10/13/2011 Market Outlook (Up then Down?)


Cobra's Market View Private Messaging System shows:


SHORT-TERM: COULD SEE HIGHER HIGH THEN PULLBACK, JUST A SPECULATION, NOT SURE

I see nothing special worth blah blah today, so let me, based on all the evidences I’ve got so far, make a little guess about what’s the next:

  • As mentioned in 10/12 Market Outlook, a RSI negative divergence is needed before any meaningful pullback, so my guess is SPY will revisit the 10/12 highs first
  • Statistically, gap down, lower low after 10:00am ET then intraday reverses up, most likely the morning low will be revisited in the next couple of days, so my guess is after revisiting the 10/12 highs, SPY will pullback to test today’s low.

SPYEvilPlan

Then, why couldn’t it be going low first higher later? Possibly, but considering the similarity showing in the chart below, I’d prefer high first lower later. Of course, you can always argue since the 3rd time is the charm so this time we’ll see lower price first. Sure, I cannot say you’re wrong. As long as we all remember that, the bottom line, it’s very rare such a strong push up is just one legged therefore a pullback, if any, is buy. Hence if we see low first, since that RSI is still missing negative divergence therefore we’d have one more assurance for buying the dip, right? Then, what if there’s no negative divergence at all this time? Well, if signals have no exceptions at all in the stock market then everybody would be rich. The reality is, as we all know, there’re always some exceptions, so the only thing we can do is always to bet on the side that statistically has higher odds, instead of, say, I know this signal works 90% of the time, but hey, I feel, this time would be different. Well, you simply cannot play this game like that in the long run although for a few times you might be lucky.

SPY

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 3 of 5 BUY 4 of 5 NEUTRAL Cobra Impulse in BUY mode; Non-Stop in BUY mode.
Short-term UP 6 of 6 NEUTRAL
* = New update.

 

 

Chinese Transcript

SHORT-TERM: COULD SEE HIGHER HIGH THEN PULLBACK, JUST A SPECULATION, NOT SURE

今天没看到什么值得大吹特吹的东东,所以只能根据已有的证据猜测一下下面的走法。见下图:

  • 10/12 Market Outlook里提到了要有RSI negative divergence先,才可能有真正意义的回调,所以我猜明天SPY会先去测试10/12的high。
  • Gap down,lower low after 10:00am ET,然后盘中反转,这种情况,统计上绝大多数情况两天内会重新测试该low,所以我猜去过10/12的high后,会掉下来。

SPYEvilPlan

那么,为什么不是先掉下来,再去high呢?可能啊,不过考虑到跟过去两次的相似性,所以我猜先high再low,当然你要说第三次不一样,所以这次先low后high,这个我也没法说你不对,呵呵。反正目前的交易策略很清楚,这么强的上涨,是不可能只有一条腿的,所以pullback如果有的话,是buy。也所以,如果先low的话,因为有着RSI那个missing negative divergence在那呢,所以可能先low的话buy起来更加有底些。什么?要是这次就是没有negative divergence呢?这,这,这,我就没法子了,股市里要永远没有例外,人人都发财了不是?问题是,现实没有那么简单,因此我们只能总是bet在高点几率的那头,而不是说,这个,有90%的机率要涨,但这次,我感觉不一样,所以我要做空。呵呵,长期来讲,大概不能这么玩,尽管可能有几次你运气好。

SPY

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 3 of 5 BUY 4 of 5 NEUTRAL Cobra Impulse in BUY mode; Non-Stop in BUY mode.
Short-term UP 6 of 6 NEUTRAL
* = New update.
  • Xiao Jian

    thanks.

  • hao

  • Anonymous

    Just read. Thanks.
    I mainly play ETF 3x, your SPY report is important to guide me.

  • Anonymous

    Just a small observation on the hourly chart. As far as I can tell, the move from the early October lows appears to be missing the 3rd push up. I might be wrong though…

  • Hey Cobra, good post. I agree that this is looking like a Sept 19th type setup. Maybe one more small push up tomorrow before some consolidation/more meaningful pullback. I also have a (admittedly highly speculative) scenario that I am noodling around with: http://marketthoughtsandanalysis.blogspot.com/2011/10/revisiting-large-count.html

  • Anonymous

    Thanks a lot.

