04/20/2010 Market Recap: CPCI Rose Big on a Strong Up Day

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 Non-Stop Model is in BUY mode Short-term 1 of 1 are BUY 6 of 6 are NEUTRAL SPY ST Model is in BUY mode

ATTENTION 0.2.3 NYSE McClellan Oscillator: Negative divergence. *1.0.6 SPY Unfilled Gaps: 17 unfilled up gaps. (max was 18) 0.1.1 SPX Intermediate-term Trading Signals: Could be an Ascending Broadening Wedge in the forming. BULLISH 4.1.0 S&P 500 Large Cap Index (Weekly): Head and Shoulders Bottom, target 1246. BEARISH 0.1.1 SPX Intermediate-term Trading Signals: CPCE and CPC MA(10) too low. 4.0.4 Dow Theory: Averages Must Confirm: NYHILO too high. 4.1.0 S&P 500 Large Cap Index (Weekly): BPSPX too high. *0.2.2 Extreme Put Call Ratio Watch: CPCE MA(5) too low. CPCI too high.  8.1.5 Normalized CPCE: New record low. 04/14 Market Recap: Smart/dumb confidence spread at sentimentrader is too large. 04/14 Market Recap: Too many bearish extreme signals at sentimentrader. 0.0.2 Combined Intermediate-term Trading Signals: CPCE broke the trend line, so top confirmed? *6.2.3 VIX:VXV Trading Signals: A little bit too low. CONCLUSION 04/19 – If it’s the same post Major Distribution Day pattern then the market was bottomed.  Just with the put call ratio this extreme, I don’t know how the market is going to handle it? In wait and see mode.

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 04/08 low Reversal Bar *04/20 L 0.9xATR(10)   NYMO Sell     *Sell short if SPY tomorrow’s open > tomorrow’s close. The stop loss will be 0.8 x ATR(10) in case you need it to calculate the position size. Non-Stop     Newly added setup, will give signal on this setup the next time it’s triggered. OTHER ETFs TREND TRADE COMMENT – *New update. Click BLUE to see chart if link is not provided. QQQQ UP   4.1.1 Nasdaq 100 Index (Weekly): BPNDX too high. IWM UP   *Morning Doji Star? Not sure. CHINA ?   Big red bar always led to more red days, so expect more pullbacks. EMERGING UP   *Morning Star, so more rebound? CANADA UP   4.1.5 iShares CDN S&P/TSX 60 Index Fund (XIU.TO Weekly): BPTSX is too high. BOND DOWN   Testing resistance. DOLLAR UP Head and Shoulders Bottom, target $24.28. 4.2.1 US Dollar Index Bullish Fund (UUP Weekly): Hollow red bar, rebound? *6.4.5 GLD and UUP Watch: GLD black bar means UUP gap up tomorrow morning? GOLD UP   GDX UP   OIL UP ENERGY UP   FINANCIALS UP   REITS UP MATERIALS UP   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: NO UPDATE 

CYCLE ANALYSIS: THE NEXT IMPORTANT DATE IS 04/20

The market could rebound to 04/20 (+-) then pullback to 05/06 (+-)? See 04/16 Market Recap for more details.

INTERMEDIATE-TERM: EXPECT ROLLER COASTER AHEAD

Maintain the forecast for Roller Coaster ahead for 3 reasons:

1. 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 (See 03/19 Market Recap for more details). Since we’ve seen the new high so now it’s the pullback’s turn.
2. Statistically when the market has been up, especially at a 52 week high, entering the earnings season, the average performance during earnings season is usually not good (See 04/09 Market Recap for more details).
3. 6.1.0 Extreme CPCE Readings Watch, take a look at how the market behave when CPCE was extremely low. I expect no difference this time (choppy ahead like past) especially when there’re simply so many bearish extremes accumulated in the table above.

SHORT-TERM: COULD BE SOME WEAKNESS AHEAD

There’re 2 not so bull friendly signals today, plus the All Up Day mentioned in today’s After Bell Quick Summary, so my guess is we could see some weakness in a very short-term.

0.2.2 Extreme Put Call Ratio Watch, CPCI is a little bit too high. The fact it rose big, meaning big guys bought lots of index put on a strong up day like today is a little bit suspicious.

 

6.2.3 VIX:VXV Trading Signals, a little bit too low now. VIX to VXV ratio seemed worked OK recently.

Another very interesting thing today was that the Nasdaq Intraday Cumulative TICK (courtesy of sentimentrader) skyrocketed again. Very very bullish, perhaps a little bit too bullish. The last time I WOW-ed was in the 04/14 Market Recap. Coincidence? Well, we’ll see.

The chart below explains why the Nasdaq Intraday Cumulative TICK skyrocketed today, because there’s no minus TICKQ almost whole day today as everybody rushed to buy buy buy and buy, this really is bullish.

Let’s take a look at how many people bought AAPL CALLs (from sentimentrader morning report). Well, judging by AAPL AH actions, everybody will be rich tomorrow morning at open. Making money could be that easy, no wonder I had a reader asking me this morning, since all the bearish signals in the table above didn’t work why bother mentioning them! Well, that’s certainly was a good question.

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.