10/28/2011 Market Outlook (Still Overbought)


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SHORT-TERM: COULD SEE PULLBACK SOON, HOPEFULLY SEE HIGHER HIGH FIRST THEN PULLBACK

No new stuff, reiterate what mentioned in 10/27 Market Outlook, higher high then pullback. See evil plan below:

  • Pay attention to the similarity among candlesticks, events and times between now and that of 07/21. I know similarity mostly does not work, if not always. I just think it’s worth mentioning here.
  • The most bull friendly event the next week is 11/02 FOMC announcement, which almost automatically implies that the market would at least rise till the day, plus the higher high rule after a Major Accumulation Day mentioned in 10/27 Market Outlook, so HOPEFULLY we could see a few more up, which, if indeed, I certainly don’t expect to be big, most likely small range days.

EvilPlan

Why do I still expect a pullback? Because all the “not ordinary” signals I mentioned in 10/27 Market Outlook are still valid, some become even more extreme.

  • The statistics below are from Bespoke, clearly the very first challenge on MA(200) won’t be that easy. Also I added two more charts below to explain why MA(200) is very important for bear market rebounds.

SPXCrossAboveMA200
SPXandMA200inBearMarket0
SPXandMA200inBearMarket1

  • T2112 > 47, statistically, the next and next next week won’t be pleasant. The sample size is too small though, so I won’t read too much into it.

T2112

  • VIX closed 20% below MA(10), there’re only 2 cases in the past 2,000 trading days.

VIX

  • T2122 becomes even more extreme.

T2122

  • NYMO still is extreme, and as I said before, such a signal cannot be argued.

NYMO

  • Rydex Traders (retailers) are very bullish, have accumulated large amount of bull funds while discarded most bear funds. This is just to follow the Rydex Bull Fund Asset Flow chart I mentioned before.

RydexFundFlow

INTERMEDIATE-TERM: WE COULD SEE MULTIPLE WEEKS RALLY, WILL NEED REASSESS SPX 1,000 DOWNSIDE TARGET

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. I’m not sure about this call anymore, will need more evidences to reassess.

SUMMARY OF SIGNALS:
TREND MOMENTUM COMMENT
Long-term 2 of 3 *BUY
Intermediate 5 of 5 BUY 4 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: COULD SEE PULLBACK SOON, HOPEFULLY SEE HIGHER HIGH FIRST THEN PULLBACK

没有新内容,维持10/27 Market Outlook的判断,higher high,然后掉下来。

下面是evil plan。

  • 注意棒棒,事件以及时间上与07/21的相似性。当然,相似性不总是工作,我只是觉得值得一提。
  • 目前对牛牛最有利的是FOMC在11月2号,一般大盘都会涨到这一天,加上10/27 Market Outlook里提到Major Accumulation Day后基本都会有higher high,因此希望还能再涨几天吧。当然,我不认为会大涨特涨,多半是几个小棒棒而已。

EvilPlan

为什么会掉下来?10/27 Market Outlook提到的,绝非一般的信号,继续有效,有的还更加extreme了。

  • 下面的统计来自Bespoke,可以看到第一次挑战MA(200)一般不会那么顺利的。另外两幅图解释了MA(200)与熊市反弹的关系,应该有助于理解为什么那么多人盯着MA(200)。

SPXCrossAboveMA200
SPXandMA200inBearMarket0
SPXandMA200inBearMarket1

  • T2112大于47,从下面的统计看,下周,下下周都不好玩,当然sample太小,可能不足为凭。

T2112

  • VIX closed 20% below MA(10),过去2,000个交易日里,只有两个例子。

VIX

  • T2122更加extreme了。

T2122

  • NYMO还是在extreme的范围内,我说过,这个信号是不能argue的。

NYMO

  • Rydex Traders (散户)很牛,买了很多牛fund,也少有人对熊fund有兴趣了。这个是follow up以前提到的Rydex Bull Fund Asset Flow,因为有同学还惦记着。

RydexFundFlow

INTERMEDIATE-TERM: WE COULD SEE MULTIPLE WEEKS RALLY, WILL NEED REASSESS SPX 1,000 DOWNSIDE TARGET

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. I’m not sure about this call anymore, will need more evidences to reassess.

