12/09/2011 Market Outlook (Still expect Dec 8 lows to be revisited)


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SHORT-TERM: STILL EXPECT 12/08 LOWS TO BE REVISITED

First of all, starting from the next week:

  1. We’ll have a drill (test post) to make sure all the paid members are able to read member only posts. Our customer services would make sure every paid members have registered and login-ed and indeed are able to read the post. We’ll test every member’s email address as well.
  2. Then we’ll start to lock the daily report one by one gradually. This is to make sure a smooth transition to a paid member only site from a free site. Our customer services again would make sure every unexpected problems being solved before taking the next step further.

Although I’m sure, given the quality of the members management software it demonstrated in the last couple of weeks (when you did your registration) 99% paid members would have no problem in reading the member only posts but I just don’t want that 1% paid members feel frustrated for not being able to read if I suddenly lock all the reports, so the above steps are absolutely necessary. I thank you in advance for your patience. After all, we’ll spend many years together, so well begun is half done.

Meanwhile, those who’re still wondering to be or not to be (the member), this is your last chances to consider this $10 per month deal, which I can guarantee you won’t be available in the future. Our regular monthly membership rate would be at least $29.99 per month. Yes, we’ll have a promotion now or then but the best promotion deal would never go below $19.99 and no way it’s a monthly rate, you’d have to pay, say, $249.99 to get this equivalent monthly rate , so take a little time to think about whether you'd like to take this opportunity or not. Consider we’re the stock you want to buy,  see us as still in our early IPO stage, and your fundamental analysis would be my demonstration of the perseverance and talent for the past 4 years, then it should be not very difficult to foresee our long-term growth potential. So again, don’t miss the deal. I honestly think this is one of a few best deals you could ever find.

 

So far 3 things I’m relatively sure:

  1. The 12/08 lows will be revisited in the next couple of days.
  2. The 11/25 lows will be revisited eventually. See 11/25 Market Outlook for details as all the evidences are still valid.
  3. I believe we’ll have the Santa Rally. 31 out of 41 (76%) winning rate and on average 1.6% gains since 1969 (data up to 2009) are the odds I won’t challenge without thinking twice.

What I’m not sure is how and when the market would fulfill my calls above. The chart below should help you to understand what I’m sure and what I’m not. So accordingly, I’ll temporarily keep my call for the Intermediate-term target at 1010ish there. The reality is, personally, I’m not sure about whether I should be bull or bear on the intermediate-term because the two of my intermediate-term model, Non-Stop and Cobra Impulse System are in buy mode now, which officially I should never argue with them (but apparently I have a little doubt this time).

SPYEvilPlan

The huge rally on 12/09 was expected, but from questions asked during the trading hours in the Intraday Forum, I bet many people are now doubtful about whether the 12/08 lows would be revisited. What I can say are, odds are that 12/08 lows will be revisited. Since the 12/09 rally was expected, plus I have additional evidences, which I’ll present shortly below, therefore I cannot deny the possibility of revisiting the 12/08 lows simply because we had a huge rally on 12/09. That said, all I’m talking about here are odds, so even it worked 100% in the past, still it’s possible it doesn’t work this time. So trading wise, first of all you should be clear about your time frame. If you’re not trading short-term, then basically you can forget about the call for revisiting the 12/08 lows. If you do trade on short-term, then you should always bet on the side that has higher odds, instead of trying to find an excuse to argue that this time is different. By doing this way, although you might be unlucky now and then (which is inevitable), but in the long run, the edges are clear. I don’t mean you should short this rally of course. I just explain how you should apply those analysis and statistics in your trade. OK, enough blah blah, let’s see if I can talk you into believing that the 12/08 lows will be revisited:

MADAfterMDD

  • On Friday, SPY was up 6 consecutive hourly bars. The chart below shows all the past similar cases in year 2011. The chart is huge, so don’t forget to use the scrollbar. Surprisingly, 11 out of 15 (73%) such a cases were around at least a short-term top.

Up6HourlyBars

  • I used the chart below in the12/08 Market Outlook to prove that we’d see huge rebound then fall back to test the low. Some people could not understand the chart, so instead asked me for why, so I put some arrows in the chart below, hopefully now you could see why. So far the rally of 12/09 looks like repeating exactly what happened in the past.

Down7HourlyBars

  • Another unique thing I noticed on Friday is ISEE Indices & ETFs Only Index >= 100 which usually means a close below the Friday’s close within 2 trading days.

ISEE

In the Friday’s Trading Signals, I mentioned the seasonality would be very bullish the next week. Some people disagreed, because from the day to day seasonality chart, the next week should be the darkest week in December, which is true, so I won’t argue here.

