03/03/2010 Market Recap: The Appetite for Higher Beta Stocks is Too High

TREND INDICATOR MOMENTUM INDICATOR COMMENT (Click link to see chart) Long-term 3 of 3 are BUY     Intermediate 2 of 3 are BUY 4 of 6 are NEUTRAL SPY ST Model is in BUY mode Short-term 1 of 1 are BUY 3 of 8 are NEUTRAL

BULLISH 1.0.2 S&P 500 SPDRs (SPY 60 min): Could be Head and Shoulders Bottom, target 119.42. BEARISH 6.4.A SPY Bottom Shape: Could be another leg down to test the low.  0.0.8 SPX:CPCE: A top was confirmed. 1.0.2 S&P 500 SPDRs (SPY 60 min): 14 unfilled gaps. (max was 15) 1.1.0 Nasdaq Composite (Daily): 9 unfilled gaps. (max was 9) 2.3.4 Nasdaq Total Volume/NYSE Total Volume: *Too high, topped? CONCLUSION

SPY SETUP ENTRY DATE STOP LOSS INSTRUCTION: Mechanic signals, back test is HERE, signals are HERE. TRADING VEHICLE: SSO/SDS, UPRO/SPXU ST Model 02/26 L breakeven Reversal Bar 02/26 L breakeven NYMO Sell       VIX MA ENV

OTHER ETFs TREND COMMENT – *New update. Click BLUE to see chart if link is not provided. QQQQ   *Black bar, could pullback. IWM   *ChiOsc too high. CHINA   EMERGING Down *Black bar and under multiple MA resistances, could pullback. CANADA FINANCIALS   REITS   MATERIALS     ENERGY Down Broadening Top in the forming, the breakout direction is unknown. OIL   GOLD Down DOLLAR UP Head and Shoulders Bottom. *ChiOsc too low. BOND Down

INTERMEDIATE-TERM: VERY CLOSE TO A TURNING POINT, NOT SURE IT’S A TOP OR BOTTOM THOUGH

See 03/01 Market Recap, there’re several cycles due this week or early next week, among them the 03/08 could be the most important one. The market rises into 03/08 then 03/08 could be a top while the market drops into 03/08 then 03/08 could be a bottom.

SHORT-TERM: A TOP COULD BE VERY CLOSE

From comments at my forum, some people don’t understand the title for the last night report. Actually, it refers to chart 2.3.4 Nasdaq Total Volume/NYSE Total Volume, Nasdaq volume to NYSE volume ratio too high means people are chasing higher beta stocks too much, therefore it usually means a top. Just in the past two reports, I wasn’t sure if the ratio was high enough. But today it' looks like the market could be topped (or very close). For the past performance about this signal, please check chart 8.1.1 Normalized NATV/NYTV, so far it’s very reliable. So suggest bulls taking at least partial profits here. By the way, my SPY ST Model has no design for partial profit taking so please don’t expect it to give sell signal here. I think you’d have observed this model for quite a time, so far it worked not bad, right? Except it usually stopped out flat. This actually means that you have to find an appropriate time to take partial profits by yourself. Nothing is perfect, taking profits too soon, sometimes you may miss a big run but taking profits too late sometimes you loss everything, the model is designed to stay in a trend as long as possible so the solution for “stopped out flat” is taking a partial profit in the middle.

 

About the black bar mentioned in today’s After Bell Quick Summary, I think most of you probably have forgotten the past patterns. The chart below should remind you about that. It doesn’t mean that the market will be red tomorrow but a short-term top is close. If the market doesn’t pullback immediately then mostly it will consolidate for a few days, the chance for a big up after a black bar is not very high.

 

1.0.7 SPX Cycle Watch (Daily), take a look at the daily cycle chart again, still looks like a top.

 

STOCK SCREENER:  For fun only, I may not actually trade the screeners. Since SPY ST Model is in BUY mode, only LONG candidates are listed. For back test details as well as how to confirm the entry and set stop loss please read HERE. Please make sure you understand the basic risk management HERE.

Since the intermediate-term direction is not clear, so no stock screeners from now on until the dust settles.