02/03/2012 Market Outlook (T2112 is too high again)


Cobra's Market View Private Messaging System shows:


SHORT-TERM: HIGHER HIGH AHEAD BUT COULD SEE PULLBACK AS EARLY AS THE NEXT MONDAY

Three cents:

  1. Most likely we’d see a higher high ahead.
  2. SPX may close below this Friday’s close within the next 2 trading days.
  3. In 14.4 trading days on average, SPX would have a little bigger pullback, ending with 4 down days in a row.

The charts below (showing all the record high NYHGH since the year 2000) explained why we’d see higher high ahead, and why SPX would close below this Friday’s close within the next 2 trading days.

The NYHGH new high means the up momentum is strong, so in the most cases there’d be a higher high ahead. The idea case is a negative divergence formed between the NYHGH and the SPX before a top of some kind is possible. However, also from the chart, we can see far more dashed red lines and blue lines than green lines which means more likely a pullback within the next 2 trading days.

RecordNYHGH2010
RecordNYHGH2004
RecordNYHGH2003

The chart below is another reason to expect a short-term pullback: The VIX first touch of its BB bottom. Also we can see lots of red dashed lines which means a short-term pullback.

VIX1stTouchBB

The chart below explained why SPX would have a little bit larger pullback within on average 14.4 trading days. T2112 >= 47% means at the Friday close, there’re above 47% of NYSE stocks (around 1,500 stocks) closed above its BB(40, 2) top which is very rare and very extreme in the past 5,000 trading days, as I’ve demonstrated In the Friday’s Trading Signals. If you short at Friday’s close, turn off the computer and hold until SPX down 4 days in a row before covering your short, the average trading length was 14.4 trading days, the average return was 3.62%, the winning rate was 100%. There’re however only 5 cases in the past, so I won’t read this 100% winning rate too much though. Also hold until SPX down 4 days in a row is just for the back test convenience, it’s not a must condition. The bottom line though, T2112 is not at all an ordinary overbought indicator. Similar to NYMO overbought, it’s one of a very few indicators, that I mentioned before, should never be argued, so I believe chances are really high we’d see a little bit bigger pullback soon. The only question is whether the T2112 would go as high as 56%, like it did in year 2009, before any meaningful pullback? That’s possible, of course, but my guess is the reading around 47% this time is the limit. Because in year 2009, most stocks were at a very low prices so it’s easier for them to close above BB top, while now since so many stocks are already at the 52 week highs (already forgot the record high NYHGH I just mentioned above? Hey, everything I said here always have evidences), so more difficult for them to close and stay above the BB top. So the trend is the extreme readings of T2112 should go lower and lower as the stock market goes higher and higher, therefore I believe the current reading might be the highest we have.

T2112

Based on the T2112 extreme readings, I think it’s necessary to remind you that the Friday’s gap up might be an exhaustion gap.

ExhaustionGap

The chart below is another reason (besides the T2112) that I suspect that the Friday’s gap up might ben an Exhaustion Gap: Nasdaq 100 Intraday Cumulative TICK hit its 2nd record high. The first record high, by the way, was on 10/27/2011, which should be enough said.

NasdaqCumTICK

Once again let me emphasis this. The call for an Exhaustion Gap, is just an analysis, so still the old cliche: Don’t front run! In the daily Market Outlook, via the analysis of signals and statistics (which now you know, mostly don’t work if against the current trend), I have to tell you the possibility of a top or bottom being formed. But in the reality trading, the purpose is not to find top or bottom, instead, the simpler the better, therefore to follow the trend is the key. The chart below explained what I believe as to trade by following the trend. You can see it really as simple as, up then long, down then short. Although I didn’t get anything in return this round, instead even lost a little on Friday’s huge gap up, the most important thing is I strictly followed the trend instead of guessing the top or bottom (and traded accordingly). My way of trading certainly is not the best, otherwise I’d sunbath somewhere in a famous beach instead of selling a report here. I just want to explain here what I understand about to follow the trend which as you can see, is not at all a simple oral blah blah, it’s a doable in reality. So again, let’s make this very clear, if all you care are buy or sell signals, then the daily Trading Signals report is what you really need. The daily Market Outlook is for experienced traders only which I’ve explained clearly in the Quick Start Guide and whenever and wherever I can.

FollowTheTrend

THE INTERMEDIATE-TERM TREND IS UP

THE LONG-TERM ACCORDING TO OUR SIMPLE STRATEGY IS LONG SINCE JANUARY

  • According to the January Barometer, 80%+ chances, 2012 will end in positive territory.