The chars below are from Stock Trader’s Almanac and Bespoke. You can see from different angle, the seasonality shows huge differences for the next week.

SPXAvgDecIntraday
blog_20111209_Dec_TWW

I’m more inclined to believe that Triple Witching Expiration week is mostly bullish, because such statistics has some logic or context behind it while a simple day to day statistics are merely mathematics. The chart below is from Schaeffer, clearly the Triple Witching Expiration Weeks do have some bullish tendency since the year 2009.

ExpirationWeekPerformance

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

 

 

Chinese Translation

SHORT-TERM: STILL EXPECT 12/08 LOWS TO BE REVISITED

先通知一下,从下周起:

  1. 我会先发一个会员only的测试贴,所有已经付费的会员可以借此检查一下是否自己有足够的权限来看这个贴。我的目的是要确认每个已经付费的会员,都已经成功的注册,并且可以login读会员only的帖子。同时我也会测试各位会员是否能收到email。
  2. 完成上述测试后,我会逐步的锁定每天的报告,我会在解决了每一步转换期间暴露出来的所有问题后才进行更多的锁定,这个动作是保证从free site到member only site的无缝隙转换。

从目前的会员管理软件表现出来的质量看,绝大多数会员付费和注册的过程都很顺利,因此我确定,我如果突然锁定所有的发帖的话,99%的会员是不会有不能读会员only报告的问题的。我只是不希望那剩下的1%的会员会因为暂时不能读帖而感到很愤怒,毕竟是已经付了钱了。所以上述的两个步骤,我认为是非常必要的。希望大家能够理解和支持。在此先谢谢大家的耐心。毕竟,好的开端是成功的一半,我不希望一开始就让大家很失望。

同时,还没有决定是否加入的,这应该是最后的机会了。$10一个月的deal,我可以保证以后是绝对不会再有了。以后的标准收费将不会少于$29.99每月。我们当然时不时的会有优惠期,但这个优惠价,最低不会低于$19.99每月,并且铁定不是按月付费,您得一次性付一年$249.99才能有相当于这个每月的$19的会费。所以稍微花点时间考虑一下吧,过了这村,就没有那店了。我看到有个同学的比喻很好,就是把我这个看成一支股票,现在我还是在IPO阶段,以我过去四年表现出来的毅力和天才,我这只股票应该有很大的长期增长潜力。我觉得这个比喻是再恰当不过了。老实说,我自己也确确实实认为这个deal是非常少见的好deal。谢谢!

 

目前我有三个地方比较确定:

  1. 12月8号的low几天内就应该会去测试。
  2. 11月25号的low最终还是要去的。理由,详见11/25 Market Outlook
  3. Santa Rally多半是会有的。31 out of 41 (76%) winning rate and on average 1.6% gains since 1969 (data up to 2009),这样的机率是不该轻易怀疑的。

目前不确定的是大盘将以什么样的方式以及在什么时间内实现以上的预测。下面的evil plan应该有助于理解我确定的和不确定的。也因此,我暂时维持Intermediate-term target 1010ish的预测,当然实际情况是我目前不确定intermediate-term是该牛还是该熊,因为从我的两个intermediate-term model,Non-Stop and Cobra Impulse System来看,intermediate-term应该是clear uptrend,按理,我是不该argue这一点的。

SPYEvilPlan

12月9号的大涨,虽然是在预料之中的,但从Intraday Forum的提问看,很多人怀疑12月8号的low是否会再去了。我只能说几率上讲,12月8号的low还是会去的,既然12月9号的大涨是预料之中的,外加我又有新的证据,因此目前暂时还没有足够的理由来否决去测试12月8号的lows的可能性。当然,我讲的是几率,既使是过去100%几率,也有可能这次会不一样。因此,从交易的角度讲,首先要明确你的time frame,如果你不做短期的,基本上就可以忽略这个去测试12月8号lows的预测。如果你是做短期的,你应该每次都下注在机率比较高的一端,而不是总是去想也许可能大概这次会不一样,这么做,可能有时不走运,但长期坚持下来的话,应该还是有edge的。当然,我不是说你要short这个反弹,我只是解释应该怎样把统计分析运用到你的交易中去。好了,下面看看为什么我坚持说12月8号的low还会去的:

MADAfterMDD

  • 下面的图是所有2011年,SPY up 6 hourly bar的情况。图很大,注意使用scrollbar看。非常surprise,11 out of 15 (73%) cases这样的情况都是至少在一个短期顶的附近。

