10/10/2011 Market Outlook (Higher High Ahead)


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SHORT-TERM: HIGHER HIGH AHEAD BUT EXPECT PULLBACK NO LATER THAN THE DAY AFTER TOMORROW

Four cents:

  1. Today’s high is not the high.
  2. Expect pullback as early as tomorrow, no later than the day after tomorrow.
  3. If no higher high tomorrow, the market pullback at open, then the pullback is buyable. If tomorrow higher high first then pullback, then more likely such a pullback still is buy, just need see signals to confirm, so in this case we’ll have to wait and see.
  4. Another green day tomorrow, especially if it’s a narrow range day, then better bulls take some profit.

Begin with why “expect pullback as early as tomorrow, no later than the day after tomorrow”: TICK MA(3) is way too high, with no exception, SPX closed below today’s close no later than the day after tomorrow. This chart is also why I said if green day again tomorrow, then better take some profits.

TICKMA3

Now let’s see why expect higher high ahead:

Rarely, if never, was Major Accumulation Day exactly the market top. This actually is the law of inertia.

MADHHGuaranteed

2 Major Accumulation Day within 5 days used to be a very powerful intermediate-term buy signal. It didn’t work as well as it’s used to be recently, but still it’s a good short-term up signal.

2MADWithin5Days

INDU broke above 09/27 highs ahead of SPX, so expect SPX would follow soon.

INDULeads

Non-Stop model gave buy signal today, so tomorrow should close short open long. Click Non-Stop and check the last half part of the post, you’ll see never was a Non-Stop buy signal given at exactly the market top. SPY was at least up for a few days thereafter and in fact, 73% chances such an uptrend could last more than 10 calendar days. So the buy signal give by Non-Stop also imply at least the short-term will be up for a few more days.

NonStop

INTERMEDIATE-TERM: SPX DOWNSIDE TARGET  IS 1,000

See 08/19 Market Outlook and 09/30 Market Outlook for details.

SEASONALITY: NO UPDATE

See 09/30 Market Outlook for October day to day seasonality chart.

SUMMARY OF SIGNALS:
TREND MOMENTUM COMMENT
Long-term 3 of 3 SELL
Intermediate 5 of 5 SELL 4 of 5 NEUTRAL Cobra Impulse in SELL mode; Non-Stop in *BUY mode.
Short-term UP 4 of 6 NEUTRAL
* = New update.

 

 

Chinese Transcript

SHORT-TERM: HIGHER HIGH AHEAD BUT EXPECT PULLBACK NO LATER THAN THE DAY AFTER TOMORROW

四点说明:

  1. 会有higher high,就是说今天的high多半不是the high。
  2. 最快明天,最迟后天会有pullback。
  3. 假如明天没有先higher high就pullback的话,这个pullback比较确定是buy,假如明天先higher high再pullback的话,基本上这个pullback也是buy,不过需要看当时信号的情况。
  4. 明天又收绿的话,特别如果是小棒棒,那么牛牛最好套利。

先看最迟明天,最快后天会有pullback的证据:TICK MA(3)太高了,最迟后天会close在今天的close以下,没有例外。这也是我为什么说,明天如果收绿的话,最好套利的理由。

TICKMA3

下面看看还有的涨的理由:

鲜有Major Accumulation Day是exactly market top的。这个其实就是惯性定律啦。

MADHHGuaranteed

2 Major Accumulation Day within 5 days,这在过去是个非常强大的中期买信号,最近两次虽然工作的不好,但是至少短期还是涨了几天的。

2MADWithin5Days

INDU今天break above 09/27的high了,SPX应该会follow。

INDULeads

Non-Stop model今天出了买信号,明天应该close short open long。点击Non-Stop,在文章的最后可以看到Non-Stop的买信号从来么有买在exactly top的情况,后面总是要涨个几天,有73%的机会是会涨10个calendar day以上,所以这个model的买信号,至少也是短期看涨的信号。

NonStop

INTERMEDIATE-TERM: SPX DOWNSIDE TARGET  IS 1,000

See 08/19 Market Outlook and 09/30 Market Outlook for details.

SEASONALITY: NO UPDATE

See 09/30 Market Outlook for October day to day seasonality chart.

SUMMARY OF SIGNALS:
TREND MOMENTUM COMMENT
Long-term 3 of 3 SELL
Intermediate 5 of 5 SELL 4 of 5 NEUTRAL Cobra Impulse in SELL mode; Non-Stop in *BUY mode.
Short-term UP 4 of 6 NEUTRAL
* = New update.
  • Anonymous

    Thanks

  • Xiao Jian

    thanks!

  • Anonymous

    thx,ding

  • Anonymous

    thx,ding

  • Anonymous

    thx

  • Shuo Yi

    thanks.

  • Anonymous

    Thanks for the “free” hard work Cobra. BTW, are you using EMA(20) for buy/sell signals (NYSI, BPSPX and BPNDX)?

    • Not for BPSPX and BPNDX. 

  • Anonymous

    thank you so much

  • Anonymous

    thank you very much your kindly sharing and excellent hard-working.

  • Anonymous

    After stopping the market several times in the last 1.5 months, the 50 day EMA & SMA finally gave way rather easily today.  A testament to the rip-roaring rallies that extreme bearish sentiment can bring (120 pts so far in SPY in 5 days).  Now the resistance is littered above between 1195-1234.  I don’t see any clean exits or entries yet from here until we get to the next medium term downside trade which is still a few weeks away.

    I’ll close my 50 day MA trade tomorrow when 1201 beckons and wait until the VIX comes back to the low 20s, which might coincide with a 200 day MA test some time in November.  Any market swoon over the next couple weeks should be a buy, but keep an eye on VIX 30 level, it has stopped rallies several times now just like the 50 day MA did.

