Live Update

Tuesday, May 26, 2009

05/26/2009 Market Recap: Bullish Engulf

Summary:

Maintain "down" view on the intermediate-term but better wait until SPX 878 broken before taking further actions.

Expect a pullback tomorrow.

  Trend Momentum Comments - Sample for using the trend table.
Long-term Down   Idea for trading intermediate-term under primary down trend.
Intermediate Down Neutral  
Short-term Up* Neutral  

A Bullish Engulf pattern was formed today which looks bullish. Although the volume seemed a little low comparing with the relative bigger rising rang but since I’ve seen so many cases continuing up on decreased volume, so I don’t think it’s the reason to be bearish. Because no sell signals are changed in chart 0.0.3 SPX Intermediate-term Trading Signals, so, no argue with signals, maintain the “down” view on the intermediate-term. If you plan to follow the intermediate-term sell signal but have yet started, suggest to wait until SPX 878 is broken in case all the sell signals given by chart 0.0.3 are whipsaws. If you’ve already started shorting then don’t average down now, wait to see if the market could follow though the today’s Bullish Engulf pattern. Tomorrow, because very short-term is very overbought, so I expect a pullback and eventually a red close.

SPXMidTerm

 

2.8.0 SPX:CPCE, this is the main reason for expecting a pullback tomorrow: CPCE is way too bullish and every time it’s this bullish the next day wasn’t very pleasant.

SPXvsCPCE

Short-term model from www.sentimentrader.com, overbought. This model works pretty well recently so I consider it as another reason for expecting a pullback tomorrow.

STEM.MR

From seasonality however, as reported in the weekend' report, tomorrow is the 2nd most bullish day in May. Also it’s a very common pattern that a big price bar (such as today) is followed by a small price bar (for consolidation purpose). So a reasonable guess for tomorrow is a small red price bar or a Doji bar. 

Seasonality

 

The follow are for your reference only as I’m trying to add the “cycle” analysis into my daily report gradually.

1.0.2 S&P 500 SPDRs (SPY 60 min), the 7 trading day cycle and 13 trading day cycle are very interesting (For bigger picture please see 7.6.1 SPX Cycle Watch (60 min)). Today happens to be the end of the 13 trading day cycle which was usually a turning point in the past. So does this mean a turning point tomorrow? Well, let’s wait and see.

SPY60min 

7.6.0 SPX Cycle Watch (Daily), 3 interesting cycles on the daily chart. By the way, the March bottom happens to be the joint point for all these 3 cycles and that could be the reason why the rally we’ve seen is so powerful. LOL

SPXDailyCycle

24 comments:

  1. no need for all this technical mumbo jumbo. Just stay long until we hit 963 or June 15. OK?

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  2. Dear Cobra,

    There's no mention of the NASDAQ finishing over the 200dma? I'm a little spooked that tech will continue to be the leaders of this rally and a move over the 200 day might spark further rallies as the NASDAQ thus draging the other indicies along with it.

    Honestly, I was hoping the continued negative divergences would be enough to give us another bounce off 880 before shooting higher.

    Also, does it go without saying that the volume today was officially an accumulation day? It seemed lately the accumulation was trending down and the distributions were trending higher, so I wonder if that is reversing.

    Great work, Cobra. We really appreciate your effort.

    Thank you,
    -A.

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  3. ADD, I think it's fair I don't mention MA200 for nasdaq as I never mention MAxxx for other indices as well. :-) In fact, I only mention something that I think is convincing enough to talk you into beliving my excuse. LOL. If I mention everything I see from my chart book and lots of other paid services, it'd be very boring list.

    I don't think today's an accumulation day as the Friday's volume was not a normal volume so the fact that today's volume is higher than that of the Friday's doesn't mean anything to me.

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  4. Hey Cobra, what exactly do you mean by "something big is gonna happen"?

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  5. Cobra,

    As usual, great work. I am glad to see that you added "Cycle" trend analysis in your post.


    Keep up the good work.

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  6. princepersia, something big means a big price movement is about to happen either up or down, I don't know the direction.