Up6HourlyBars

  • 下面的图12/08 Market Outlook里show过,用意是证明会先涨后跌。有同学可能是没看懂图,所以就问我为什么会有先涨后跌的结论。因此我做了进一步的标注,这次规律应该很清楚了吧?12月9号的走法只不过是重复过去而已(至少从目前看)。

Down7HourlyBars

  • 周五还有个比较特别的地方就是ISEE Indices & ETFs Only Index >= 100,这个一般意味着2天内会有回调,跌破周五的close。

ISEE

在周五的Trading Signals里,我提到了下周的seasonality很bullish。有同学提出反对意见,说从day to day seasonality来看,下周应该是12月最黑暗的日子。这个说法不错。

下面的图分别来自Stock Trader’s Almanac and Bespoke,从不同的角度统计,下周的seasonality确实是有不同的结论。

SPXAvgDecIntraday
blog_20111209_Dec_TWW

我比较倾向于Triple Witching Expiration week比较bullish的统计,因为这样的统计还有些logic behind,而day to day的统计则纯粹是数据统计了。下面的统计来自Schaeffer,可以看到Triple Witching Expiration Week一般都都是比较牛的。

ExpirationWeekPerformance

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

    Thanks!

    BanZhang.

    too busy last two weeks. no trade and not ready many posts. but if a nice pullback, still plan to buy-dip.

    • Thanks. Yeah, haven’t seen you for awhile, glad you’re back.

  • Anonymous

    thx, ding

  • BB Finance

    Wonderful analysis. Exactly my line of thinking. My cycle is telling me that the short term bottom is around December 13- 14 and then we will have the Santa rally. I am co-relating the bottom with AUD and will get out of any short when AUD is around 1.005.
    Really appreciate the effort that you put through. I have only a few favourite blogs in my Blog roll and no wonder you are one of them.
    Great work. 

  • Anonymous

    Cobra Ban: Is your big calls, like retest Nov 25 low, muti week sell off, 2010ish suppose to be within Dec time frame? Since I consider after new year day to be next generation, too far to figure.

    • I think SPX 1010ish might happen the next year. Nov 25 lows still possible in December.

      • graciela c

        one 100 % next year after jan , I think we are going to see some market implusion. The bearish tone got too out of control now we are going the opposite direction becasue humans tend to get bored of the same thing over and over . next year after q1 earnings things are going not too look great with earnings being not that great and europe back on the table. 
        I think we are going down next year I am out of the market and shorting when I see the market starting to go down . not front running as my teacher cobra has taught me!

        • Anonymous

          Human psychology has it’s pro’s and cons.  pro is that it is highly adaptive.  con is also that it is highly adaptive and shifty and change mind often.  u can have asteroid hit planet earth and market fall and if market somehow rallied 8% in 2 weeks u will find majority of market participant actually think market can continue higher.  in past 30 years of study, i have found severe second large correction in the uptrend is beginning of bear.  and beginning of bear always look like continuation of bull when market retrace from the correction low.  more so than any time in the bull cycle and this is when the retail crowd piles in long thinking they have a discount.

  • uempel

    Much analysis suggests further upside, positive outlook because of triple witch next Friday, Santa rally is coming, charts look good, resistance will be broken…

    All this postive outlook makes me feel very unsure. My sentiment would be much more bullish if some weirdos were calling for an immediate crash…

    • Right, the long side might be getting overcrowded here. Something wild might happen here, say a huge down day and a close below the current consolidation, resting there and then gapping right up 40 pts above 200 SMA never to look back.

    • HighRev

      uempel, I’m surprised you didn’t comment on those eggs I posting replying to you yesterday in Trading Signals. ;-(

      Pretty revealing of an imminent move I’d say.

      • uempel

        Eggs, eggs? How did you know? We just had breakfast, oj, bacon and eggs! 

        As to a move higher next week – it’s kind of obvious, but to me it seems nearly too obvious. The entire TA community is calling for more upside. I’ve tried to find more evidence for Cobra’s call for a small dip next week and all I found is this. Not very convincing, but does give last week’s top at 1267 more credibility

        • HighRev

          I was also trying to draw out as much bearish evidence as I could with that ham and egg post I mentioned. http://www.cobrasmarketview.com/2011/12092011-trading-signals/#comment-383673356

          And as I noted, like you, I have troubles seeing much to suggest a happy short term scenario for the bears.

          More intermediate and longer term I think I do see what will bring us back down to Cobra’s targets though. His operative words are “What I’m not sure is how and when the market would fulfill my calls above.” From what I’ve gathered going back over the charts back over the years, when comparing similar setups, the lows are either revisited very soon after the primary low, or 2 to 3 months later (70/30ish), and there doesn’t seem to be much in between.

