05/14/2010 Market Recap: Ascending Broadening Wedge

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

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 0.1.1 SPX Intermediate-term Trading Signals: Ascending Broadening Wedge? Target: 1008 to 1019. 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 For general direction guide only. Others *05/14 S 05/13 High *1-2-3 formation sell setup (see 05/13 Market Recap). Info only. 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. *4.1.4 Shanghai Stock Exchange Composite Index (Weekly): Testing support. EMERGING DOWN     EUROPEAN DOWN   4.1.7 Vanguard European VIPERs (VGK Weekly): Bearish 1-2-3 formation, target $35.54. CANADA ?   BOND UP   EURO DOWN     YEN ?   GOLD UP   4.3.0 Gold Trust Shares (GLD Weekly): Head and Shoulders Bottom, target $129.99. 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: MONDAY AND FRIDAY ARE BULLISH

According to Stock Trader’s Almanac:

1. Monday before May Expiration, Dow up 19 of last 21.
2. May expiration day, Dow up 5 of last 8.

INTERMEDIATE-TERM: SPX PULLBACK TARGET COULD BE AROUND 1008 TO 1019 AREA

Maintain the previous forecast below:

1. 05/06 low may be broken but no evidence says this is a start of a new bear market. See 05/07 Market Recap for more details.
2. The pullback could last to 05/23 at least. See 05/10 Market Recap for more details.

The chart below is my most recent speculation about the pullback target. Because the Monday to Thursday’s rebound conforms the partial rise pattern so now it looks like the Ascending Broadening Wedge is as real as it gets, therefore combining the text book target and Fib confluences area and weekly MA(89), the possible target could be around 1008 to 1019 area. As for when the target will be hit, I have no idea. The only thing I can say is that the minimum pullback time could last to 05/23.

 

For your reference, the chart below shows why weekly MA(89) is important.

 

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: BEAR FLAG

I read a lot of market analysis, so far almost all expect a Monday rebound. I’m not sure if this is a bad sign, after all, not every weekend, will we see someone jumping out yelling that he/she will print $1,000,000,000,000. 1.0.0 S&P 500 SPDRs (SPY 60 min), could be a Bear Flag in the forming, so most likely the pullback isn’t over yet. Just I’m not sure if the flag has further to go before breaking down.