SUMMARY OF SIGNALS:
TREND MOMENTUM COMMENT
Long-term 2 of 3 *BUY
Intermediate 5 of 5 BUY 4 of 5 NEUTRAL Cobra Impulse in BUY mode; Non-Stop in BUY mode.
Short-term UP 3 of 6 OVERBOUGHT
* = New update.
  • Anonymous

    Simply the best and most objective analysis, day after day!

  • Anonymous

    Great!
    having been waiting for it this weekend.

    Thanks Cobra!

    • Read again on the right bottom side of the bear fund flow chart. 🙂 I could see 2 words there, but I’m not wearing glasses, so maybe you could help me by reading it out. 🙂

      • Anonymous

        Thanks. I got it, with big eyes.

  • Anonymous

    thx, ding

  • Anonymous

    Thanks Cobra.

  • Sunhwa Lee

    Always thank you for your insight. Do you think how large and how long of a pullback do you expect we ‘ll have next week?  In advance, thank you so much!

    • Don’t know yet. Normally a day or 2 sharp pullback when NYMO is too high, so, see 2% pullback from high to low at least.

  • uempel

    This weekly chart argues for a halt of the bullish charge of SPX and Cu. Presumably the halt is only termporary, but this weekly close chart shows tough resistance at the SPX 1300 area and Cu 3.70ish

    PS: Fans/Fib Fans: I guess they were first applied 1920/40 by Gann, but I don’t know for sure. If the inventor should read Cobra’s blog (either here on Earth or up in Heaven): hey, thank you!

  • Jason_70

    Cobra/Guys,

    I am back.  I am not sure if anyone wants/expects me to be back.  🙂
    I have found out that what i predicted through my analysis has more than proven right.  I stated we will bottom around 1050-1060 on the ES and we touched 1068.  I stated that after this point we will rally hard all the way on TF to 750 and so it did. 
    Unfortunately, as with most traders, my execution has been pathetic and even though i made good money on the way down as well as up, i lost almost all of it on my stubborness that we will test 1050 on ES which was a bad call on my part.  At the end my round trip lost me all my profits and some princi, but what the heck the beauty of stock market is that it will be around forever and we will get more opportunities again and again. 🙂

    So, here’s my magic wand work once again.

    – Next 2 weeks will be range bound
    – By either OPEX of november or towards the end of Nov, TF will wipe out all the gains it made through this rally
    – We will however end this year with TF regaining back again all of what it lost in Nov, the so called santa rally.
    – January will bring bears out of oblivion.  TF will lose 50% by end of january.

    Now, all of this is not astro/my own personal opinion/beliefs/rumors.  There has been a lot of analysis and thought behind these predictions, pretty much similar to how i concluded the first part of my targets.  Yes, obviously some delta must be accounted for.  But these should roughly be reached.  Hopefully, i will be able to make the maximum out of these moves as i definitely missed out on making money on my own analysis/predictions. 

    Knowing what will happen is one thing and living through it is another. 

    Thanks cobra for wonderful analysis day-in and day-out.  I have been extremely busy lately and hence been unable to watch your intraday forum but do take a peek at your daily commentary, which has NO match in the investing circles as you already know. 🙂

    GLTA

    • uempel

      Come on Jason, you’re a smart guy and you know how diffcult is is to get one single call right. Whoever tries to predict a sequence of ups and downs and adds dates to the turns is in mathematical no man’s land. The probabiltity of the calls sinks drastically. I like the first part of your prediction, but what follows is too much crystal ball for me… 

      • Jason_70

        🙂
        Completely agree uempel.  I do not have a crystal ball and i am not saying that this is how it will shape up.  I trade based on variety of systems and combine that with probability. 
        If you see all of what i stated are extremely high probability plays.

        – Nov Opex market gives back all its gains -> With volatility at it’s lowest seen in many months, it is obvious that protection aka puts are way cheaper than anyone can even imagine.  Big boys buy cheap puts, take market down which increases their profits multi fold
        – Santa rally then is pretty much given.  If we go down so hard, a relief rally is obvious
        – January we get to reality.  Ted/Libor will help answer this question and why markets will take a deep dive.  Being presidential year, not a whole lot of decisions would be taken and things would be left @ their own.

