Market kept dropping but CPC readings were quite bullish, almost around 0.8 the whole day today. I guess this implies that many are anticipating a FIREWORD from the government. Three points to say:
1. Not sure if we could get a firework, but eventually there sure will be a payback time for extremely low CPC readings. So firework, if any, is a gift to bulls.
2. INDU lower low today, so according to 1.2.0 INDU Leads Market, SPX will have a new low which is lower than 804.30. This also complements the above, which says, firework, if any, is a gift to bulls.
3. Market could bounce tomorrow.
Let's see the reasons for the tomorrow's bounce first. It's a tough call though, because in chart 1.0.4 S&P 500 SPDRs (SPY 15 min), ChiOsc shows negative divergence, so market could drop first tomorrow morning.
0.0.2 SPY Short-term Trading Signals, hollow red bar (which means open low close high but still close bellow the last close), usually means a reversal.
2.0.0 Volatility Index (Daily), black bar (which means open high close low but still close above the last close), also means a possible reversal.
3.4.1 United States Oil Fund, LP (USO Daily), I think oil is building a base, so could bounce at any time (well, sure it can drop at any time, but still 50% chances, it can bounce, right?), this is good for the overall market.
Now, the firework. 2.8.2 SPX:CPCE, look familiar? Sure, I know, similarity usually does not work, and that's why I said I'm not sure if we can get a firework this time. But here the point is extremely low CPC readings...
1.2.0 INDU Leads Market. Also 1.2.1 Dow Theory: Averages Must Confirm, TRAN has confirmed the lower low. Not good.
Every Elliott Wave report I read is looking for one more brief push up tomorrow, then a drop. A 38.2% retrace = 837, 50% retrace = 845, 61.8% retrace = 853. Bottom-line, their views fits well with your outlook.
ReplyDeleteI know you are a strict chartist, but I thought I'd share some historically reliable sentiment data that you might find useful:
ReplyDeleteThe AAII poll is considered to be in a 'danger zone' when a downturn in the market can be expected soon once investor bullishness reaches a high level between 50% and 55%. In the other direction, corrections are usually at or near bottoms when bearishness rises to between 50% to 55%.
In its latest poll last week, the AAII poll showed 47.25% bearish, and only 25.27% bullish. That is a level of fearful sentiment more associated with lows than with tops.
fyi, here's an interesting counterpoint on USO:
ReplyDeletehttp://traderplanet.com/blogs/zentrader/2009/02/02/skid-marks-ahead/
Your hollow red bar reversal call may end up being correct, but I would only point out that all those prior reversals were on higher volume days than yesterday. Two of your three examples had twice the volume of yesterday.
ReplyDeleteAlso, VIX during the two prior higher volume reversal days was above the upper envelope band, which it currently is not.
ReplyDeleteMike, I agree with you. I did notice the differences last night, but I decided to give bulls some credit here because of low CPC readings.
ReplyDeleteAnd yes, sentiment points to a bottom, and I haven't ruled out the possibility that the market could go up a lot from here yet. Just again low CPC readings have to be corrected first. Let's wait and see. Thanks.
Why do you note on your S&P500 30-min and 15-min charts that it is a Sell signal when MACD historgrams moved below 0.00 in late January...but not note it as such when the same thing occurred on January 5 and January 20?
ReplyDeleteAlso, since January 5 (the period available on the 30-min chart), you haven't noted any MACD histograms crosses ABOVE 0.00 as being Buy signals. Why?
Oh, I might not understand your question correctly. For signals I just market the most recent one, such as today, it's sell signal, so there's only one sell signal there. I don't keep the old signals on the chart.
ReplyDeleteYou got the question right, but I thought I've seen a number of older signals on the other charts. Is your practice of removing old signals specifically to 30-min and 15-min charts?
ReplyDeleteSPY 30min/15 min charts are updated everyday. A few not so important charts may not get updated everyday. Or sometimes the signal is considered as possible whipsaw so I might wait for a few days. Generally, pay attention to the charts I mentioned in my daily report are enough.
ReplyDelete