        • Again, I read your chart as very bearish.

    • I read your chart as very bearish.

      • uempel

        Your stubbornness is great! I’m glad that you keep on pestering me with your annoying bearish call:

        Instead of focussing my calculations on April/August 2010, I now went back to the troughs and peaks of late 2008/March 2009. Eureka! – the larger ellipses show that the recent high at 1267 is even more significant than I previously thought. Very unlikely that it will be frivolously broken. 

        I would not have checked this without your persistance – thank you Cobra.

    • Allan Sun

      When everyone anticipate the same thing, that thing would not happen? Why? The player on the market right now has been changed. Over the past years, it is the mutual & pension funds who push up the Santa rally. But right now, they are out of the arena and hedge funds initiate most block traders in these months. What is the magic hands of hedge funds:

      1. What you expected may not happen. >> No Santa rally this year.
      2. When do you expected may be delayed >> rally in the next year.
      3. Rallied by a very dangerous way that you don’t dare to long >> Market pull up by pre-market.

  • 명석 채

    test

  • Pingback: 12/09/2011 Market Outlook (Still expect Dec 8 lows to be revisited)()

  • Anonymous

    “… your fundamental analysis would be my demonstration of the perseverance and talent for the past 4 years, then it should be not very difficult to foresee our long-term growth potential. ”

    I agree 100%.Cobra.  Best of luck to you.

  • Seawaves

    Every day, market is at a critical point, to break out or not is a question.

  • HighRev

    How about this for subconscious bearish bias. I posted the George Soros 2 billion dollar European bond purchase on various blogs and NOBODY HAS EVEN COMMENTED IT!!!!

    That one major BLOCK trade made by one of the world’s most astute traders, and no-one wants to talk about it? That’s the bear burying his/her head in the sand, look the other way, pretend it doesn’t exit, way to deal with that?

    One can say the same with the Eurozone decision to pursue balanced budget fiscal policies even at the expense of saying so long to the U.K.. That’s a historic decision that no-one’s talking about either (except with a couple of good critical thinkers where I was quite provocative on Daneric’s blog).

    I’ve got the sense that a lot of faces are going to get ripped off in short order.

    Then, somewhere down the line, say in 3 or 4 months on the outside, we’ll get the sell all USD denominated assets moment. Yep, you heard it here first. Treasuries, U.S. equities, the USD, gold (the entire commodity complex) will take at least a 20% beating. At least 20% and quite possibly much more. Let’s say the Dollar and Treasures take a 20% hit, equities a 30%, gold 40%, and silver 50% . European equities will do relatively better (because they’re already down a lot relatively) and European bonds will be the best relative performers. Then we get a bounce and I’ll reassess. 😉

  • Anonymous

    Outstanding market outlook this weekend, Cobra.  Your best in recent memory.  So far, this is the best 10 bucks I’ve ever spent.  🙂

    I am very convinced that we’ll see some weakness sometime this week, and if we approach the the 12/08 lows, I will not hesitate to cover my shorts and to go long.  It looks like it could be a touch-and-go! 

    Based on the Dec day-to-day seasonality chart I posted in the Trading Signals, I neglected to point out that while the next 4 days were red, Friday was a big green.  Just another piece of evidence that suggests any weakness through midweek should be bought as we will likely finish the week higher –  inline with your commentary.

    Thanks Cobra!

    • Anonymous

      Go Browns!!!!!!

      • Anonymous

        Maybe next year!? 🙂

  • Pedro Pereira

    Another week ahead.Another week of ups and downs, the joys and sadness. Another week of stress for walking in the markets trying to negotiate not to lose, and above all try to win.I’ve long since stopped worrying about the price deme. I prefer systems that do it for me, for I realized that I can not decide an input and output without eliminating the stress of the trade.Make it simple. Keep it simple. Maintain discipline. For AT, AF, or simply random, keep a course.Around here I leave the machine to manage the business.greetingshttp://spx500.blogspot.com/

  • Anonymous

    Hi Cobra, just reading pundits in financial media and twitter.  Vast majority are overly bullish with some calling for 1350 even.  Maybe a poll time for end of year? Reeks of alpha desperation

    • Yes. It’s my fault, I forgot the weekend poll. I planed to have polls every weekend.

  • uempel

    Guys, thanks to Cobra’s persistance I changed my focus and started to work with the 2008/2009 period (instead of playing with the summer of 2010). The result is this important chart, Why do I think it’s important? – A) because all indicators show that the ellipses are valid and B) because the period between Fall 2008 and March 2009 was so significant. (Check the chart to the right, the others are courtesy of Disqus malfunctioning).

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