| Trend | Momentum | Comments - Sample for using the trend table. Warning: This is NOT a trading recommendation! | |
| Long-term | Down | Idea for trading intermediate-term under primary down trend. | |
| Intermediate | Up | Neutral* | Hold long. |
| Short-term | Down | Neutral |
| Report Focused On | Buyable dip or the market topped? |
| Today’s Summary | No clue, hope tomorrow the market could give us more hint. |
The double confirming line on 2.8.0 CBOE Options Equity Put/Call Ratio has not broken yet, which is what I expected. As I mentioned in the yesterday report, the market would seesaw and top out after several rounds of N vs N while the institutional accumulation is greater than distribution. Concerning the N vs N rule, if the market pulls back and 780 still holds, then 4 up days vs 4 down days thus bulls win, and that will be a buyable dip (no guarantee that the market won’t pullback further on the next Monday). If the market rises tomorrow and the low is above SPX 814, 2 down days vs 2 up days, bulls will be losers if the day high is below 845, then the dip is not a buy and one should wait until Monday. Ironically, bulls wish a down day while bears are looking forward to the opposite.
1.0.4 S&P 500 SPDRs (SPY 15 min). Bullish falling wedge plus pre-holiday effect, the market would possibly rise, however I am not completely sure.
1.1.4 Nasdaq 100 Index Intermediate-term Trading Signals. It’s still overbought.
1.3.7 Russell 3000 Dominant Price-Volume Relationships. 1571 stocks price up volume down, bearish. However I am not sure if this data can be ignored because of the pre-holiday effect.
Nice work Cobra,
ReplyDeleteThat was quite a reversal in the futures overnight. Maybe a little more upside? The big institutional selling hasn't seemed to kick in yet. While I think things are starting to look wobbly, seems there are almost too many people out there (myself included) that think the market is going to correct. just a thought...
On the other hand, the $SPXA50 is getting really high, I cant see how it get much higher.
Cobra,
ReplyDeleteI think your bullish bias made you cheat a bit on the CPCE chart, bacause the double conforming line was broken on 4/7/09. I use CPC, CPCE, and ISE sentiment indicators (in a different way though) and my results show a clear turn in sentiments. Smart money are exiting the markets while dumb money are buying. It will take some time for following indicators to turn and show the true direction.
While smart people like Greenlander and his friends do expect correction, the general masses are sold to the impending recovery and quite bullish (comparable to May 2008). I can see that at work where most people seat on underwater 401k (no capitulation yet) and very confident that the market is turning up big way.
One more thing, the seasonal/historical data is useless IMHO. I was burnt badly in 2007 trying to trade based on that. Even last Nov was a case in pont.
Well, CPCE wasn't broken, yeah, a little broken, but according to my past experiences, it didn't count.
ReplyDeleteI'm not a fan of seasonality either.
My point is before the institution enters into pure distribution mode, bears should be careful. No hurry rush in.
If you run and EWT or Head and shoulders off that move we just broke out of you get 1000SPX, or roughly the 200dma.
ReplyDeletenot that it's going to hit it...
But sentiment wise... all the top callers have to STFU, for it to happen. The luke warm response to this post 2 reply's shows limited acceptance to upside notion.
If one can't call a bottom... why would you try and call a top? Trade what you see.
But nobody will read this because.... For the most part the only analysis people want is the analysis that agrees with how they feel. And that is the easiest way to lose money.
Eric, thanks, well said.
ReplyDeleteI'm still bearish, and I still don't believe that we'll see SPX at 1,000. Just I'm not brave enough to lead the charge. :-)
Let the market go first.
Cannot agree more with this: "For the most part the only analysis people want is the analysis that agrees with how they feel. And that is the easiest way to lose money."
If you get the technicals right, and the sentiment, If your bearish or bullish doesn't matter. Bears must Capitulate or bulls must capitulate....
ReplyDeleteand that is the Turn.
I don't want to have a "Bearish or Bullish Bias", I'm here to make money.
We probably won't hit 1K, but when everyone is talking about it... You know they are "All In"
Cheers! Eric, keep in touch!
ReplyDeleteEric,
ReplyDeleteYou wrote: "But sentiment wise... all the top callers have to STFU, for it to happen. The luke warm response to this post 2 reply's shows limited acceptance to upside notion."
I didn't get it. Would you care to explain?
BTW, today it feels like the bears capitulated. All of them, no? So now, all re in indeed.
It's not an exact science.
ReplyDeleteI quote "Fly on Wallstreet":
"Surrender
April 9, 2009 – 3:56 pm
Sold out of 85% of my SRS and FAZ positions."
Is that Capitulation? selling 85%?
I quote Cobra "I'm still bearish, "
have you looked at Clusterstock?
"Morgan Stanley not out of the woods yet"
From Big Picture:
"Congressional Panel: Fire Managers, Liquidate Banks"
Now... Beyond giving up ones bearishness... One could suggest that the bears need to become Bulls.
As they say "Every Great Rally STARTS, with short Covering", so if this is short covering, it MAY be the beginning of this leg.
