10/27/2011 Market Outlook (Overbought and Possibly an Exhaustion Bar)


Cobra's Market View Private Messaging System shows:


SHORT-TERM: MAY SEE HIGHER HIGH TOMORROW BUT A PULLBACK OF SOME KIND IS DUE

Three cents:

  1. Higher high ahead. Again, please pay attention to my wording, it’s HIGHER HIGH not HIGHER CLOSE. So as long as tomorrow’s high is higher than today’s high then the forecast is fulfilled, it doesn’t have to close in green.
  2. As mentioned in the yesterday’s report, if decisive new high today, then the 3 Push Up pattern is invalid. We will have to wait for the next reversal pattern before speculating a top of some kind. This conclusion basically guarantees the very first pullback is buy, because most likely, at least today’s high or any high thereafter if higher than today, would be revisited before any serious pullback. Why? Because you Earth people always like to try twice before trying the opposite direction. And this is why for most top or bottom, we usually have Double Top or Double Bottom, occasionally, we see Triple Top or Triple Bottom, but never Quater Top or Quater Bottom. You Earth people, by the way, too easy to give up, unlike we Martians, never give up, well, I’ll skip the next 10 thousands words criticising you Earth people…
  3. Also as mentioned in the yesterday’s report, a huge up today would force me to yell overbought. Because the signals I used to watch for overbought are no ordinary signals, therefore whenever I yell overbought, we’d see a pullback as early as (pay attention to as early as) the next day. That said, again and again, I don’t imply that you should short, because apparently short is against the current trend therefore is very very dangerous. From all the feedbacks and comments I got today, I found people tend to listen only 50% of what I say, so if another 4% huge up tomorrow and your bear claws got burnt, just don’t come back blaming me. Then why did I tell you such an overbought nonsense? Because this is a market report, which is totally different from a trading report, in which, I must tell you all the signals that worked in the PAST (pay attention to the PAST), I cannot, simply because I don’t believe some signals therefore pretend not to see them. As for all the signals I reported, whether they could be trusted and how to use them, it’s all up to you, not me.

The chart below is my next evil plan based on the pattern analysis. Again another wild-est-est-est guess. The main consideration is today’s bar looks a lot like an exhaustion bar, so after a higher high tomorrow to fulfill my number 1 call today (see above), we might see a pullback that finally could last for a few days. Please be noted, although I drew a cycle on the chart implying a similarity, I don’t mean we’ll have the same pullback magnitude. It could be larger or smaller, I don’t know, I just meant to show direction only.

EvilPlan

Then why a higher high ahead? Because today is a Major Accumulation Day which means a strong up momentum, so according to the law of inertia, it almost guarantees a higher high tomorrow.

HHGuaranteed

OK, now let’s talk about overbought. I see too many overbought signals, therefore cannot list all of them here. So just don’t tell me, hey, you see, RSI or ChiOsc or MACD or blah blah blah, because even with all those usual signals sitting at very extreme levels that rarely seen, dare not I say a red day tomorrow. Nowadays, as I said many times, to be a bull, all you need are just imagination, so I wouldn’t be surprised to see a 100% up day tomorrow to all time high. Well, to be safe, in case we rose more than 100% tomorrow, please forgive my lacking of imagination, really, please.

NYMO becomes extreme again. I said before, this is one of a few rare signals that cannot be argued.

NYMO

T2112 which is Percent of NYSE stocks 2 StdDev above MA(40), is now at 4th record high.

T2112

T2122 shows 95% NYSE stocks are now at 4-week highs.

T2122

The 2 charts below are for record only purpose because they really are very rare.

Nasdaq 100 intraday cumulative TICK hit 10 years high, a very big WOW! People just love the Nasdaq stocks so much, so keep buying and buying and buying, the whole day. Well, speechless.

NDXCumTICK

The chart below is similar to T2112, just it calculates the number of S&P 500 stocks 1 StdDev above MA(50). It shows only a few cases in year 2003 could match what we have today, that’s at least 20 years record.

1StdDevAboveBB50

INTERMEDIATE-TERM: WE COULD SEE MULTIPLE WEEKS RALLY BUT MAINTAIN SPX DOWNSIDE TARGET AT 1,000

For why we could see multiple weeks rally, please see 10/14 Market Outlook for details.

