topped?
12/31 Market Recap: Lowest ATR(10) readings in 13 years, so topped?
*
0.2.2 Extreme Put Call Ratio Watch: Both CPC and CPCE are low, so topped?
6.5.1b SPX and NFP: Red NFP day means the trend will turn (down).
8.2.9c QQQQ – 2002 to 8.2.9k QQQQ – 2010: Poor QQQQ performance until the end of January.
01/07 Market Recap: Seasonality wise the rest of January isn’t good.
01/07 Market Recap: Strong Off-Season means poor Earning Season.
01/07 Market Recap: SPX weekly price volume negative divergence, 71% chances SPX < 1271 in 2 weeks.
01/10 Market Recap: SPX down 3 days in a row was a bad sign.
01/10 Market Recap: INDU down Friday and the following Monday was a bad sign.
*4.1.0 S&P 500 Large Cap Index (Weekly): Too high above MA(200).
*4.0.4 Dow Theory: Averages Must Confirm: BPSPX is way too overbought.
*6.2.2a VIX Trading Signals (BB): Potential short setup.
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
ST Model *Buy whenever SPY drops below the 01/14 mid price at $128.72 but still above $126.80. The stop loss will be 1.9*ATR(10). Not sure if it’s too late though.
Short-term N/A N/A Trend is UP.  I hold partial long position over the weekend.
My Thoughts A correction is just a matter of time, but until price confirms, I prefer long to short, with caution though.

SHORT-TERM: COULD SEE SOME WEAKNESS THE NEXT WEEK

We could see some weakness the next week. Also on the intermediate-term, if there’s ever any possible bear counter-strike, the next week would be the best chance, otherwise, bulls will be safe until at least 01/26 FOMC.

Let’s begin with the short-term pullback signals:

  • The SPX weekly price volume negative divergence setup mentioned in 01/07 Market Recap is till valid, therefore there’re 71% chances, SPX would close below 1271 within 2 weeks.
  • Seasonality according to Stock Trader’s Almanac, January Expiration Week horrible since 1999, Dow down big 8 of last 11.
  • 0.2.2 Extreme Put Call Ratio Watch, both CPC and CPCE are way too low. The signal was formerly an intermediate-term signal, but looks like now it’s only effective for 2 to 3 days, but no matter what, the most important of all, this indicator still works.

ExtremePCRatioWatch

VIXBBTradingSignal

SPY60min

INTERMEDIATE-TERM: COULD BE WAVE 5 UP TO SPX 1300+, PIVOT TOP COULD BE AROUND 01/05 TO 01/12

The price and time target I’ve been blah blah for the intermediate-term has finally been met, although the time target seems a little too early but let’s give it another week, see whether the forecast is good or bad.

Wave5TargetMet

The charts below are all the weekly extremes I’ve collected, so from the indicator point of view, the price and time forecast for the intermediate-term may stand a fair chance to be correct. But, again and again, the most important is till the price pattern must confirm. Before seeing at least a 1%+ down day and close almost low of the day, to be a bear is a very dangerous job. And besides, don’t forget, even we do get such kind of 1%+ down day, a general pattern for an important top is reversal of reversal of reversal, which means a big daily red bar usually is followed by a big daily green bar, this basically means bulls would have plenty of chances to escape, so, overall, the situation is not friendly at all to bears, please just don’t forget this.

TooFarAboveMA200
WeeklyEMA13andEMA34SpreadTooLarge
BPSPXWayTooHigh
VIXWeekly

SEASONALITY: BULLISH TUESDAY, BEARISH FRIDAY, HORRIBLE WHOLE WEEK

According to Stock Trader’s Almanac:

  1. First trading day of January Expiration Week, Dow up 13 of last 18.
  2. January Expiration Day, Down down 10 of last 12.
  3. January Expiration Week horrible since 1999, Dow down big 8 of last 11.

The chart below is about the seasonality around Martin Luther Kind Jr. Day, looks like post holiday wasn’t so great.

holiday_mlk

Also see 12/31 Market Recap for the January seasonality chart.

HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST

SIGNAL COMMENT
QQQQ 01/10 L
NDX Weekly UP *Too far away from MA(200) and BPNDX is way too overbought.
IWM
IWM Weekly UP
CHINA
CHINA Weekly UP Should have set the trend to down from up but I’ll see how the market rebounds.
EEM
EEM Weekly UP
XIU.TO 01/06 S
XIU.TO Weekly UP Weekly Bearish Engulfing, be careful.
TLT *0.2.1 10Y T-Bill Yield: Symmetrical Triangle? So bond should keep falling?
TLT Weekly UP
FXE
FXE Weekly DOWN
GLD *1-2-3 trend change, wait for further confirm, GLD may fall into a downtrend.
GLD Weekly UP
GDX 12/17 S 1-2-3 trend change confirmed, so GDX could be topped. Be careful about gold itself.
GDX Weekly *DOWN
USO
WTIC Weekly UP
XLE 06/15 L *Too far away from MA(200).
XLE Weekly UP
XLF 10/15 L
XLF Weekly UP Testing resistance which also is multiple Fib confluences area.
IYR
IYR Weekly UP
XLB 01/06 S
XLB Weekly UP BPMATE is way too overbought.
  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. 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 no trading signals will be given in this report except the mechanical signals such as SPY ST Model.
  3. * = New update; Blue Text = Link to a chart in my public chart list.
  4. Trading signals in OTHER ETFs table are mechanical signals. See HERE for back test results. 08/31 L, for example, means Long on 08/31.
  5. UP = Intermediate-term uptrend. Set when I see at least one higher high and higher low on weekly chart.
  6. DOWN = Intermediate-term downtrend. Set when I see at least one lower high and lower low on weekly chart.
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