04/01/2010 Market Recap: 6 Consecutive Reversal Bars

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

ATTENTION 2.4.4 NYSE McClellan Oscillator: Negative divergence. BULLISH 4.1.0 S&P 500 Large Cap Index (Weekly): Head and Shoulders Bottom, target 1246 1.0.2 S&P 500 SPDRs (SPY 60 min): Head and Shoulders Bottom, target 119.42. BEARISH *1.0.2 S&P 500 SPDRs (SPY 60 min): 16 unfilled gaps. (max was 16) 1.1.0 Nasdaq Composite (Daily): 9 unfilled gaps. (max was 10) 0.0.3 SPX Intermediate-term Trading Signals: CPCE MA(10) too low. 4.0.4 Dow Theory: Averages Must Confirm: NYHILO too high. *1.1.0 Nasdaq Composite (Daily): NDXA50R is way too high. 03/25 Market Recap: Smart/dumb confidence spread is too large. 4.1.0 S&P 500 Large Cap Index (Weekly): BPSPX too high. 0.0.9 Extreme Put Call Ratio Watch: CPCE MA(5) too low. *2.3.4 Nasdaq Total Volume/NYSE Total Volume: A little bit too high. CONCLUSION Bearish signals are accumulated enough to justify a short sell. For aggressive traders only. 03/25, another Bearish Engulfing and the NYMO Sell setup was triggered.

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 03/22 low Reversal Bar   NYMO Sell 03/25 S 03/25 high Non-Stop     Newly added setup, will give signal on this setup the next time it’s triggered. OTHER ETFs TREND MACD COMMENT – *New update. Click BLUE to see chart if link is not provided. When TREND is up, use MACD buy, when TREND is down, use MACD sell. QQQQ UP *SELL *6.4.6 QQQQ Black Bar Watch: doesn’t look good. 4.1.1 Nasdaq 100 Index (Weekly): BPNDX too high. IWM UP SELL   CHINA ? BUY *Sorry my mistake, Symmetrical Triangle on 4.1.4 Shanghai Stock Exchange Composite Index (Weekly) not breakout yet, so intermediate-term trend still is not clear. EMERGING *UP BUY   CANADA UP SELL 4.1.5 iShares CDN S&P/TSX 60 Index Fund (XIU.TO Weekly): 3 Doji under important resistance. Lots of negative divergence plus BPTSX is too high. Expect pullback. BOND DOWN SELL DOLLAR UP *SELL Head and Shoulders Bottom, target $24.28. GOLD DOWN *BUY GDX DOWN *BUY OIL *UP *BUY   ENERGY ? *BUY FINANCIALS UP BUY REITS UP *SELL False breakout on narrow range so the real breakout could be on the downside. MATERIALS ? BUY 4.4.4 Materials Select Sector SPDR (XLB Weekly): BPMATE too high.

*Please make sure you understand how to use the table above. The main purpose of this report is to provide information so contradictory signals are always presented.

SEASONALITY: APRIL IS THE BEST MONTH FOR THE DOW

According to the Stock Trader’s Almanac, April is the best month for the Dow, average 1.9% gain since 1950.

The April seasonality chart from sentimentrader.

 

CYCLE ANALYSIS: CYCLE TOP AROUND 04/01, COULD PULLBACK TO AROUND 04/12

For 3 reasons below expect cycle top around 04/01, pullback to around 04/12. See 03/31 Market Recap for more details:

1. 1.0.7 SPX Cycle Watch (Daily), 2 cycles due on 03/31 and 04/01, both look like a cycle top.
2. 4.1.0 S&P 500 Large Cap Index (Weekly), BPSPX is way too overbought which could mean a red week the next week.
3. As mentioned in 03/26 Market Recap, the next important turning points are around 04/12 to 04/15. 

INTERMEDIATE-TERM: EXPECT ROLLER COASTER AHEAD

Nothing new, according to the II Survey, too many people expected a correction, so the stock market should rise to a new high first before actually pulling back. Basically, my guess is that we’ll repeat the year 2004 roller coaster pattern. See 03/19 Market Recap for more details.

SHORT-TERM: EXPECT PULLBACK SOMETIMES IN THE NEXT WEEK

Since the table above has accumulated enough top signals, I think it’s reasonable to believe that the cycle analysis might work this time that the market could pullback from 04/01 to around 04/12.

There’re a few top signs generated on Thursday:

1.1.0 Nasdaq Composite (Daily), NDXA50R (Percentage of Nasdaq 100 stocks above MA(50)) rose above 92 again. All the past records when NDXA50R >= 92, available from the stockcharts are listed below.

 

6.2.5a VIX Hollow Red Bar Watch, VIX mid sized hollow red bar usually means a short-term top.

 

0.0.5 QQQQ Short-term Trading Signals, 6 reversal bars (either open > close or Doji) in a row plus lots of negative divergence, should mean something, shouldn’t it?

 

6.4.6 QQQQ Black Bar Watch, a little guess about the pullback target, well, if indeed.

 

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.

Looks like it’s too late to long stocks now as the market is way too overbought. Waiting for a better chance.