    • Anonymous

      Does this also mean that you have closed all your short positions which you initiated at spx 1180ish ?

  • Anonymous

    Cobra, that RSP:$CPCE chart is my favorite one, how did you invert the $CPCE sell signal? lol.  That’s a terrific idea.

  • Anonymous

    Thank you for the awesome new site. No more smileys?

  • Anonymous

    THX!!!

  • Jason_70

    Cobra,

    I know you know that i am short/bearish and i have my own reasons for the same and don’t want to post my rant here :-).  But here’s a backtest that i did last weekend and thot u/others may be interested in.

    Buy @ Close SPY
    > 20 DMA
    < 200 DMA
    Crosses 50 DMA
    At  13 day High

    SL of 3-15%, pick one.

    In the last 20 years, 10 trades and 0 winners. 🙁

    I know data set is too small.  But again, i had to add as many conditions as i could to capture the exact event (day) as of today.  I am not sure if we will repeat the same thing again now, but since this showed 100% success rate, i didn't want to go against it.  Of course over SPY did not cross 50 DMA last week when i went all it shorts, but i was working on my risk appetite and hence doing this research.

    Now add 

    DOW – Monday.

    We have only 3 such cases, including today.  0 winners.  In one case we made a new low and the other 50% retracement.  Hence, my ploy is for the 50% retracement and will decided further course after that.

    Thanks again cobra, for all your hard work

    • Anonymous

      Are you concerned about curve fitting?  13 day high seems like potential curve fitting.  Do 12 day highs not work?  I like the idea, and certainly the numbers look good.  What are the two days where the Dow is incorporated into the criteria (aside from today)?

      • Jason_70

        I am always confused on this term ‘curve fitting’, and hence dont use it. 🙂
        I’d say, to get to a more discrete state, i added more conditions/variables.  I guess you may call it that.  
        I dont have the data right in front of my right now, but the other two instances were 2000 and 2008 (march i believe).

    • uempel

      Jason, I agree that statistical approach is questionable if there is hardly any data. And the long timeframe doesn’t help, it makes the data even less meaningful. People I know who were at MIT (MIT teaches that markets ain’t predictable) and now work in IB, acknowledge that statistics can work on a short time frame. 

      This means that with data for two trading weeks showing 50 cases might have a statistical validity for the next two weeks. But if you use the statistics a month or two later, previous data loses significance. So if somebody uses 2008 data for prediction in 2011 – that’s statistical nonsense. But it does mean that it doesn’t  work. This contradiction is due to big guys copying the 2008 pattern… 

      CS is publishing a daily report which compares 2008 with 2011. They use FTSE as a lead because (so far) is has followed 2008 most acurately (as indices worldwide tend to go in sync this doesn’t matter).  Dotted black verticals indicate the 2008 pattern.
       

      • Jason_70

        Uempel,
        I have to agree with your statement that the most recent stats play most vital role than the past.  But in this specific case the conditions were so many that the event in itself is a rarity.  Hence, we had to move as much back as we could to get additional data points and thus longer timeframe.
        In fact i was one of the strong believers in what you stated and cobra may also recall our discussions on these lines from the past.  But the thing is, conditions such as the “Death cross” doesnt happen on a daily or even monthly basis and hence to collect meaningful stats for such important events, we need to go a long way, back.  Is it not something that is published by almost every other website or followed by every other fund manager?  Yes.

        Hence, as you stated, it definitely is a contradictory statement.  But again, this was NOT the only reason for my decision though.  I am a very big follower of pattern matching/recognition on a shorter timeframe.  And believe me if i upload the 100’s of charts here, you would be stunned at what i saw on friday.  Just that all of those patterns bit the dust with the 350 pip rally on the euro on no real technical or otherwise bounce that lifted the entire US stock market on wafer thin volumes.

        But again we have to trade what we see and adjust ourselves to the moves, one way or another. 🙂

        Thanks for the nice discussion man. 🙂

    • Jason, I believe your setup should work, makes a lot sense, we’ll see.

  • great new site cobra, congratulations.

  • i hope we get that pullback soon soon.

  • roadmap for tuesday, 10/11, is ready for anyone interested.
    click on my name next to avatar for the link.

    i’m tracking 2 of my long term portfolios now, just added some new picks.

  • Anonymous

    班长: 你说的pull back 只是一天的小回调吗?

    • Could be just a day or two pullback, but may be huge and scary according to the past pattern.

  • Hagen .

    HI,

    I would like to know what indicator is above od RSP:$CPCE, in that indicator you say “Generally the most reliable sell signal……”

    Thank

  • uempel

    My target for Tuesday is the 1200 area, afterwards I’m expecting a (short term) correction down to support levels. 

  • HighRev

    Very nice.

    Add me to that long thank you list below!

  • HighRev

    I was looking closer at your TICK MA3 chart, and I noticed something interesting that I’ve noted on your chart.

    • uempel

      Nice chart, maybe stystem only works in bull runs?

      • HighRev

        You’re correct.

        I’ve added a couple of points to the original post.

    • Jason_70

      Among the 100’s of things that i monitor closely and have raised it earlier to cobra, Tick is one of my favorite when compared to MAD/MDD for reasons explained elsewhere.  And this is exactly why i did not believe any of the moves last week as TICK barely budged, the smoothened version of course. 
      However things started only to move towards the end.  And i guess “the end” moves captured by your chart does indeed make sense and blend with what i have been seeing/observing.  
      Nicely done man.

    • Hmm, nice chart. Thanks.

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