05/13/2010 Market Recap: About 1-2-3 Formation Trading Setup

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

ATTENTION 1.0.6 SPY Unfilled Gaps: 12 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 0.2.1 10Y T-Bill Yield: Bottomed? 0.1.3 Nasdaq 100 Index Intermediate-term Trading Signals: NADVN too high. 0.1.1 SPX Intermediate-term Trading Signals: CPC MA(10) too high. BEARISH CONCLUSION

SPY SETUP ENTRY DATE STOP LOSS INSTRUCTION: Mechanic signals, back test is HERE, signals are HERE. TRADING VEHICLE: SSO/SDS, UPRO/SPXU, RSP ST Model 05/06 S 1.9xATR(10) Reversal Bar     NYMO Sell     Non-Stop 05/11 S N/A OTHER ETFs TREND TRADE COMMENT – *New update. Click BLUE to see chart if link is not provided. QQQQ DOWN     IWM DOWN     CHINA DOWN   *2 big green bars in a row usually means rebound more. EMERGING DOWN     EUROPEAN DOWN   4.1.7 Vanguard European VIPERs (VGK Weekly): Bearish 1-2-3 formation, target $35.54. CANADA ?   BOND UP   *0.2.1 10Y T-Bill Yield, 4 reversal bars rejected at resistance so yield could pullback while bond could rebound. *ChiOsc is way too low. EURO DOWN   4.2.1 Currency Shares Euro Trust (FXE Weekly): Testing major support. Also too low below MA(200) now. *ChiOsc is way too low. YEN ?   GOLD UP   4.3.0 streetTRACKS Gold Trust Shares (GLD Weekly): Head and Shoulders Bottom, target $129.99. ChiOsc is way too high. OIL DOWN ENERGY DOWN   FINANCIALS DOWN   REITS UP   MATERIALS DOWN

*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

SPX TIME AND TARGET ANALYSIS: THE PULLBACK COULD LAST TO 05/23

See 05/10 Market Recap for more details.

INTERMEDIATE-TERM: 05/06 LOW WILL BE BROKEN BUT NO EVIDENCE SAYS THIS IS A START OF A NEW BEAR MARKET

See 05/07 Market Recap for more details.

WARNING: If you don’t understand the true meaning of overbought/oversold, please skip the session below. Generally, you should try your best not to trade against the trend. Trading purely based on overbought/oversold while against the trend is lethal to the health of your account. Before going further, please make sure you understand how to use the table above.
SHORT-TERM: PAY ATTENTION TO 1-2-3 FORMATION SETUP

The drop today may mean nothing, the market direction is still not clear, although still temporarily maintain the forecast for expecting a 2nd leg down to test 05/06 low.

0.2.0 Volatility Index (Daily), VIX chart is a little bit ugly because Hammer has 60% chances of leading to a bullish reversal which is not good for the broad market. It needs a confirmation tomorrow though.

 

0.2.1 10Y T-Bill Yield, some people may disagree, but to me, this chart doesn’t look good as 4 reversal bars were formed under an important resistance. If yield pullback so will the broad market. Don’t neglect the yield, from my experiences, the yield always leads the market.

 

Take a look at the chart below if interested, because I often mention 1-2-3 formation, so I’d like to take this chance to tell you a little about the typical trading setup for this pattern. However, by no means, I imply that you should short, just I really don’t have anything else to say today.

 

Now take a look at 0.1.0 SPY Short-term Trading Signals, should conform the 1-2-3 formation sell setup, so break down below today’s low is a short, well, again, theoretically.