One might also remark how Skeptical people are about WFC. I'm not saying anything about the "Reality" of it, just that people were Skeptical.
The interesting thing is that for all the people who know "you can't catch a bottom", There are certainly a ton of people who are willing to "call a top"... As Sentiment, it's a No go if people can call it.
Trends "Tend to end" when the last thing in the world that you want to do, is Sell. We are still too Skeptical.
What we need to see, besides the Bears gone(short covering/capitulation), is for them all to turn into Bulls.
At that point "Everybody is long", there is no more upside.
Also Cobra will look at the downtrend line from all the Highs since the Crash, and realize we are all Right up against it. With the market closing on it's highs, we should pull back on Monday, but once all the people who see that we have broken that trend will trade the Break out.
Also if one Reads EWT, this is more like a Wave 3 with 240 Dow points on the day, Meaning we still need the momentum to slow down.
we should see some resistance here.... Then we will see.
But the Bears no longer Shorting it, would say this is a middle, The true top is when EVERYBODY goes long.
Also out of this blog, we may want to see say Cobra make a bullish call, and for us to have about 15 Positive Responses"
Of course I'm breaking the Heisenberg uncertainty by saying this here, but with so little comment, I'd say there is little interest in this post.
I imagine that most the Bears spent the day Under the covers, and probably covered at the close. But after a few days of bullishness, which they will disbelieve. they will be willing to "Go Long" at which point we can Build a tradable top.
But this trend has been Unusually Bearish, Regardless of what is on CNBC, Seems like There are tons of "disbelievers".
Let me also suggest how all the "Followers of Roubini" who are Waiting for SPX 600. If you apply any form of game theory to that Target(I know that they are going to buy at 600, so I'll buy at 610, But I know that they know I'll buy at 610, so I will be smart and buy at 620... ETC)--- 666 wasn't out of the Question, as a bottom.
I can add even more, bullishness as some of the Hedgefunds and Mutual funds, start to think... "maybe this was it" and maybe we should put some more money to work next week. And if that works, they will keep spending.
With WFC saying "we are making money" and that many of these people over the weekend will come to the realization that "maybe I'm wrong about my Bearishness" "maybe this isnt Great Depression II". And maybe
I'm not saying anything about the "Reality", just the sentiment. I'd suggest that you don't believe anything that people say, But try and figure out what they are doing based on what they say.
All we are looking for is people moving from one side of the boat to the other.
Well I apologizes, this has gone into the GYOFB territory.
to make it simple, "Besides Bears giving up(capitulating)... They may actually need to become Bulls. "
Sentiment changes fast, We could wake up on monday, and see everyone "go Long".
Wow, Eric, nice article. Mind I publishing it?
ReplyDeleteAnd maybe pretend that I wrote it? (This is kidding)
Let me re-Edit it and Throw in a link.
ReplyDeleteWait... :-)
ReplyDeleteEric,
ReplyDeleteThanks for replying. I don't agree that everyone has to cover short and go long to mark a top. As I said above, while dumb money add to positions, smart money quietly exit and start short positions.
I subscribe to sentimentrader and some of his indicators show as much bullishness as end of May 2008 and most exceeded levels of 1/6/2009.
Even Cobra's normalized $CPC chart hit record low -0.2 recently and such low peaks were associated with tradeble peaks, including the long term chart 8.1.2 (except for bull markets).
Mixing Sentiment Trading With Technicals.
ReplyDeleteIf you get the technicals right, and the sentiment, You can catch the Turns.
If your bearish or bullish, to a trader doesn't matter.
Bears must Capitulate on the tops or bulls must capitulate at the bottoms....
and that is "The Turn".
I don't want to have a "Bearish or Bullish Bias", I'm here to make money.
But sentiment wise... all the top callers have to stop talking about it, for it to happen. And that doesn't mean you, it means you should look at all the sentiment from the market, and try and figure out where we are.
The luke warm response on Cobra's post (2 reply's) shows limited acceptance to his upside notion.
If one can't call a bottom... why would you try and call a top? Trade only what you see.
But nobody will read this because.... For the most part the only analysis people want is the analysis that agrees with how they feel And that is the easiest way to lose money.
I was asked to explain why if "the Bears Covered today" Why that isn't capitulation.
Real Capitulation is when the Bears give up and become Bulls.
So here is some sentiment from today:
I quote:
"Fly on Wallstreet":
"Surrender
April 9, 2009 – 3:56 pmSold out of 85% of my SRS and FAZ positions."
Is that Capitulation? selling 85%?
I quote Cobra: "I'm still bearish, "
Have you looked at Clusterstock?
"Morgan Stanley not out of the woods yet"
From Big Picture:
"Congressional Panel: Fire Managers, Liquidate Banks"
As they say "Every Great Rally STARTS, with short Covering", so if this is short covering, it MAY be the beginning of this leg.
One might also remark how Skeptical people are about WFC. I'm not saying anything about the "Reality" of it, just that people were Skeptical. All over T.V. Today they talked about the earnings... But almost every time they would talk about how "They still weren't done with the Write downs!"
