SHORT-TERM: DIRECTION NOT CLEAR, SENTIMENT IS TOO BULLISH BUT SEASONALITY IS VERY BULLISH
The market is consolidating so the direction is not clear. Bear has the support of indicators as well as way too bullish sentiment (see table above), while sure bull has the bless of very very bullish seasonality, so how the market is going to resolve this conflicts, we’ll have to wait and see. Personally, I’m more interested to see if we could see more record sentiment readings in the following couple of weeks.
INTERMEDIATE-TERM: COULD BE WAVE 5 UP TO SPX 1300+, PIVOT TOP COULD BE AROUND 01/05 TO 01/12
For intermediate-term, I’ll maintain the forecast for calling a wave 5 up to SPX 1300+ (See 12/10 Market Recap for more details). Because the sentiment is way too bullish (see table above), so I’m more and more inclined to believe that eventually we’ll see a correction similar to what happened in April. NOW THE ONLY QUESTION TO ME IS WHEN? My guess is the top could be around 01/05 to 01/12 for 3 reasons:
- The most important reason is from chart 8.2.9c QQQQ – 2002 to 8.2.9k QQQQ – 2010, check by yourself in my public chart list, starting from the 8th trading day in January until the end of the month, QQQQ has been bearish since year 2002 without exception.
- 4.1.3 Volatility Index (Weekly), let’s assume in the most bullish case the VIX keeps dropping (which is a reasonable assumption because it’s now the 4th time the support is being tested, so the chances for the support to hold is very remote), see the %B below, looks like at most the VIX would have 2 to 3 weeks to drop, this means the SPX could rise for 2 to 3 more weeks which happens to be around 01/05 to 01/12.
- The 3rd reason may not appear very solid but you never know, the world never lacks coincidences. Counting 28 trading days from the TED Spread top happens to be on 01/05. And are there any other factors that makes 01/05 so special? Well, remember the Magic Day 6? See Gann Day table below, since year 2000, there’re at least 2 pivot dates around 01/05.
Speaking of TED Spread, I’d like your attention to chart 4.0.7a Collection of Leading Indicators I again as I feel that divergence is now too much, combining with the Hindenburg Omen triggered recently, I think now it’s the time to pay attention to this chart.
SEASONALITY: NO UPDATE
See 12/03 Market Recap for December seasonality chart.
HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST
|USO||*Could be a Pennant in the forming, so more push up?|
|IYR Weekly||UP||Home builders are lagging.|
|XLB Weekly||UP||*BPMATE is way too overbought.|
- 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.