SHORT-TERM: ABOVE 70% CHANCES, SPX WILL CLOSE BELOW THIS WEEK’S CLOSE WITHIN WEEK OR TWO
The SPX weekly bar is very interesting, see chart below:
- Marubozo bar on the widest range in 7 weeks (WR7) which could mean a buying exhaustion (Name it “Exhaustion Bar” from now on, the back test below also requires weekly %B >= 1).
- After a stair down in volume for 3 up weeks, the volume suddenly increased which also could mean a buying exhaustion.
From the back test below, we can see, short at the Friday’s close and cover on the very first red weekly bar close, both have 70% or more winning rate. Considering all the bearish extremes mentioned in 11/04 Market Recap are still valid (see table above) and even become more extreme, so the back test should be trustworthy, beware the possible short-term pullback. Besides, pay attention to what happened after an Exhaustion Bar, see bars highlighted in red, in most cases, the market would consolidate for awhile which fits well the pattern I’m going to mention in the intermediate-term session below.
INTERMEDIATE-TERM: SPX MAY SHOOT HIGH THEN FALL BACK TO WHERE IT STARTS WHICH USUALLY IS THE 2ND BUY OPPORTUNITY
The very unique thing happened on Friday is that SPX has a daily bar completely out of BB which is very very rare for SPX. From the statistics below we can see, all such cases thereafter were undergoing a pattern similar to the firework – shot high then fell to the ground which may provide the 2nd buy opportunity:
- Intermediate-term was bullish, average 3.4% rise and could last on average 21 calendar days.
- With on exception, after shooting high, all fell to where the shooting started. I’ve zoomed into all those 12 cases so you can clear see that the fall to the ground was actually the 2nd buy opportunity.
- From the monthly chart, even it’s year 2000 and year 2007, there’s at least one more month to rise before the top was in, considering the strong seasonality in September and December so chances are very good that bulls are safe for the rest of this year.
So to summarize above, bulls may have 2 chances to load: A possible short-term pullback as mentioned in the short-term session and after the firework falling to the ground. While for bears, the shooting high could be a short opportunity and if lucky enough, maybe it’s the year 2000 or year 2007 kind of top, just the chances are very low though, 2 out of 12 cases since 1991.
I’ll keep watching the institutions actions, whether buying like crazy after the Quantitative Easing II announcement or via we retailers are dreaming of earlier retirement, they simply are distributing. I’ll keep you informed if anything interesting happens.
SEASONALITY: LAST 2 MONTHS OF YEAR ARE BULLISH
See 10/29 Market Recap for more details.
HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST
|NDX Weekly||UP||%B too high with negative divergence.
NASI STO(5,3,3) sell signal.
NDX:SPX too high.
*Too far away from MA(200) (PPO(1,40,1) too high).
|EEM||*ChiOsc is too high.|
|EEM Weekly||UP||*EEM:SPX too high.|
|XIU.TO||08/31 L||TOADV MA(10) too high.|
|TLT||*ChiOsc is too low.|
|GDX||10/29 L||*ChiOsc a little high.|
|GDX Weekly||UP||*BPGDM too high, pullback?|
|XLF||10/15 L||*Complex Head and Shoulders Bottom or Double Bottom breakout, target $16.74.|
|IYR Weekly||UP||Home builders are lagging.|
|XLB Weekly||UP||*BPMATE overbought. XLB:SPX a little too high.|
- Please make sure you understand how to use the table above. The purpose of this report is to provide info so contradictory signals are always presented.
- Position reported in short-term session of the table above is for short-term model only, I may or may not hold other positions which will not be disclosed.
- Conclusions can be confirmed endlessly, but trading wise, you have to take actions at certain risk level as soon as you feel the confirmation is enough. There’s no way for me to adapt to different risk levels therefore no trading signals will be given in this report except the mechanical signals such as SPY ST Model.
- * = New update; Blue Text = Link to a chart in my public chart list.
- Trading signals in OTHER ETFs table are mechanical signals. See HERE for back test results. 08/31 L, for example, means Long on 08/31.
- UP = Intermediate-term uptrend. Set when I see at least one higher high and higher low on weekly chart.
- DOWN = Intermediate-term downtrend. Set when I see at least one lower high and lower low on weekly chart.