09/06/2011 Market Outlook (Bear Flag?)


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SHORT-TERM: MORE PULLBACK AHEAD

The market rose from beginning to the end, feels very bullish, however a little bit bigger picture, it’s just a Bear Flag in the forming, so I tend to believe the pullback isn’t over yet. That said, I don’t have enough evidences to exclude the possibility that there’s still a 3rd push up left. (I should pretty much exclude the possibility of the route YES WE CAN, please see 09/02 Market Outlook for more details.)

SPYEvilPlan

The chart below is the main reason why I believe it’s the Bear Flag case. It’s basically the law of inertia, a forward accelerating car cannot be reversed without slowing down first. The RSI new low means the downward push is accelerating therefore the chances are rare that the low was in today.

NoRSIPD

An unique thing today is SPY dropped more than 0.7%, why retailers were very bullish, they bought lots of equity calls so as the result the ISEE Equities Only Index closed at 233 which is pretty high readings. The chart below, highlighted in red, are all the similar cases in the past since the inception of the ISEE Equities Only Index (starting from year 2005). Looks to me, very likely a lower low tomorrow (with only 1 past exception), besides, none of the case was the bottom, some simply went straight down and some after a rebound then continued down again.

SPYDownOnISEEEquitiesOnlyIndexSurge0
SPYDownOnISEEEquitiesOnlyIndexSurge1

INTERMEDIATE-TERM: SPX DOWNSIDE TARGET  IS 1,000, THE CORRECTION COULD LAST 1 TO 2 MONTHS

See 08/19 Market Outlook for more details.

SEASONALITY: BULLISH TUESDAY, BEARISH SEPTEMBER

According to Stock Trader’s Almanac, day after Labor Day, Dow up 13 of last 16, 1997 up 3.4%, 1998 up 5.0%.

See 09/02 Market Outlook for September seasonality.

SUMMARY OF SIGNALS FOR MY  PUBLIC CHART LIST: 

TREND MOMENTUM COMMENT
Long-term 3 of 3 SELL
Intermediate 4 of 5 BUY 5 of 5 NEUTRAL Cobra Impulse in BUY mode; Non-Stop in BUY mode.
Short-term DOWN 6 of 6 NEUTRAL
  TREND COMMENT
QQQ & Weekly DOWN  
IWM & Weekly DOWN  
SSEC & Weekly DOWN 4.1.4 Shanghai Stock Exchange Composite Index (Weekly): Long term support broken.
XIU & Weekly DOWN
DAX & Weekly DOWN  
TLT & Weekly UP  
UUP & Weekly DOWN
GLD & Weekly UP  
USO & Weekly DOWN  
  • * = New update; Blue Text = Link to a chart in my public chart list.
  • UP = Intermediate-term uptrend. Set when weekly buy signal is triggered.
  • DOWN = Intermediate-term downtrend. Set when weekly sell signal is triggered.
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