(Again, I'm not taking sides, I'm just talking about the "Emotion" of the market.)
The interesting thing is that for all the people who know "you can't catch a bottom", There are certainly a ton of people who are willing to "call a top"... For what is it 4 weeks? almost every day everyone screams "That is the top, Short the banks"
Trends "Tend to end" when the last thing in the world that you want to do, is Sell. We are still too Skeptical. Just like you have to "Buy them, when you are Crying", you also have to do the opposite on the Tops, Sell them when it's the last thing in the world you want to do. You have to think it's so crazy to sell the market right here. It should be obvious that Everything is great, and the Rally will never end.
What we need to see, besides the Bears gone(short covering/capitulation), is for them all to turn into Bulls.
At that point "Everybody is long", there is no more upside.
Also Cobra will look at the downtrend line from all the Highs since the Crash, and realize we are all Right up against it. With the market closing on it's highs, we should pull back on Monday, but once all the people who see that we have broken that trend, we will trade the Break out.(Probably)
Also if one Reads EWT, this is more like a Wave 3 with 240 Dow points on the day, Meaning we still need the momentum to slow down. Maybe a pull back on Monday, then 2 days of say 50-20 pt upsides. The market is like a truck, it does not Turn on a dime, it takes days for momentum to slow.
we should see some resistance here.... Below the Trendline. Then we will see, But One should try and measure sentiment Every day. And certainly there is a chance we will break the Trendline and find it to be a "Bull Trap"
But if all that happened was short covering from the bears,one would say this more like a middle, The true top is when EVERYBODY goes long. At a great Tradable top, everybody should be doing everything they can to go long, Not just short covering.
I look at the market like a boat, everybody running from one side to the other, but what you want to be is the first guy to turn around and go the other way, but time it so that the "Last fool" just hit the Guard Rail.
Out of Cobra's blog, we may want to see say Cobra make a bullish call, and for us to have about 15 Positive Responses in the comments. There are a Thousand Blogs out there, and you can use any number of them to Measure sentiment.
Of course I'm breaking the Heisenberg uncertainty by saying this here, but with so little comment, I'd say there is little interest in this post.
I imagine that most the Bears spent the day Under the covers, and probably covered at the close. But after a few days of bullishness, which they will disbelieve They will Finally be willing to "Go Long" at which point we can Build a tradable top.
But this trend has been Unusually Bearish, Regardless of what is on CNBC, Seems like There are tons of "disbelievers".
Let me also suggest how all the "Followers of Roubini" who are Waiting for SPX 600. If you apply any form of game theory to that Target(I know that they are going to buy at 600, so I'll buy at 610, But I know that they know I'll buy at 610, so I will be smart and buy at 620... ETC)--- 666 wasn't out of the Question, as a very real bottom.
I can add even more, bullishness as some of the Hedgefunds and Mutual funds, Spend the weekend and start to think... "maybe this was it" If Wells Fargo can make money, maybe that was the Bottom. and maybe we should put some more money to work next week. And if that works, they will keep spending, Until they are out of Cash.
Many of these people over the weekend will come to the realization that "maybe I'm wrong about my Bearishness" "maybe this isn't Great Depression II". And maybe they will "Just try and deploy some cash next week.
I'm not saying anything about the "Reality" of any of what people think, I'm not interested in having a debate about CDO's or Bank Solvency, just the sentiment. I'd suggest that you don't believe anything that people say, But try and figure out what they are doing "based on what they say". Every person who talks about how they "Feel about the market". You should look behind what they are saying and realize that what they say reflects their position in the market, Every talking head talks his market position.
To make it simple, "Besides Bears giving up(capitulating)... They may actually need to become Bulls.
Sentiment changes fast, We could wake up on monday, and see everyone "go Long". So you have to invest almost as much time Researching Sentiment, as one would spend Looking at charts.
But I'm not the Real Pro at this, If you are looking for this kind of trading. The Real Wizard is Teresa Lo.
post that! if you want.
Annon,
ReplyDeleteI was reading the comments on WFC at google... and they are still very Bearish.
I would suggest that the "Top" will come when you can't hold yourself back from going long.
In fact it should make you sick to go short. And after doing it... You should barely be able to sleep. That is how a "top" feels to me.
Thank you Eric!
ReplyDeletethis is the sentiment cycle chart
ReplyDeletehttp://www.powerswings.com/wp-content/uploads/2007/08/15-sentiment.gif
Wow. I am truly an idiot for not picking up those BAC calls I've been eyeing.
ReplyDeleteI swear whenever everyone starts getting bearish, the opposite happens in a big way.
Right now, recent activity (last few weeks) just looks like an up channel.
And I was v bullish on financials until 2 days ago. Right when I give up and aim for a lower entry, they blow up...
ReplyDeleteGot out my shorts EOD Wed and spared meself the slaughter today. Da Bulls running rampage on WFC earnings with TARP money. Wow.
ReplyDelete