04/06/2010 Market Recap: More Bearish Extremes

TREND INDICATOR MOMENTUM INDICATOR COMMENT (Click link to see chart) Long-term 3 of 3 are BUY     Intermediate 3 of 3 are BUY 4 of 6 are OVERBOUGHT SPY ST Model is in BUY mode Short-term 1 of 1 are BUY 5 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. 1.0.4 S&P 500 SPDRs (SPY 15 min): Ascending Triangle breakout, target $119.96. BEARISH 1.0.2 S&P 500 SPDRs (SPY 60 min): 17 unfilled gaps. (max was 17) 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. 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. 04/05 Market Recap: Too much call buying.  *8.1.5 Normalized CPCE: Too low. *04/06 Market Recap: Smart/dumb confidence spread is too large. *04/06 Market Recap: Too many bearish extreme signals at sentimentrader. CONCLUSION So far no bearish signals worked but they are simply too many, so I won’t attempt any short until the next NYMO Sell setup is triggered. Still hold the SPY ST Model long position, but no more long will be added.

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 *03/26 low *Adjust stop loss. Reversal Bar   NYMO Sell       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 4.1.1 Nasdaq 100 Index (Weekly): BPNDX too high. IWM UP SELL   CHINA ? BUY   EMERGING UP BUY   CANADA UP SELL 4.1.5 iShares CDN S&P/TSX 60 Index Fund (XIU.TO Weekly): BPTSX is too high. BOND DOWN SELL DOLLAR UP SELL Head and Shoulders Bottom, target $24.28. GOLD ? BUY GDX ? BUY *2 reversal bars in a row, stalled under resistance, could pullback. OIL UP BUY   ENERGY UP BUY FINANCIALS UP BUY REITS UP SELL MATERIALS UP 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. See 04/01 Market Recap for the April Seasonality chart.

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

See 04/01 Market Recap, originally I thought the market could be topped around 04/01 then pullback to around 04/12. I’ll give another day or two for this cycle to work out but looks like it could be wrong AGAIN.

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: MORE BEARISH EXTREMES

Bearish extremes keep piling up. I have no idea when they will work, but sooner or later they sure will and the result won’t be pleasant. Take a look at today’s After Bell Quick Summary if you haven’t done so because today is an All Up Day.

8.1.5 Normalized CPCE, the so called “normalized” is to use the spread between MA(10) and MA(200) instead of using the absolute value so as to eliminate the bias the equity put/call ratio exhibits depending on what type of market we are in, therefore the effectiveness is better than simply using CPCE MA(5) and MA(10). However since different method of measuring CPCE has different time frame so I’ve listed all these 3 charts in the table above.

 

Indicators at extremes from sentimentrader, around 35% of the sentimentrader indicators are now at bearish extreme which is too high.

 

Smart money/dumb money confidence from sentimentrader, dumb money confidence as well as the spread between the smart money and dumb money is too high.

Rydex % of sectors with assets > MA(50) from sentimentrader, in other word is that the retailers are very bullish.

 

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.