09/20/2011 Market Outlook (Bearish Reversal Plus VIX Negative Divergence)


Cobra's Market View Private Messaging System shows:


SHORT-TERM: IN WAIT AND SEE MODE

Four cents:

  1. No idea about tomorrow. Just as mentioned in today’s Trading Signals, FOMC day tends to be a green day 73% of the time.
  2. FOMC tomorrow, the general intraday pattern is up until 2:15pm ET announcement, then rollercoaster show.
  3. The big picture, 2 down days within 7 days, so this rebound is not even a strong rebound as measured by 7 Days Rule, therefore one more evidence arguing that this is (was) just a rebound. Again, as I said many times, a conclusion can be confirmed and confirmed until too late, so you must decide when to take actions when signals are confirmed to a certain risk level that you feel enough convinced.
  4. Cannot exclude the possibility that the high was in or very close. Such a high, however, could be just a short-term or even an intermediate-term which I don’t know yet, need see the following few days.

The following charts are my main reasons why I cannot exclude the possibility that the high was in or very close:

Today, we had a gap up, higher high then closed in red so it’s a bearish reversal day. From the chart below, such a day was very likely at least a short-term top. Especially, it’s used to be just one blue arrow at most, the SPX would pullback immediately after the next Bearish Reversal Day (red arrow). While this time, we’ve already had 2 consecutive blue arrows, my question is: Will the 3rd time be a blue arrow again (i.e. no immediate pullback tomorrow)?

BearishReversalDay

SPX made a higher high today (just tiny little bit, but still is higher high), but VIX didn’t make a lower low, and it had 2 consecutive reversal like bars (Black bar and Hammer). Since generally, VIX leads, so this could imply that SPX is about to turn down.

VIX

The 3rd reason is very subtle. RSP is an equal weighted SPX ETF, so when RSP lags, it means the push up was mainly due to a few heavy weighted stocks, therefore is suspicious. You can also take a look at $VLE and $NYA, obviously they are further from the previous Swing High than that of SPX which also argues that the quality of the current rally is suspicious.

SPY60min

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

See 08/19 Market Outlook for details.

SEASONALITY: BEARISH WEEK

According Stock Trader’s Almanac, week after September Triple Witching, Dow down 16 of last 20, average loss since 1990, 1.1%.

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 *Unclear 6 of 6 NEUTRAL
  TREND COMMENT
QQQ & Weekly UP  
IWM & Weekly DOWN  
SSEC & Weekly DOWN  
XIU & Weekly DOWN
DAX & Weekly DOWN  
TLT & Weekly UP  
UUP & Weekly UP  
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.
© 2013 Cobra's Market View — All Rights Reserved.