For why SPX downside target at 1,000, please see 08/19 Market Outlook and 09/30 Market Outlook for details.

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

 

 

Chinese Transcript

SHORT-TERM: MAY SEE HIGHER HIGH TOMORROW BUT A PULLBACK OF SOME KIND IS DUE

三点说明:

  1. Higher high ahead。这里再次强调一下,注意我的用词,是higher high,不是higher close,也就是说明天只要高过今天的high就算我对了,不是一定要收绿的。
  2. 昨天的报告提到了,如果decisive new high,那么3 Push Up pattern无效,下面还得再等一个reversal pattern才有top的可能。这基本保证了第一次pullback是buy,因为前高至少还会再被测试一次,才有top的可能。为什么?你们地球人做什么都喜欢试两次,然后才可能调头,这就是为什么顶和底大都是Double Top / Double Bottom的原因,偶然会有Triple Top / Triple Bottom,但绝没有 Quater Top / Quater Bottom。你们地球人太容易放弃,不象我们火星人,那个,什么,此处省略一万字。
  3. 昨天的报告也提了,今天大涨特涨,我会喊overbought,而因为我看overbought的信号都不是一般的信号,所以一般我说overbought,最快(注意最快这个词)第二天就会有回调。当然,我不是说你要做空,因为做空是against trend,因此是非常非常危险的。我发现我讲的话很多人只听一半。明天再大涨个4%,把熊爪子烧没了,不要来怪我哈。那,我为什么还要报告这个?因为这是报告,跟trading是两码事,我必须报告我看到的过去(注意过去这个词)被证明有效的所有的信号,我不能因为我这次不信就假装没有看见。至于这些信号,可不可信,怎么使用,那是你自己要决定的事情,OK?

下面的图是基于pattern分析得出的evil plan,属于wild-est-est-est的guess。今天是exhaustion bar的可能性很大,因此明天探新高实现我的1号预言后,会有持续几天的pullback。当然,我不是暗示,我们这次会有类似上次的pullback幅度,我不清楚,可能更大,也可能更小,下图只是示意方向。

EvilPlan

那么,为什么说higher high ahead?因为今天是Major Accumulation Day,表示上涨的动能很大,所以根据惯性定律,基本保证明天会有higher high。

HHGuaranteed

下面看看怎么个overbought法。信号实在太多,所以就只能列出比较特别的信号了,那些非常普通的的,RSIChiOscMACD什么的,就麻烦别告诉我了。既使有这么多非常特别的信号extreme了,我都不敢说明天要跌,你那些普通信号,我哪敢信哈。还是那话,这年头,作牛,只要有想象力就行了,所以明天大涨100%直接all time high,我都不会表示惊奇。恩,如果明天涨不止100%的话,还请原谅我的想象力不够。

NYMO又extreme了,我说过,这个信号是不能argue的。

NYMO

T2112,Percent of NYSE stocks 2 StdDev above MA(40),这是历史第4的纪录。

T2112

T2122,95%的NYSE stocks都4-week high了。

T2122

下面两幅图只是做记录用,因为比较稀奇。

Nasdaq 100 intraday cumulative TICK, 10年新高,big WOW,大家太爱Nasdaq了,一整天都拼命买啊,无语。

NDXCumTICK

再下面的图原理跟T2112一样,只不过计算的是number of S&P 500 stocks 1 StdDev above MA(50)。这个,20年的历史,只有2003年有过类似的纪录,非常非常extreme了。

1StdDevAboveBB50

INTERMEDIATE-TERM: WE COULD SEE MULTIPLE WEEKS RALLY BUT MAINTAIN SPX DOWNSIDE TARGET AT 1,000

For why we could see multiple weeks rally, please see 10/14 Market Outlook for details.

For why SPX downside target at 1,000, please see 08/19 Market Outlook and 09/30 Market Outlook for details.

