01/21/2011 Market Recap: INDU higher high ahead but may close the week in red


Cobra's Market View Private Messaging System shows:


  TREND MOMENTUM COMMENT
Long-term 2 of 2 are BUY  
Intermediate 3 of 5 are BUY 4 of 5 are NEUTRAL SPY ST Model in BUY mode; Non-Stop in BUY mode.
Short-term 6 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.
*1.2.0 INDU Leads Market: INDU new high, so SPX will follow?
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 means SPX < 1271 in 2 weeks. Failed.
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): Short setup triggered on 01/18.
0.0.2 Combined Intermediate-term Trading Signals: Trend line broken, so topped?
*01/21 Market Recap: INDU up 8 weeks in a row, could mean a red next week.
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 Long triggered on 01/14, flatted out on 01/19, no chance to follow though.
Short-term N/A N/A Trend is DOWN.  I hold short position over the weekend.
My Thoughts Not sure if the much anticipated correction has started, it looks like so though.

SHORT-TERM: INDU HIGHER HIGH AHEAD BUT MAY CLOSE THE WEEK IN RED

Whether the 01/18 highs is the high, bears need at least show us a confirmed 1-2-3 Trend Change pattern first, so far none, so the only thing I can say now, is, well, let’s wait and see.

My best guess is:

  1. INDU will have a higher high the next week and so will SPX. But the higher high will not be a decisively breakout of the SPX 01/18 highs because chances are very good the INDU will have a weekly red bar the next week. So accordingly, the 1-2-3 Trend Change pattern, despite a slightly higher high could still be valid the next week. However, even the 1-2-3 Trend Change pattern could still be valid but so far I have no evidence to convince you that the 1-2-3 Trend Change pattern would be confirmed the next week (which I’m basically saying that I have no idea about the trend, LOL).
  2. If indeed there’s a higher high the next week, it most likely will be on 01/26. In another word is that 01/26 could be our next pivot day.

SPY60min

Let me begin with why INDU will have a higher high and so will SPX, and why INDU eventually will close the week in red?

The chart below is my main reasoning. When INDU was up 8 weeks in a row, the next week most likely was in red but a higher high was guaranteed in THE MOST RECENT YEARS. If back test the entire INDU history, then the next week is not guaranteed to be in red but short at the Friday’s close (that’s 01/21) and cover at the first down week close, it had 79% winning rate. So all in all, the conclusion for a INDU red the next week is somehow trustworthy.

INDUUp8WeeksInaRow

If INDU does have a higher high, I expect SPX to follow, because 1.2.0 INDU Leads Market. By the way, I don’t mean that INDU really leads the market, simply because INDU consists of the most heavily weighted stocks in almost all the major indices and it’s only 30 stocks, so it’s easily being controlled. Big guys can use INDU to make the market look pretty or ugly to suit their needs.

INDULeadsMarket

Then why, if indeed there’s a higher high, it could be on 01/26?

Because FOMC is on 01/26. The chart below shows FOMC more often than not could be a pivot day. Besides, if you still remember, last year, the pivot days were clustered around day 25.

FOMC
GannDay

INTERMEDIATE-TERM: IN WAIT AND SEE MODE, WHETHER THE 01/18 HIGHS IS THE WAVE 5 HIGH REMAINS TO BE SEEN

Since even the short-term I have no answer for whether the pullback is over, so whether the intermediate-term was topped, we’ll have to wait and see. The chart below is just a concept, I’m not saying that we’ll from now on drop that far. Just want you to know once the correction starts, the general target should be SPX 1220 to 1230.

PullbackTarget

SEASONALITY: THE LAST 2 TRADING DAYS OF EACH MONTH SINCE AUGUST 2009 WERE BEARISH

The chart below says for itself – short at 01/27 close then cover at 01/31 close, odds are 15 out of 17.

Last2TDBearish

HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST

SIGNAL COMMENT
QQQQ 01/20 S
NDX Weekly UP BPNDX is way too overbought.
IWM
IWM Weekly *DOWN *No lower low to confirm yet, but the sell off is strong, so downgrade the trend to down from up.
CHINA
CHINA Weekly DOWN
EEM
EEM Weekly UP
XIU.TO 01/06 S
XIU.TO Weekly UP
TLT 0.2.1 10Y T-Bill Yield: Symmetrical Triangle? So bond should keep falling?
TLT Weekly ?
FXE *3.1.1 US Dollar Index Bullish Fund (UUP Daily): 1-2-3 trend change, UUP could be in downtrend.
FXE Weekly *UP *No higher low to confirm yet but the rebound is strong, so I upgrade the trend to up from down.
GLD 1-2-3 trend change, GLD may fall into a downtrend.
GLD Weekly ? *Testing long term trend line.
GDX 12/17 S
GDX Weekly DOWN
USO
WTIC Weekly UP
XLE 06/15 L
XLE Weekly UP
XLF 10/15 L
XLF Weekly UP Testing resistance which also is multiple Fib confluences area.
IYR Could be an Ascending Triangle in the forming.
IYR Weekly UP
XLB 01/19 S Testing major trend line and MA(50).
XLB Weekly *DOWN 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 daily chart.
  6. DOWN = Intermediate-term downtrend. Set when I see at least one lower high and lower low on daily chart.
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