        Again, i am not stating that this is how things will definitely pan out.  But assigning probability to these you will see that these actually make sense.

        Dont buy me.  Check out cobra’s 1000 prediction which is long overdue.  It will eventually come true.  There are far too many reasons to believe the above.  But again, i must admit, i lost my shirt thinking logically the two years of 2009-10.  Hence, i won’t add 2+2 and say it is 4.  Instead will try to stick to what i see. 🙂  Because in today’s trading cycles, 2+2 is definitely not 4, at least since 2009.  🙂

        • Thanks Jason. I give up that 1,000 call already although deep in the heart I don’t believe this rally, but, well, no argue.

        • uempel

          Jason, as to cheap puts: schaeffersresearch says that hedging in 4th quarter is different than January – September. They say that fund managers tend to not protect longs (!) and trust seasonality/santa rally in 4th quarter. Their conclusion: 4th quarter cheap puts ain’t a sign of market weakness. As to schaeffersresearch: in general their analysis is quite reliable.

    • do you mind tell me what TF is . thank you 

    • hello gerald is there any place you can learn how to read your posting ? i go to your web and is hard to understand . thanks

  • 99er
  • Anonymous

    Thanks Cobra, your chart of VIX looks like a tempting buy!  As of 10/25/2011 commercials were net short $USD at a ratio of 5:1.  Speculators were long $USD at a ratio of 4:1.  http://www.cftc.gov/dea/futures/deanybtsf.htm

    Perhaps those positions will reverse quite soon as $USD has a good support level at $74, perhaps it bounces at $75 (I also like the upside down “hammer” candle on the daily)

  • cobra have you consider the melt up rally from here after the pullback ?
    since the pullback did not happened friday. do you feel it will happened tuesday? 

    • we’ll see a pullback of some kind the next week. Then what the next is, we’ll have to see.

  • cobra with the VIX closing below the MA .. 2 instances in the past one shows it went down. the other shows it went up correct? 
     meaning we are not sure were will go 

    • uempel

      Graciela, a good TA analyst is never sure where the market will go, never ever. A good analyst seeks a small edge in his prediction, let’s say 55:45 instead of 50:50. I Suggest you read “Technical Analysis of the Financial Markets” by John J. Murphy and “Technical Analysis Explained” by Martin J. Pring. There other good books, but these two are mandatory. They show you what TA is and what it ain’t. You cannot understand TA without reading them.

    • both had pullback for at least 2 days.

  • by the way. thanks for these reports. Again and again , thanks

  • Rip Van Trader

    Watching QQQ very closely.  It had a one-legged bear market in August and everything since looks like an enormous B wave.  There are negative divergences from 10/20 to 10/26, indicating that after this rally, the party could be over.

    ES has a two hour cross tonight, so might want to have some popcorn tomorrow.

    • graciela c

      sorry I am such a beginner can you tell about the two hour cross and how you find it ? and what it means ? thank you

  • Anonymous

    Thanks for the report!

  • Plagarism, smarts the old fashioned way, we stole it!

    The first chart contributed by Doctor J, a real elliot wave technician
    who also screen caps female forms onto charts, quite amazing.    The
    dogs here are by me though.

    And free paid reports from BPT, 50 pages of great chart, enjoy.

    http://oahutrading.blogspot.com/2011/10/free-newsletter-and-foreign-market.html

  • graciela c

    could anyone tell me what a two hour cross means on the ES ? 

    • Rip Van Trader

      Sure!  I am watching ES (S&P  500 futures for 12/11) on TD Ameritrade’s Think Or Swim (TOS).  There are various platforms available for seeing off-hours activity.  I am seeing that the 10 and 20 period moving averages made a bearish cross in the 2 hour time frame.  This should mean at least a day of downside action.

      I have no idea where it’s going.  Will just let shorts ride until I see a bullish divergence.

      • Anonymous

        Likewise with eur/usd, dead cross on 2hr timeframe 10 period crossing down of 20 period MA 🙂
        I think cobra is right about pull back this time. Hopefully it will last a couple of days to heal all bear wounds.
        Big picture, it would be nice to see price action gets back below 200 dma where it belongs Lol

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