SUMMARY OF SIGNALS:
TREND MOMENTUM COMMENT
Long-term 3 of 3 SELL
Intermediate 5 of 5 BUY 5 of 5 NEUTRAL Cobra Impulse in BUY mode; Non-Stop in BUY mode.
Short-term *UP 3 of 6 *OVERBOUGHT
* = New update.
  • Cobra, my bear claws definitely got chopped down unnecessarily today.  How does one avoid the temptation to counter trend trade?

    • Burn sever times more, you’d eventually remember.

      • do you actually do the chinese translation  ?

        • Sure. You think Google can do a human readable translation?

          I do everything here, the entire site, everything, except I have someone to read the feedback from “Contact Us” in case some basher to bash me into bad mood. The mood is very important in writing. And I don’t visit other Chinese web site except my own one, because there’re some bashers like to bash me everyday for being running a successful blog. I guess someone might have bashed for 4 years which is amazing. 🙂

          • Anonymous

            Arabs from old days said ( wesdom or prudence ): never been thrown except the fruitful ( productive or profitably ) tree.
            forgive my weak english tryed hard to put it in english but I think you got the idea  ….
            Keep up your great work Cobra 

            • Thanks. This site is my life, there’s no way I’m gonna to blow it. 🙂

              • Anonymous

                It’s clear that this site is a labor of love.  Only love could motivate someone to devote so much time and energy to helping others.  As one of these others, I am unwavering in my gratitude, Cobra.

                • Thanks, appreciate you understand that. 

              • Anonymous

                Love your site Cobra, just keep it up, I’m with you every day:)))

              • EvilTrader

                You tell me who the bashers are and i will just shoot them in the face !

                Im EVIL after all.

            • uempel

              Dow, please give the translation a second try, I’d love to get the meaning. At the moment I just see the broad outline of the saying. Thanks so much.

              • Anonymous

                Hahaha Uempel, you really made me LOL .. I am loughing on my english not on any other thing.
                anyway, let me explain it with example then try to translate. the wesdom goal is to show that only the productive and succecful people are creticized and the lazy or unproductive people are usually been ignored because they don’t provide a product to be satisfied or creticized. Like the other wesdom says  ” if you don’t want to make a mistake, then don’t work ” or in other word, people who work, do mistakes but the most important thing is what they do and decide after that mistake. 
                Now back to the first wesdom, if you have 2 trees, one is apple tree and the other is lets say unfruitful tree. Which tree you will throw to have what is usfull for you ? it is sure the apple tree. So, we here in the arab world use this wesdom for (say it ) the person who is succecful but some times been creticized in a way just to make him angry or mad.
                I hope I explain it better than the first time    -:) 

                • uempel

                  Thanks Dow, very true. 

                  There is another aspect of Cobra’s problem with bashers: Don’t critisize what you don’t understand (Bob Dylan). Problem is that people who stumble into trading and pick up advice which they don’t understand get killed.

                  I have a trading account with a broker who tests new clients with difficult MCQs (in Arabic: multiple-choice-questions). The bright side for the broker is that he bans beginners who might bash him or even worse if trading heads south. Bright side for trader who passes the exam is that there are no restrictions whatsoever – as long as he provides margin.

          • Anonymous

            Thanks Cobra for the report. It’s excellent as always.
            About the bashing, the person must have been in love with your site so much because he/she has had to visit, read, and spend time to voice his/her ‘opinion’ 😉

    • Anonymous

      One way is to trade according to his short-term model on overnight holdings, which is actually in long tonight! Of course it’s a small position …

    • Anonymous

      There is a study from brockrage firm shows that most of retail traders LOVE to counter trend, because they listen and read reports ( Economics,  earnings, or politcs ) that is mostly priced in the market and they most of the time late. I think if you remeber this study you might think twice before placing any counter trend trade. Also remeber this fact, trades with trend will give you advantage in many things such as:
      1-  risk reward ratio ( the stop is tight and clear and the target is big )
      2- time to reach the target for the trade with the trend is faster than counter trend.
      3- number of wrong trade is far less than the correct.
      4- no need for too much analysis
      … etc 

  • With that said we have a massive divergence in daily TICK with the SPX.

  • Cobra what is your indicator of the trend?

    • breadth, moving average, pair of higher high and higher low etc etc.

  • Truly great blogging as always. Thank you again for your charts, your knowledge, your insight and your good spirits. 

