10/11/2014 Market Outlook (Lower Low Ahead)


THE BOTTOM LINE:

  1. Likely the selling isn’t over. 95% chances the Friday’s low is not the low. 80% chances this bear may have another leg, i.e. the coming rebound would fail, the selling thereafter would make a new low.
  2. The next Monday, SPY has 75% chances to close in green, 90% chances to rebound to $191.70, 70% chances to rebound to $192.07. I’m not saying Monday would rebound right at open though, most likely it’d go down first then rebound.

The above conclusion is drawn from the statistics below. The chart is very large, you may need click twice to see the original size. I know, one single evidence doesn’t mean anything. The actual reason is the down momentum demonstrated on Thursday and Friday was very strong therefore rarely this bear is just one legged. I just cannot say, my experience tells me that there might be another leg down, I’d need a witness to back me up. If you follow my live update for awhile, you’d know that my experience does count.

VIXUp30PercentIn2Days

THE TRADE:

Pay attention to the human analysis session of the Friday’s Trading Signals, IWM is officially in long term down trend now. If you’re not experienced, it’s a signal to close long position or book partial profit. Short and hold for long term is no practical, you’ll need do swing trade to be a bear.

 

THE SHORT-TERM:

Based on the above conclusion, we should be on the solid blue line which means bears have earned a dashed blue arrow coupon.

EvilPlan60min

For the target of the solid blue line, the chart below should be clearer, it’d be Aug low or MA200. Those 2 targets are very obvious, since there’re obvious and not far away, so both bears and bulls would wait for the target therefore before reaching the target, bulls won’t buy, bears won’t cover, as the result, SPY would accelerate to the target. This is the reason why at the beginning of this report, I said Monday most likely would go down first then rebound.

SPYDaily

THE INTERMEDIATE-TERM:

I’m still not sure whether we’re on the dashed blue line or dashed red arrow. I’m more inclined to believe we’re on the dashed blue line because I still don’t see THE lower high. Trading wise, not sure where we are means don’t know whether the bull’s intermediate-term buy dip coupon can be used or not, which is not helping. However, I do know that bulls still have one more chance to buy dip on the weekly chart, see long term session below for more details.

FindingTop

THE LONG TERM:

Since likely dropping below the tinted area is just matter of time, so we might be on the dashed blue line now. For such a tight up price channel, the first time it’s broken, at the very best, it’d be a range, so bulls at least would have one to two times to buy dip, rarely is the very first drop of a strong up price channel is the end of the world. Accordingly, trading wise, still the old way, if trapped now, lay down pretend dead, as I heard bears don’t eat dead people, wait until NYMO extremely oversold before considering buying the 2nd round. The worst case is a few days of bad mood, but the chances of you’re really dead are low. If luckily above the water the next week, since I mentioned at the very beginning of this report that 80% chances this bear may have another leg, so better take the opportunity to reduce the long positions.

EvilPlanWeekly


CHINESE TRANSLATION

 

THE BOTTOM LINE:

  1. 多半还没有跌完。95%的机会周五的low不是the low。80%的机会熊熊还有一腿。就是说反弹后还会有新低。
  2. SPY,周一有75%的机会收绿,90%的机会反弹至$191.70,70%的机会反弹至$192.07。不是说周一开盘就反弹哈,比较大的机率是先跌再反弹。

以上结论是从下面的统计得到的,图很大,要点击两次才能看到原图大小。我知道一个证据并不能说明什么。主要理由其实是周四和周五的下跌很猛,因此很少一腿就结束的,只不过我不能说,凭经验,还有一腿下跌,我总得找个证人什么的。经常看我live update的同学应该对我的经验有信心啦。

VIXUp30PercentIn2Days

THE TRADE:

注意周五的Trading Signals人工分析的部份,IWM正式long term trend down了。对于没有多少经验的,这是close long position or partial profit taking信号,short and hold长期是不太现实的,需要swing trade。

 

THE SHORT-TERM:

根据上面的结论,我们应该在蓝色实线上,熊熊应该挣到了一张蓝色虚线箭头的coupon。

EvilPlan60min

关于蓝色实线的target,下面的图应该更清楚些,八月的low或者MA200。这两个都是大家公认的target,既然是公认,且已经不远了,那么大家都会不约而同的等待那个target,因此在到达target前,不会有多少牛买,也不会有多少熊cover,这样,周一SPY可能会非常快速的跌至target先,然后才可能反弹。

SPYDaily

THE INTERMEDIATE-TERM:

我不清楚我们到底是在蓝色虚线上还是红色虚线箭头上。我倾向于我们还在蓝色虚线上,因为我没有看到THE lower high。操作上,不清楚我们在哪里的后果就是不清楚是否中期牛牛还有一次buy dip的机会,这个分析当然对操作没啥帮助,等于什么也没说。不过,我比较确定牛牛在weekly图上还有一次buy dip的机会,详见下面的long term session。