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  7. Cobra,
    Do you think the current market action mimics May-June 2008? I see similarities in the chart pattern with yesterday's action mimicking the June 5 2008 surge with NDQ testing new high and breaking MA200. We all know how it all finished. I believe Fed has to do something very soon with the widespread perception that inflation is going be a big problem soon. Fed acted succesfully in summer 2007 and 2008 to kill inflation. How about now?
    Jack

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  8. Jack, if you were Fed, what would you do to kill inflation? Raising interest rate or pretent that there's no inflation at all?

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  9. Cobra,
    So far, they pretent that there's no inflation at all. I don't think it will work. China (and other international bond buyers) can stage a stoppage of bond buying like they did so in June 2007 to remind USA who pays US' bills. USA cannot afford rising rates, as it is insolvent as it is. The fed will be forced to withraw money from the system (probably without rising rates) by say stopping monetization for a while.

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  10. The yield is very high now but who cares?

    China stop buying bond? Well, China will keep buying those worthless paper, don't worry. Chinese government is mean to its own people but very generous to foreigners. It's being like this for thousands of years.

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  11. Dear Cobra,

    Do you feel this "Tomorrow, because very short-term is very overbought, so I expect a pullback and eventually a red close." might be in jeopardy?

    If we close green, does that bode well for a greater chance of red tomorrow and/or Friday?

    Thank you,
    -A.

    ReplyDelete
  12. Add,

    Jeopardy?
    No, not untill the market closes.

    Close in breen today then greater chance of red tomorrow?
    That depends on if the overbought signals have been corrected or not. A consolidation like now could fix the overbought signals.

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  13. Hi, Cobra;

    Can the banks and GS just keep borrowing from Fed Discount Window and return the TARP money? If that is true, then it is like six equal to half dozen.

    Thanks.

    EW

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  14. Hi, Cobra;

    China lends 2 Trillion to US. Fed lends 6T to US. US debt is about 10T. Why people care about China? If China stops lending, Feb will keep lending.

    EW

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  15. I have no financial background so I really don't understand what's going on here.

    Just it's funny that since treasury or whatever banks need money then Fed lend the money to them. The question is where Fed gets those money to lend? If simply priting money can lead us into a bull market and out of recession, then how come we had so many bear market and recessions in the past?

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  16. Taking out Government Spending, we actual are in a 10 year recession. Roughly, government borrowed 10T deficit (10% a year) in the past 10 years and get only 5% GDP. UK and other counties are doing the same.

    Y = C + I + E + G

    Y = GDP
    C = Consumer Spending
    I = Investment made by industry
    E = Excess of Exports over Imports
    G = Government Spending

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  17. Cobra,
    The problem with printing money is too much of good thing can kill the economy by inflation. It happened in 1970's and recently in 2003-2004 (housing bubble) and then 2007-2008 (commodities bubble).
    Unfortunately, goverment and bankers cannot be trusted with these things. Looks like we will have alternating inflation (money printing) and deflation (deleveraging) in the years to come.
    Jack

    PS: you were likely correct with the red closing today. I hope I'm right with my June 5 2008 analogy as I was close to be stopped out from my shorts.

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  18. The "expectation of something big to happen" is based on the bollinger bands constricting?

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  19. prince, the answer is yes.

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  20. Cobra, your

    0.0.1 Market Top/Bottom Watch

    The bottom of the chart "something big is going to happen", still valid? Something big happen today, $TNX shoot through the roof and 30 year fix mortgage interest rate rose 30%, yes that's fu**ing 30%! Wow! Bond sold off and so did equity... Is this what you mean by "something big is going to happen"? :)

    All I can see is that US of A if fu**ed and so is the government and so is it's citizen...

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  21. Yeah, people may not realize that today's yield surge would dramatically change our lifes in a near term.

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  22. $TNX RSI(14) went over 90. Not good. Last time we had that was mid 2007 and bed things started. Is this a beginning of the last leg down? GM bancrupcy may well be the catalyst.

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  23. TNX might already be the catalyst.

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  24. Anonymous, "is this a beginning of the last leg down?"... noway, SPX is going back to 200s

    ReplyDelete

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