 

 

Chinese Translation

SHORT-TERM: HIGHER HIGH AHEAD BUT COULD SEE  PULLBACK AS EARLY AS THE NEXT MONDAY

三点说明:

  1. 多半会有higher high ahead。
  2. 最快周一,最迟周二,SPX可能会收在本周五的close以下。
  3. 平均14.4个交易日内,会有较大幅度的回调,SPX可能以连跌4天的方式结束回调。

下面的图(all the record high NYHGH since the year 2000)解释了为什么会有higher high,同时也是周一或者周二会有回调的理由。NYHGH new high意味着上涨的动能很强,因此绝大多数情况下,会有higher high ahead,最理想的情况是NYHGH与SPX形成negative divergence才可能top。但是从图上也可以看到,红色的虚线和蓝色的虚线很多,这是说最快周一,最迟周二会有回调。

RecordNYHGH2010
RecordNYHGH2004
RecordNYHGH2003

下面的图是另一个短期会有回调的理由,VIX first touch BB bottom,也是很多红色虚线,说明短期会有回调。

VIX1stTouchBB

下面的图解释了为什么说平均14.4个交易日内,SPX会有较大幅度的回调。T2112 >= 47%,意味着周五收盘的时候有47%的NYSE股票(大约1500支)是close在its BB(40, 2) top以上。关于这个图,我在周五的Trading Signals里已经展示了过去5000个trading days的情况,大于等于47%是非常非常极端的情况。Short at Friday’s close,然后关掉电脑,死扛到SPX连跌4天才cover,平均14.4 trading days,return 3.62%,赢率是100%。当然只有5个case,所以不能过分解读这个图。我的意思是所谓连跌4天的target只是为了测试方便,并不是一定的规律,但是the bottom line,T2112不是一般的overbought indicator,和NYMO overbought一样,它是为数不多的几个不能与之argue的indicator之一,因此我认为短期会有较大回调的可信度是很高的。唯一的问题是,这次T2112是否会象2009年一样涨到56%以上才可能起作用?这个当然有可能,不过我猜,目前这个47%可能已经是极限了。这个不能跟2009年比,因为2009年的时候大多数股票都在低位,所以相对比较容易有很多股票close above BB上沿。而现在很多股票都已经是52 week high了(忘了前面刚提到的NYHGH new high了吗?),不太容易一直close在BB的上沿以外。所以,T2112的极限高度是会越来越低的,因此目前这个读数,恐怕已经是极限了。

T2112

鉴于T2112的情况,我觉得还是有必要提醒大家一下,不能排除周五的gap up是exhaustion gap的可能性。

ExhaustionGap

下面的图是另一个我怀疑这是Exhaustion Gap的理由:Nasdaq 100 Intraday Cumulative TICK 2nd record high。Record high那次是10/27/2011,这个日子本身应该是enough said了。

NasdaqCumTICK

再强调一下,上面关于Exhaustion Gap的质疑,仅仅是分析,还是老话,不要抢跑。在Market Outlook里,我必须通过分析各种信号和统计,告诉大家顶或者底的可能性。但是trading的目的不是找顶和底,而是越简单越好,因此follow the trend is the key。下面的图解释了操作上,我怎么follow the trend,真的就是简单的涨了就多,跌了就空。这一轮虽然什么都没有捞到,还稍许亏了点儿,但是重要的是我紧紧follow了trend而不是去猜顶和底。我的方法当然不是最好,否则我早就去晒太阳了,也不需要在这里卖报告,我只是想说明一下我理解的follow the trend。所以,这里再次说明一下,假如你只关心是买还是卖的话,每天的Trading Signals才是你要注意的。Market Outlook is for experienced traders only,这个我在Quick Start Guide里说的很清楚,可能很多人没有注意。

FollowTheTrend

THE INTERMEDIATE-TERM TREND IS UP

THE LONG-TERM ACCORDING TO OUR SIMPLE STRATEGY IS LONG SINCE JANUARY

  • According to the January Barometer, 80%+ chances, 2012 will end in positive territory.
  • Anonymous

    thx, ding

  • Anonymous

    Cobra: What do you mean by:”If all you care are trading”???

    • should be if all you care are trading signals (to buy or to sell).

    • the market outlook is for people who have their own trading strategy, so it’s to provide info only. My analysis plus his/her own analysis might provide enough edge to act. Remember, we have many people here, this is still by far the largest single person TA site in terms of visits, so different people have different needs. Whatever you don’t want might someone else precious. 

      I just got a mail saying, the email alerts are annoying, asking for how to unsubscribe. But I also got mails, asking for email alerts. 🙂

      • Vickmore Fu

        Waiting for pullback on Monday or Tuesday.

    • Modified the contents as you implied. thanks.

