11/25/2011 Market Outlook (Sell the Bounce)


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SHORT-TERM: COULD SEE SHARP REBOUND BUT MOST LIKELY IT’S A SELL OPPORTUNITY

If you have followed my report for awhile, you’d pretty much know what I’d say today: Because of oversold, so chances are we’ll see a short-term rebound but because of the law of inertia, most likely the selling isn’t over yet, so the rebound, if any, is a sell.

Begin with why there’d be a rebound?

We all know that oversold can be more oversold, therefore oversold is not a reason to expect a rebound. However, all my oversold signals are no ordinary signals, especially the NYMO oversold which basically cannot be argued, besides, a big rebound usually comes after 3 Major Distribution Days, such a rule worked even in the darkest period in year 2008, which was one of a very few signals that still worked in that time. So I believe odds are high that we’d see a rebound of some kind the next week.

Listed below are all my no ordinary signals, take a look and pay attention to what happened after green or blue dashed lines. Charts should be self-explanatory enough, so no more blah blah here.

NYMO
MADandMDD
NYADV
TICK

Then why wasn’t the selling over?

Because of the law of inertia. A forward accelerating car cannot be reversed all of sudden without slowing down first.

  • Such a forward acceleration in terms of signals is represented by NYMO extremely oversold readings. The chart below should be clear, only when a positive divergence formed between NYMO and SPX, there’d be a chance SPX could be bottom. This implies, that SPX must rebound first then fall again to a new low while at the same time there’s no new low on NYMO which is the sign that the down momentum is finally weakened, and only after that, there’re chances SPX would reverse up. Pay attention here, the weakening in down momentum only means that the car is not ACCELERATING forward, but still the char is MOVING forward, so the NYMO positive divergence is only the very first step toward a possible SPX bottom, by no means it’s a bottom signal.

NYMOPDNeeded

  • Such a forward acceleration in terms of chart pattern is SPX down 5 or more consecutive days; Such a forward acceleration in terms of chart pattern is SPX closed below BB bottom for 3 or more days in a row; Such a forward acceleration in terms of chart pattern is SPY daily bar both opened and closed below its BB bottom. For what happened after all those 3 extreme patterns, take a look at the links below which all basically argue for a short-term rebound (may or may not), but after that, the price would come down at least to test the Friday’s lows.

8.2.4a SPX Consecutive 5 or More Down Days 2000 – 2001 to 8.2.4e SPX Consecutive 5 or More Down Days 2010 – 2011

8.2.7a SPX Closed Below BB Bottom for 3 or More Days 2001 – 2002 to 8.2.7e SPX Closed Below BB Bottom for 3 or More Days 2011

8.3.6a SPY Daily Bar Completely Below BB Bottom – 1993 to 8.3.6j SPY Daily Bar Completely Below BB Bottom – 2011

SPXandBB

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

See 11/18 Market Outlook for more details.

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

 

 

Chinese Transcript

SHORT-TERM: COULD SEE SHARP REBOUND BUT MOST LIKELY IT’S A SELL OPPORTUNITY

读了我的报告一段时间的同学,应该熟悉我的思路了,所以能猜出来我要说什么吧?由于超卖,所以会有短期反弹,但是由于惯性,因此多半还没有跌完,所以这个反弹,是卖的机会。

先说说为什么会有反弹?

大家都知道超卖可以更加超卖,因此超卖不是反弹的理由。不过,我看的超卖信号都不是一般的超卖信号,特别是NYMO超卖,基本上是不能aruge的,此外,3 Major Distribution Days以后会有大反弹既使在2008年最黑暗的时候都是工作的,是当时为数不多的几个还能工作的信号之一。所以下周有反弹的机率应该是很高的。下面就看一下我所谓的不是一般的超卖信号吧。注意绿色虚线以后都发生了什么。图应该很清楚,所以我就不解释了。

NYMO
MADandMDD
NYADV
TICK

为什么说还没有跌完?

因为惯性。向前加速行驶的汽车是不会在不预先减速的情况下就突然向后倒退的。

  • 这个向前加速的过程表现在信号上就是NYMO极度超卖。下面的图应该很清楚,只有当NYMO和SPX形成positive divergence以后,SPX才有到底的可能。这就意味着,SPX要先反弹,然后再跌下来形成new low,而这个下跌却未能使NYMO形成new low,预示着下降动能的衰竭,只有这样,SPX才有反转的可能。注意,下降动能的衰竭,只是表示汽车不再加速向前了,并不意味着汽车已经开始倒退了,所以NYMO positive divergence只是SPX bottom的第一步,是必须的第一步。

NYMOPDNeeded

  • 这个向前加速的过程表现在chart pattern上就是,连跌5天以上,就是close below BB bottom 3天以上,就是both opened and closed below BB bottom。关于出现这3种极端的情况以后都发生了什么,可以参看以下链接。基本上都是说短期可能有反弹,但是至少至少反弹后还会掉下来测试周五的lows。

