04/28/2010 Market Recap: VIX MA ENV Buy Setup

TREND INDICATOR MOMENTUM INDICATOR COMMENT (Click link to see chart) Long-term 3 of 3 are BUY     Intermediate 2 of 3 are BUY 3 of 5 are NEUTRAL Non-Stop Model is in BUY mode Short-term 1 of 1 are SELL 5 of 6 are NEUTRAL SPY ST Model is in BUY mode

ATTENTION 1.0.6 SPY Unfilled Gaps: 16 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. 0.2.3 NYSE McClellan Oscillator: NYHGH new high could mean SPX new high ahead. 0.2.0 Volatility Index (Daily): Too high above MA ENV(10,20), also out of BB. BEARISH 0.1.1 SPX Intermediate-term Trading Signals: CPCE MA(10) too low. 0.2.2 Extreme Put Call Ratio Watch: CPCE MA(5) 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. 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 *Long if SPY is up tomorrow. The stop loss will be 1.5 x ATR(10). Reversal Bar *Long if SPY is up tomorrow. The stop loss will be 0.9 x ATR(10). NYMO Sell     Non-Stop     VIX MA ENV     *Long if SPY tomorrow’s open < tomorrow’s close. The stop loss will be 1 x ATR(10). 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 overbought and too high above MA(200). IWM UP   4.1.2 Russell 2000 iShares (IWM Weekly): Too high above MA(200). CHINA DOWN   EMERGING DOWN   Bearish 1-2-3 formation, target $39.90. CANADA UP   BOND ?   Testing important resistance, will upgrade to up from down if breakout. DOLLAR UP FXE breakdown to new low! GOLD UP   GDX UP   OIL ? $WTIC tests MA(50) again, will downgrade to down from up if breakdown. ENERGY UP   FINANCIALS DOWN   4.4.2 Financials Select Sector SPDR (XLF Weekly): Too high above MA(200). Bearish 1-2-3 formation, target $15.29. REITS UP MATERIALS UP

*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: MOSTLY THE MONTH’S LAST TRADING WEEK WAS RED SINCE AUG 2009

See 04/23 Market Recap for more details.

CYCLE ANALYSIS: THE NEXT IMPORTANT DATE IS 05/06

The next potential turn date is 05/06 (+-) which could either be a top or a bottom depending on how the market marches to that date. See 04/16 Market Recap for more details.

INTERMEDIATE-TERM: EXPECT ROLLER COASTER AHEAD

See 04/26 Market Recap for more details.

SHORT-TERM: A FEW LONG SETUP NEED CONFIRMATION TOMORROW

From SPY daily chart, today is a typical consolidation day therefore the direction is unknown, need see tomorrow (see 8.0.1 Small Body Bar Trading Rule for why). However as discussed in 04/27 Market Recap, if the market repeats the past Major Distribution Day pattern, then the small green day today probably means that the market was bottomed.

 

Of course, calling a market bottom for now is merely a speculation. For trading, we better have a good setup. And today we’re lucky to have one: 6.2.0a VIX Trading Signals (ENV), VIX dropped back into MA ENV(10, 20) triggering a potential long setup.

 

Below are the back test summary for the VIX MA ENV trading setup since 2002.

If wait until you’re sure that SPY tomorrow Open < tomorrow Close before entering a long position, the winning rate is 81%.

 

If buy at tomorrow’s open without waiting for a confirmation then the winning rate is 59%.