  • Anonymous

    Thanks Cobra – we can always count on your for consistency and integrity. Hope you do get to sun on that tropical beach one day soon.

    • Thanks. The same for you too. 🙂

  • Anonymous

    Cobra,

    One question I forgot to ask: you outline well a basis for a correction in the next few days, but you don’t mention a basis for a potential higher high in the future. Could you explain that part?

    thanks

    • I’m not sure I understand your question correctly.

      You mean I didn’t provide evidence supporting higher high ahead? That’d be NYHGH new high, generally, it has new high means a higher high ahead. But I do expect a pullback of day or two, so say, Monday we have higher high then sell off, or red Monday then Tuesday higher high, something like that.

  • Anonymous

    Cobra,

    Thanks for the report. Is it me or I cannot see a 2nd record high on 10/27/2011 for Nasdaq intraday cumulative tick?

    Thx

  • Excellent report, Cobra!
    There are two large air pockets (gaps) above 1300. At least one of them needs to get filled for bulls to have a decisive new push higher. The reason being: no new shorts – no new highs. Smart money will not chase the market here. From a market profile perspective 1308 in ES is the largest volume node in the entire upmove from 1200, which constitutes the real support right now and unless something dramatic happens, I expect this level to be tested in the near future.

  • Cobra did you hear about the DEmark 9 . sell . buy and how consistent it is on your view? I dont know much about it and google with no luck

  • Thanks, Cobra BanZhang.
    Where can I find the T2112 (for example, code number) in your chartbook?
    Besides NYMO and T2112, are there any other indicators that can not be argued? Thank you very much!

    • You can access T2112 on freestockcharts.com (for free obviously). 

    • Click the T2112 link I provided in the report, you should see the chart. Also Michael has already told you, it’s from freestockcharts.com

  • Cobra did you notice GOLD going up as well as the market since december 30.th.
     Dont you find this rally non trusty? why would the big money move to GOLD at the same time that the market is going up

    I am looking for an entry point in gold . In your opinion does it looks it wants to retest the december lows of 150-151? or up from here?

    thank you for your reply

    • I only know should be one more leg up for gold.

    • Anonymous

      I do not think Graciela is a good moment to enter GLD. I think the best level for long term is around 125. In a short term i am waiting a retracement . It´s my humble opinion. Chau

  • Anonymous

    http://screencast.com/t/iuTdT1rH  Driven into the ground like a post.  But signs of a bottom arise.

    TVIX daily

    • Only volume says a bottom, we need a chart pattern.

  • Anonymous

    Another perspective based on Fibonacci relationships 
    http://stockcharts.com/h-sc/ui?s=$INDU&p=D&yr=1&mn=0&dy=0&id=p92728854204&a=252902728 

  • Anonymous

    I think the most telling chart that you’ve posted in the last several months was the institutional liquidity inflow chart from stocktiming. Liquidity will always trump any technical or fundamental analysis since it is liquidity, not traders hopes and dreams that move the market. I have annotated and attached the original chart. Do you have an updated version?

    http://cdn.socialtrade.com/comsys/imgs/liquidity_c4HnMC_m.png

    • Here’s the latest. 

      • Anonymous

        Thanks for liquidity charts-seems to say new phase has begun long term (moved from 4th stage decline into “stage 1 accumulation see charts !! aa here 
        http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1926808&cmd=show%5Bs245556372%5D&disp=O , I think I’ll stay intermediate term bullish like Dejavu spring of ’09, summer of ’10….BUT I bought puts Friday afternoon without thinking of up volume, this weekend I looked closely the BB20 on daily, weekly of qqq and iwm and saw the chance of countertrend move when ever we settle above the BB20 ( and below bb20 qid ) so maybe consolidate in upper1/3to 1/2 of recent week’s range this week to damage some retail bulls, then pop up again week of feb 13-17  to take out some retail bears….but might happen in reverse=another pop then decline next week given the volume and momentum…Thanks for helping me stay in the game and trying to remind my dense ego not to front run!

        • Thanks. Just a reminder, the liquidity chart only tells what’s happening now. Normally, I’d expect if the market sharply down, if the liquidity stays at high, then this is a false down, but in reality, when the market sharply down, so will the liquidity chart, in short, the liquidity chart fluctuates with the market, so the chart has no predictive power and this is why nowadays I don’t bother to mention it.

  • sweenrose

    Cobra, 
    I was wondering if you could post some information comparing the old CIS with the new one?  As always, I appreciate your market views and analyses.
    Alex

    • I see what’s wrong. it’s my problem, the forward damaged the attachments, that’s why you cannot see the images. Anyway, I attached here.

© 2013 Cobra's Market View — All Rights Reserved.