11/18/2011 Market Outlook (SPX Target 1010ish)

SHORT-TERM: COULD SEE LOWER CLOSE AHEAD

First of all, don’t forget our poll HERE, at least take a look at the result (which is my real purpose: To let you know the current sentiments). It’s very interesting because since we had the poll, never was once bulls were the majority except this time (so far), although not much margin.

Three cents:

1. The seasonality around the Thanksgiving week is very bullish, especially the Wednesday, Dow up 8 out of 9 since 2002. So the general trading strategy is to buy Monday or Tuesday weakness then sell into Friday strength. I’ve noticed that such a routine hasn’t preformed well since the year 2006, so might not a bad idea to sell at least half into Wednesday’s strength. Be careful not to hold until the next Monday (11/28) because Dow down 7 out of 9 since 2002 on the day. For more details about the Thanksgiving seasonality, please refer HERE (since the Seasonality topic can be repeated every year, so it’s not part of my daily Mark Outlook anymore, instead I’d gradually add those topics under the “Seasonality” menu), and also you can find similar tips at the Trader’s Calendar on the top right corner of the site’s front page.
2. For the short-term, I expect a lower close ahead, at least lower low is more likely.
3. For the intermediate-term, although officially the downtrend has yet confirmed, I believe the game is over for bulls. There’re 47% chances a green week the next week and that’s it, after that we’d see multiple weeks selling (80% chances). I’ll discuss this in the intermediate-term session later.

Why do I expect a lower close or at least lower low ahead?

• I’ve mentioned the chart below in the 11/17 Market Outlook that an official intermediate-term downtrend starts only when $120 is broken. From the Pennant pattern formed on the Friday, I believe chances are high that $120 wouldn’t hold.

• Never should a strong uptrend have 3 consecutive down days. Unfortunately, Friday is the SPX’s 3rd consecutive down day. From the chart below, clearly chances are high there’d be a lower close ahead.

• Red OE week means 17 out of 21 (81%) chances at least a lower low the next week.

• In the intermediate-term session below I’d mention that 12 out of 15 (80%) chances we’d see a lower low the next week.
• The last but not the least, don’t forget what I mentioned in  the 11/17 Market Outlook that chances of a lower low ahead after a Major Distribution Day and a Non-Stop model sell signal are pretty high.

INTERMEDIATE-TERM: EXPECT MULTIPLE WEEKS SELLING AHEAD, TARGETING JUNE 2010 LOWS AROUND SPX 1010ISH

The chart below explained why I believe we’d see multiple weeks of selling ahead (I don’t mean red every week of course):

• NYSI weekly STO sell signal is very reliable when the long-term signal is also on the sell side. We’ve had 2 consecutive exceptions (also the only 2 exceptions), I don’t believe we’d see the 3rd exception, because the 3rd time is the charm.
• Statistically:

1. 7 out of 15 (47%) chances we’d see a green week the next week.
2. Only 3 out of 15 (20%) chances the SPX would rally for 2 more weeks from here.
3. Also only 3 out of 15 (20%) chances the SPX would rally the next week without forming a lower low first, i.e. gap up Monday and never turns back.

The chart below explained why the selling target would be around June 2010 lows:

1. Fib confluences area.
2. Measured Move target.
3. TED Spread had dropped below its 2010 lows.
4. Usually the monthly BB bottom is the target which now happens to be around the June 2010 lows.

Chinese Transcript

SHORT-TERM: COULD SEE LOWER CLOSE AHEAD

首先，别忘了投票，至少看一下投票的结果吧，很有意思，因为自从我们开始有投票以来，还从来没有过牛牛占据多数的情况，虽然领先不多，呵呵。

三点说明：

1. Thanksgiving week seasonality是很牛的，特别是周三，Dow up 8 out of 9 since 2002。所以一般trading是buy Monday or Tuesday weakness then sell into Friday strength。不过自2006年以来似乎这样的trading不行了，因此可能sell at least half into Wednesday’s strength比较稳妥。注意，不能拿到下周一(11/28)，因为Dow down 7 out of 9 since 2002。关于Thanksgiving的seasonality，请参看这里（因为seasonality这个东东，至少每年都要重复一次，所以我不再把它编排在daily Market Outlook里了，以后类似的讨论将放在Seasonality menu下面），此外主页右上角Trader’s Calendar里也有提示。
2. 短期应该还有跌，I expect a lower close ahead，至少至少lower low吧。
3. 中期，虽然目前officially下降趋势还没有确认，不过基本上牛牛已经大势已去了。不排除下周反弹收绿的可能（47%的机会），但是that’s it，后面应该是multiple weeks selling（80%的机会）。关于这个判断，将在intermediate-term session里讨论。

下面解释一下为什么说短期还有的跌：

• 下面的图我在11/17 Market Outlook里提到过，只有跌破了$120才可能算officially intermediate-term downtrend。从周五pattern看，多半是个Pennant，因此多半$120会跌破。

• Strong uptrend是不应该出现连跌3天的情况的，很遗憾，到这个周五为止，SPX已经连跌3天了，从下面的图看，很大几率会有lower close ahead。

• Red OE week意味着17 out of 21 (81%)的机会下周至少会有个lower low。

• 后面intermediate-term session里还会提到，12 out of 15 (80%)的机会下周会有lower low。 
• 最后别忘了在11/17 Market Outlook里提到的，lower low after a Major Distribution Day以及Non-Stop Model的sell信号，都意味着下周至少会有个lower low。

INTERMEDIATE-TERM: EXPECT MULTIPLE WEEKS SELLING AHEAD, TARGETING JUNE 2010 LOWS AROUND SPX 1010ISH

下面的图是我认为会持续跌几周（不是说每周都红哈）的理由：

• NYSI weekly STO sell signal在long-term signal也是sell的情况下是非常准的卖信号。我们已经有连续两次例外，且是仅有的两次例外，我不认为第三次还是例外，要知道，the 3rd time is the charm。
• 从数据上看：

1. 下周有7 out of 15 (47%)的机会收绿。
2. 只有3 out of 15 (20%)的机会SPX持续反弹两周以上。
3. 也只有3 out of 15 (20%)的机会下周没有lower low就直接上涨。

下面的图说明了为什么下跌目标可能是2010年6月的lows：

1. Fib confluences area.
2. Measured Move target.
3. TED Spread已经跌破2010年的lows了。
4. 通常monthly BB bottom是target。现在的位置正好是在2010年6月的low附近。