  • Anonymous

    thx, ding

  • Anonymous

    Overbought/sold and other counter-trend indicators do not work if major events occur. Lehman Bankruptcy was one, QE1 was one, and yesterday was the latest one. I don’t understand why Cobra is fixated on that 1000 target even ALL of his own trading systems are yelling buy buy buy.

    Although most of your charts show overbought conditions, they also show that these are conditions at early stage of major bull moves. Should traders really penny-pinch about those daily consolidation pullbacks while ignoring the big picture.

    • Come on, my report is not for you only, I have thousands of people each have different time frame. I bet some do just hold one or two days. I must cover all time frame. Besides, I have to say something everyday, do you really expect me to say the same trend is up everyday? And in this case, would you come to read my report? Don’t you think my report is fresh everyday? Please be fair to me. Again, the report is not for you only. And please don’t test my limit again if you’re from Hutong9. I’d think this is kind of betrayal!

      • Anonymous

        dividend_growth, I do see your point. When the market switches it’s direction, most experts will be skeptical about the new trend. I, however, have to say that if someone disagrees with Cobra, the person hasn’t fully digested his knowledge as a day or swing trader.

        • Thanks. To tell you the truth, I’m really pissed off when all of sudden people jump out telling me what I should write what I shouldn’t even I’m not wrong, especially if this is someone I do know and have been reading my reports for the past 4 years!

  • Anonymous

    Cobra, I find it really good that you openend this site just to discuss about the market. I’m in China and I can’t post anything on HT site. Thanks!

    • I’m really not happy about your other comment! You know I have to write something fresh everyday to suit everybody’s time frame. You’re kind investor, but most people here are not. Their time frame is much shorter.

  • Rip Van Trader

    One very ST bearish sign today was prices breaking out of daily high/low channels.  I put a very small amount of money on the likelihood that most of today’s move will be retraced in a few days.

    It seems like everything (EUR, USD, TNX, SPX) is at or near important resistance.

    Funny how LT RSI (60 min and 2 hr) is more bullish than ST RSI (15 and 30 min).  My take is that the selloff will be substantial, but not make a new low, perhaps 1230s.

    • Thanks for still daring to say something bearish. I dare not say anything against trend anymore because always there’d be people simply jumping out telling me, I should focus on bigger picture even I do have bigger picture. So you kind of have the freedom of speech. Enjoy it while you have. 

      Kidding of course. 🙂 Good luck in your trade.

  • Love your work and sense of humor Cobra.  Thank you!

  • Anonymous

    Just read this report, must be written in humor mood.

    Thanks Cobra.

  • Anonymous

    THX!!!

  • HighRev

    I asked (thinking out loud) in the poll thread on Wednesday:

    “Was today another day like Sept. 28 2010 or Oct. 4 2010 where a floor was put in under the market?

    The patterns are different, but the fractals are basically the same (as is the backtest of the neckline).”
    http://bbs.cobrasmarketview.com/viewtopic.php?f=9&t=344#p37141

    I now ask a similar question: Was yesterday like Oct. 5, 2010? (From a candlestick, chart pattern, market structure point of view.)

    In looking at the overbought conditions, the Full Stochastics are clearly *embedded* in overbought. How long can that go on? Check out the historicals from Mar., Oct. and Dec. of last year for your answer.

    And what about the breadth indicators like the McClellan Oscillator? In the chart I posted a couple of days ago, you can clearly perceive an approximate 2 week period in the second half of Mar. 2009 where it oscillated between +50 and +100 and it wasn’t until mid-May until it fell below zero.
    http://www.cobrasmarketview.com/2011/10252011-trading-signals/#comment-344181446

    I never short overbought (I may close longs into strength, but that’s a very different story). I wait for things to *come out of* overbought (and then prefer bearish divergences as well).

    • Thanks. By the way, it’s a lovely bull face. I mean you avatar. 🙂

      • HighRev

        It’s actually a cow.

        A cool cow though.  🙂

  • thanks cobra laoda ! 

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  • Anonymous

    Cobra, please comment on your long term chart 4.9.1 that now has a buy signal. (Is the bear dead?)

    • Yes, there’re some chances.

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