11/18/2008 Market Recap: Two consecutive up days needed

Again, not so much to talk about today.  In term of news and sentiment, it seemed an end of world and the market could go to zero.  However, from my experience and observations, because of oversold signals which have been corrected in some extent, the probability of short-term rebound is still higher than further selling off.  Over the intermediate term whether the market goes up or down, I still have no idea.  What I know is many newsletters are calling the 2002 low.  I also observed that the recent selling off often caused rebound during the middle of trading day, which is different from the past while the market never looked back to the upside.  Therefore, I am not willing to short without seeing a rebound of 1-2 days.  For people who are trapped by long positions especially if the positions are not very heavy, you may wait a while.

0.0.2 SPY Short-term Trading Signals.  Short-term oversold signals on this chart have been corrected.  In the past two days the market closed at a candlestick pattern which may cause reversal, which is the shooting star yesterday plus the hammer today.  The key is whether we can see a follow-through.  There is a long time we haven't see two consecutive up days, it will be good if the market goes up tomorrow.

2.4.2 NYSE - Issues Advancing.  Even if the market drops down tomorrow, it won't be too bad.  NYADV has not gone out of the oversold region, and it will be oversold once the market drops tomorrow.  After this period of testing, you may feel some confident to the oversold signal on this chart.

1.3.7 Russell 3000 Dominant Price-Volume Relationships, 1218 stocks price down volume up, so the market is oversold and the market might be due for rebound.

2.4.6 NYSE Volume Advancing.  The positive divergence on the chart hasn't changed.

 

2.0.0 Volatility Index (Daily), the bearish rising wedge is still there.

2.0.4 SPX and VIX Divergence Watch.  VIX and SPX show a bit positive divergence today.  In the past the divergence on the chart successfully predicted previous two reversals, so you'd better not overlook the divergence this time.  Of course, it isn't very significant and may not mean anything.  Just a reminder.

T2122 of Telechart, 4 week new high/low ratio.  This chart is similar with RHNYA on 0.0.2, but RHNYA is 52 week new high/low ratio, so you can see that RHNYA on 0.0.2 reached oversold level and never bounces back and then fails to be a good signal.  4 week new high/low ratio looks like making sense over the short term on the chart.  Note the green line does not stay too long after diving down under blue horizontal line, and then it will bounce back above the blue line.  Now the green line goes under the blue line again, which means the market may bounce back up.

3.0.3 20 Year Treasury Bond Fund iShares (TLT Daily).  The only negative signal for bulls today is that TLT rallied, and it was going up even when the market was bouncing back significantly prior to the close.  This is suspicious, and we should be cautious.