FindingTop

THE LONG TERM:

跌幅超过高亮区可能没有啥悬念了,因此我们多半是在蓝色虚线上了。这么紧的up price channel,第一次跌破多半最多是整个range,因此牛牛至少还有一到两次buy dip的机会,是世界末日的可能性很小。操作上,还是老一套,假如已经被套,倒地奘死,因为据说熊熊不吃死人,等着NYMO extremely oversold再考虑进第二批,最坏的情况是会有几天情绪低落,但真死的可能性不大。如果运气好下周反弹出水,由于前面提到80%的机会熊熊还有一腿,所以至少应该趁机减仓。

EvilPlanWeekly

21 Comments on "10/11/2014 Market Outlook (Lower Low Ahead)"
  1. Comment left on:
    October 11, 2014 at 2:24 pm
    Kdog75 says:

    Excellent update! Thanks for this great service!

    • Comment left on:
      October 11, 2014 at 2:31 pm
      Cobra says:

      You’re welcome. Glad you like the service.

  2. Comment left on:
    October 11, 2014 at 2:42 pm
    AK84 says:

    Awesome!!

  3. Comment left on:
    October 11, 2014 at 3:28 pm
    Al_Dente_Here says:

    Long LONG TERM:
    Mebane Faber (smarty pants; the IVY Portfolio guy) uses 10sma MONTHLY as the entry/exit signal for long-termers (above 10sma = long; below 10sma = exit longs). He uses VTI for his equity signal and it just went below his 10sma. (Maybe he waits for the month to end – 10/31/14 – I’m not sure). You can count on the VTI chart how many times it went under the 10sma in 2011, 2012, 2013.

    Bulkowski (smarty pants TA guy) believes the 12sma on the MONTHLY SPX is better… it is near… not yet…
    Both are worthy of your watch list …

    http://screencast.com/t/oCnGZJiawS1

    Today Bulkowski says: “Will the other indices [other than utilities] begin to trend higher? I think so, but I’ve been wrong so far on this downturn (except for the Nasdaq. I figured it would drop and it did). Come November, this downturn should be over and the indices should begin their move up to the year end. That’s my hope at any rate.”

    And then this Bulk table showing a NEAR TERM REVERSAL likely:

    http://screencast.com/t/aEWHfsqT6r

    • Comment left on:
      October 11, 2014 at 3:33 pm
      Eddy_112 says:

      My view is that I’d like the 1883 W1 high to hold..(if so it could be a W4) that way we can see one LAST?? nice bounce. New ATH’s are still possible. Say for ex 1893 holds (this is the .618 retrace for my W4) that is near the 1890 AH bottom.

      Then a W5 can target (2040 1x, 2080 1.272x, 2130 1.618x). I’d like this to happen so it sets up a bear pattern for 2015

      In any case, we are due for a very very nice move up soon… Indicators are pointing that towards that. Will we get new ATH’s? Its still possible…

    • Comment left on:
      October 11, 2014 at 3:50 pm
      Al_Dente_Here says:

      ADD ON:
      To answer my question: does Meb Faber wait ‘till EOM end of month (for LONG TERM PORTFOLIOS]
      Answer: yes
      “Observe the portfolio at the end of each month, and where an asset closes out the month below the level of its moving average, sell the asset and hold cash, repurchasing only when it closes back above its moving average at the end of any subsequent month.”

  4. Comment left on:
    October 11, 2014 at 3:35 pm
    Eddy_112 says:

    Great report.. a lower low is likely in my view as well…

  5. Comment left on:
    October 11, 2014 at 3:44 pm
    tytobebad says:

    Cobra, any stats on RUT being down 4.5% on week & 13% off high. .I know since 1979 avg intra year decline is 16%…but anything for next week, month , year end?

    • Comment left on:
      October 11, 2014 at 9:06 pm
      Cobra says:

      Remember I talked about IWM breakdown setup? I’d be more than happy it’d could make the target.

  6. Comment left on:
    October 11, 2014 at 5:07 pm
    uempel says:

    Channel support on the daily chart shows an important difference between the log and linear charts.

    On the linear chart (my favorite) SPX has broken red channel support at 1909 (Friday’s close was 1906.13). But I’m showing the logarithmic chart here, which is less nightmarish 🙂 Its log channel shows blue support at 1904 and red channel support at 1882. This suggests that even if SPX dips down to 1882 it’s still in a bullish channel …

    My interpretation: as I prefer linear charts I must accept that the channel as broken – but 3 handles is a very feeble break and so far I don’t take it as an accepted fact 🙂

  7. Comment left on:
    October 11, 2014 at 7:20 pm
    racer29 says:

    record bond inflows last couple weeks and in particular to quality bond funds. Only PIMCO has outflows. But others are gaining much more than PIMCO is losing.
    Also note bond inflows have been positive since the beginning of the year. So the bull sites often announced rotation out of bonds into stocks has been wrong all year long and just gibberish. Money talks and has been flowing into bonds all year and now mostly into quality high rated bonds and out of junk bonds. My highest rated muni bond funds rated AA and A shot almost straight up the last week for conservative bond funds.

