05/04/2010 Market Recap: What does 2 Major Distribution Day within 5 days mean?

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

ATTENTION 1.0.6 SPY Unfilled Gaps: 15 unfilled up gaps (max was 18), 2 unfilled down gaps.  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): More than 20% above MA(10). BEARISH 0.1.1 SPX Intermediate-term Trading Signals: CPCE 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. 04/20 Market Recap: Record high Climax Buying. 04/20 Market Recap: Weekly Bearish Engulfing could mean a top. *0.1.0 SPY Short-term Trading Signals: Diamond Top, target $114.38. CONCLUSION 0.0.2 Combined Intermediate-term Trading Signals, although the primary sell signal is not yelling yet, but sometimes NYSI and BPSPX sell signals did work, so be careful here.

SPY SETUP ENTRY DATE STOP LOSS INSTRUCTION: Mechanic signals, back test is HERE, signals are HERE. TRADING VEHICLE: SSO/SDS, UPRO/SPXU ST Model *Stopped out of long position with loss. Reversal Bar     NYMO Sell     Non-Stop     VIX MA ENV       OTHER ETFs TREND TRADE COMMENT – *New update. Click BLUE to see chart if link is not provided. QQQQ UP   IWM UP     CHINA DOWN   EMERGING *DOWN   *Confirmed bearish 1-2-3 formation, so the trend is down. EUROPEAN DOWN   CANADA UP   Lots negative divergence and I don’t like the BPTSX bearish crossover. Plus 2 reversal bars in a row today, should mean something. BOND *UP   *Confirmed breakout, upgrade the trend to up from down. ChiOsc is a little too high though. EURO DOWN   YEN DOWN     GOLD UP   4.3.0 streetTRACKS Gold Trust Shares (GLD Weekly): Head and Shoulders Bottom, target $129.99. Also there’s a small Head and Shoulders Bottom, target $121.96. OIL ? ENERGY UP   FINANCIALS ?   Price overlap, so could be a failed bearish 1-2-3 formation, the trend is unclear. REITS UP MATERIALS *DOWN   *Bearish 1-2-3 formation breakdown, so downgrade the trend to down from 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: MONDAY AND FRIDAY ARE BULLISH

See 04/30 Market Recap for more details.

CYCLE ANALYSIS: COULD BE A CYCLE TOP AROUND 05/03 TO 05/10

See 04/30 Market Recap for more details.

INTERMEDIATE-TERM: EXPECT ROLLER COASTER AHEAD OR THE MARKET COULD BE TOPPED

See 04/30 Market Recap for more details.

SHORT-TERM: COULD SEE REBOUND BUT COULD BE MORE SELLINGS AFTER THE REBOUND

Today is a Major Distribution Day (NYSE Down Volume : NYSE Up Volume >= 9). There’re 3 rules about the Major Distribution Day:

1. 6.3.2a Major Distribution Day Watch, the day after a Major Distribution Day is more likely a green day.
2. 6.3.2b Major Distribution Day Watch, 2 Major Distribution Day within 5 days confirms an intermediate-term down trend, although a short-term rebound is also very likely.
3. 6.3.2c Major Distribution Day Watch, the market bottomed when NYSE Down Volume : NYSE Up Volume >= 35.

Among those 3 rule, the rule number two is of the most importance to us for now, because today is the 2nd Major Distribution Day in the past 5 days. The chart below should be clear enough to prove the rule – short-term rebound maybe, but more selling ahead after the rebound.

 

If indeed as the 2nd Major Distribution Day rule argues, more selling ahead, then the text book target, according to the Diamond Top pattern, is around $114.38, which means that the January highs could be tested. Take a look at 1.0.0 S&P 500 SPDRs (SPY 60 min), if interested, the pattern could also be seen as a Complex Head and Shoulders Top, the target is almost identical to that of the Diamond Top.

 

For tomorrow, not only the Major Distribution Day rule number 1 (see After Bell Quick Summary) says a green day, but also there’re 2 additional charts argue so:

0.2.0 Volatility Index (Daily), VIX rose more than 18%, buy at today’s close sell at tomorrow’s close, bull has 82% chances.

 

Intraday Cumulative TICK from sentimentrader, way too panic, so it also argues for a rebound tomorrow.