  • Anonymous

    Italy 10 Yr Bonds just made a new higher high today (rate-wise), and are closing in on their all-time highs.  Perhaps a case of sell the EFSF ratification news.  Regardless, it is a bad sign for EU to have Italy rates climbing again.  Remember, a spike in Italy 10 Yr yields occurred in July, forcing the EU to react with EFSF modification plans.  Once they did, the yields subsided and ironically the stock market collapsed.  Another push higher in rates will put pressure on EU to increase EFSF to 1-2 trillion in order to cover Italy/Spain.  It is a nice leading indicator of trouble ahead, albeit potentially a month away or more.

    http://www.bloomberg.com/quote/GBTPGR10:IND

  • Anonymous

    Great report tonight Cobra! Really appreciate the hard work and like the trading plan too !!

    What are your thoughts on the chart of ISRG ? They report on Tuesday and the weekly looks like spike bottom (trendline support) at trendline support and 50DMA and now is in a triangle formation needing to break 393 which shud happen before earnings. Seems like a good play to the upside right  ? Weekly about to issue a buy signal and daily looks decent too. Thoughts ?

    Many thanks !!

    • I see Triangle too, so agree that odds are little bit on the upside. 

  • Anonymous

    EUR-USD is testing its 50% retrace zone at ~1.384 over the last couple days, but has yet to break it.  A re-test of 1.384 early tomorrow with the re-test of the stock market highs would fit perfectly with the expecation for a pullback in risk.

    NEAR TERM
    ——————–
    Copper has underperformed vs previous highs so far
    Financial stocks have been very weak in the last few days
    EUR-USD testing 50% retrace of overall down move
    VIX back at ~30 where market topped 3 times in last 2 months
    S&P double top formation matching recent tops potentially setting up

    These data suggest a re-test of the highs tomorrow is a very good risk-reward short setup.  Does anyone have data to add to this list?  Or even better data that contradicts?

  • Anonymous

    thanks a lot

  • Anonymous

    Cobra, thanks for the fantastic analysis as always.  Your past performance is truly remarkable, and I wonder why you aren’t a hedge fund manager.  A 31% annual return SINCE 1991 is a phenomenal track record!

    Fitch has downgraded several banks, watch negative:

    http://www.zerohedge.com/news/fitch-downgrades-ubs-many-others-puts-morgan-stanley-goldman-downgrade-review

    I think the low is in for September, the next few months remain to be seen…  I see a lot of people comparing this markets action to that of 2008s, and it makes sense that we could eventually have a massive sell-off considering that the underlying economic situation is probably worse.

  • Anonymous

    THX!!!

  • Anonymous

    Cobra:
    Again thanks for your daily analysis, as always it is very informative. 
    Anyway, I have one request for you. Would you please look at SPX monthly chart and explain what is the likelihood of current monthly candle bar body to be filled up more. In another word, what the odds of upper shadow be shorten further?
    I am not chart artist like you, Cobra, but I’ve been reading your blog religiously almost two months now and remember that you have often mentioned about when an object in motion in any direction, for it to reverse, it has to slow down first.  So, based on that and of course resistance at 1220ish level, I believe it’s quite safe to bet that in near future (i.e. between now and a wk later) body of this month candle bar should not increase in size. At most, by end of next week the body of bar should be same size or it might get chopped down a little bit, and create a longer upper shadow in supportive of your inertia theory of market trend, which once again makes so much sense.  With that said, I would increase my short position today if some kinda of double top forming at 1220 level.
    Thanks in advance for your response and will see you later in intraday comment 

    • Wayne, you’ve got the essence, but you cannot forecast the candlestick shape, although the market could go as you expected but you cannot exclude the possibility it rebounds for perhaps a few months before rollover again, right? So based on the theory, the only thing you can be a little sure is the correction isn’t over, that’s it and enough.

  • Thanks a lot, Cobra! Nice observation on RSI divergence.
    As of now Globex ES is accepting within 10/12 selling tail, which suggests a run on the recent highs. Watching NQ futures to test 2355.25 before shorting ES.

© 2013 Cobra's Market View — All Rights Reserved.