    These trends will likely continue a while longer unless some massive rally in stocks comes in and then it will likely only be a pause in bond inflows but no real outflows. Waiting for the next coming stress which they know will happen. I think institutions are rebalancing and selling some stocks and loading more quality bonds.

    I know many do not like to trade bonds or even talk about them (they are not glamorous or something you day trade in), but my muni bonds funds are up nearly twice as much as the SPX for the year currently – up 12-16% YTD. More down in stocks will only increase those gains over stocks. Then when we get a solid trad-able bottom back into some quality stocks for a while.

  8. Comment left on:
    October 12, 2014 at 12:39 am
    oldpigwang says:

    Cobra: Friday,Spy block trade $701=Buying on Weakness

    • Comment left on:
      October 12, 2014 at 1:44 am
      Cobra says:

      I saw that too. I mentioned awhile ago, now above 300 is a new common now, so may not mean anything anymore. I do hope Monday rebound huge though, but usually what I hope simply won’t be true.

      • Comment left on:
        October 12, 2014 at 4:36 am
        oldpigwang says:

        How do you get “90% chances to rebound to $191.70, 70% chances to rebound to $192.07”?

        2 down day, we got 60point spx drop. why $191.70?$192.07?

        • Comment left on:
          October 12, 2014 at 11:48 am
          Cobra says:

          I observed that after VIX up 30% in 2 days, the 3rd day, SPY tends to rebound into the 2nd day range, so I wrote a program to test the observation. You didn’t read the chart comments, did you? Those price levels are fib levels that program tested.

  9. Comment left on:
    October 12, 2014 at 3:47 am
    uempel says:

    Monday morning is going to be interesting. I’ve got time signals on the SPX 60 min and on the daily chart too. I’m showing the 60 min because it doesn’t signal the opening, it signals approx 10.30 a.m.

    If I read that 10.30 a.m. signal correctly it suggests that the market might go against the initial move. I.e. if the market opens weak I see a positive jump to the upside at 10.30 a.m and vice versa: an initial small jump at the opening might result in a sell-off. These scenarios are highly hypothetical – the only thing which we can take for granted is that the market will show an important move Monday morning.

    • Comment left on:
      October 12, 2014 at 11:03 pm
      tytobebad says:

      Hope your right Uemp, that we get a 1030 turn, b/c right now ,Sun.11pm est. futures are very RED.

  10. Comment left on:
    October 12, 2014 at 9:49 am
    racer29 says:

    second Ebola case possible in Texas after initial tests. A nurse who was in full protective gear while treating the infected person. If this case is fully confirmed it will send chills up the spine of many health care workers and cause many questions about how Ebola is transmitted and how can a US full suit person in top hospital get it.

    Have to see if it hits the news channels later today after the football games are over of course. Nothing preempts US football.

    So waiting for confirmation. But if confirmed and Ebola keeps getting worse it will become a market noteworthy item for more than just the airline industry whose stocks are already starting to fall.

    If this case is fully confirmed, next week I will write up a short article here about Ebola – possible lies from CDC and WHO to keep public calm, how Ebola is passed – truth and possible public lies, and self treatment protocol for superbugs. Just my educated opinions and as always it is up to the individual to inform themselves from a variety of sources and make their own decisions.

    This is now becoming a market impacting event as even GS and other investment houses have recently made note and posted articles on possible market impacts. And it will not be zero anymore.

    • Comment left on:
      October 12, 2014 at 9:13 pm
      User1323 says:

      Thx race, any self treatment advice for acid reflux and cholesterol that my father has been dealing with.

    • Comment left on:
      October 12, 2014 at 9:21 pm
      manny0453 says:

      Its made news in Aus, cheers,M

  11. Comment left on:
    October 13, 2014 at 12:10 am
    racer29 says:

    this also hitting the tape Sunday before open tonight.

    bad news for said BTFDers: just hours before futures are set to open on Sunday afternoon, the chief economist at China’s central bank said Saturday that he doesn’t see any reason for large-scale fiscal or monetary stimulus “in the foreseeable future” despite slowing growth in the world’s second-largest economy and disagreements about the depth and timing of economic overhauls.

    market was not expecting that. Market was expecting a reactionary BOC to do anything on any little dip or slowdown. It appears central banks of the world are getting tired of policies that really do not do much anymore and add to future unwind risks and political dependency.

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