8.2.4a SPX Consecutive 5 or More Down Days 2000 – 2001 to 8.2.4e SPX Consecutive 5 or More Down Days 2010 – 2011

8.2.7a SPX Closed Below BB Bottom for 3 or More Days 2001 – 2002 to 8.2.7e SPX Closed Below BB Bottom for 3 or More Days 2011

8.3.6a SPY Daily Bar Completely Below BB Bottom – 1993 to 8.3.6j SPY Daily Bar Completely Below BB Bottom – 2011

SPXandBB

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

See 11/18 Market Outlook for more details.

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

    Excellent as usual. Thanks Cobra.

    You say Jump. I say How high?

    • Anonymous

      Jump!
      How high?

      familiar words from my ex-manager.

  • d w

    10/10 as usual Cobra! 

  • Anonymous

    thank you very much indeed cobra. most likely a typo up there –> sell opportunity.

    • Thanks, fixed. 🙂

  • Anonymous

    nice charts, and the guy from http://dragonpulsetrading.blogspot.com/ agrees. 

    I was waiting to see if there was a market reversal, there is so much smart money out of the market at the moment. If that happens I tend to stay away. 

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  • Anonymous

    Extra-ordinary report as usual. Taking into consideration of the fact that we are entering the most bullish season of the year, I just wanted to point out the possibility that it could be new year until a visible positive divergence is formed in NYMO to find a real bottom, especially we keep falling into early next week. BTW, I do not keep record but to my knowledge, this is a rare occurrence that we have become this much oversold without VIX showing a real spike, which worries me about the possible rebound…

    Thx

  • Anonymous

    Brilliant and thought-provoking as usual Cobra.  Many thanks.   You Mars-people are pretty smart.  You might as well take over our planet before we ruin it completely.

  • We will rally because I sold SSO

  • Anonymous

    Italy receiving 600billion euro bailout from IMF reported today.  Expect violent strong reaction in equities futures tonight.  http://www.businessinsider.com/imf-600-billion-euro-bailout-italy-2011-11

    • 600B enough?

      • Anonymous

        It gives Italy 12-18 months to restructure budget.  Basically, euro doesn’t collapse tomorrow like people fearing.

        • Let’s see how futures goes tonight. If you’re big fund, at this time, would you commit your real capital? I suspect that no one is willing to buy this market anymore except we retailers who still think government is capable of anything. Check out sentiment poll, almost everyone thinks a sharp rebound is coming…

          • Anonymous

            I agree but as u know in bear market, squeeze can be very large.  Larger than short term rally in bull markets.

            • Yes, and let’s back to our topic about taking profit. My experiences are in bull market, I should let the winner run, but in bear market, taking profit should be quick, because the rebound is very huge.

          • Anonymous

            Another interpretation of the poll is 62% bearish intermediate term since 41% wanting to short/sell a bounce, 38% outright bullish.  There is always spin on poll if not black and white.  So question is what happens after first bounce because many say sell.  Interestingly just 2 weeks ago people calling for big year end rally and we fell big.  Now very few think we get Santa rally.  At Oct low, funds were net short and not interested in buying. Funds had highest leveraged short positions in early October highest short interest since early 2008.  I do not believe they went long in Oct rally instead we saw a very large short squeeze which proves even if asteroid about to hit Earth but there is record short interest, market would rally.  This time fund open interest is nowhere near short so more difficult for bull but I still believe there will be Santa rally.  Anecdotal sentiment from reading twitter and blogs like zerohedge today, there is not optimism on euro news.  In fact bear opinion aggressive to discount news.  Feels most are bear.  This is all anecdotal.  Trade careful.

      • 600B may not be enough for America, but it’s plenty for Italy’s economy.

  • Thank you, Cobra!

  • bwm

    Here is my summary recap on news out of Europe

    Trifecta of good news to ramp up futures at open http://www.bostonwealth.net/2011/11/27/trifecta-of-good-news-to-ramp-up-futures-at-open/

  • uempel

    Sunday evening November 27th, 6 pm: ES opens up at 1170 …

    • I bought SSO waiting for a rally then sold it – they waited for me to sell before announcing a new bailout 

  • Anonymous

    thx,ding

  • please vote on the poll: Do you think the S&P will break above 1300 by the end of 2011?

    http://bbs.cobrasmarketview.com/viewtopic.php?f=9&t=378

  • uempel

    Very early Monday morning futures are way up:

    • Not good enough, gap up then stuck in a range. I’m disappointed.

      The down leg was simply too large, this kind of rebound is destined to fail.

      • Anonymous

        Cobra: markets could close above 1200 today. That would be strong and decisive, correct?

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