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SEASONALITY: THE NEXT MONDAY AND FRIDAY ARE BULLLISH
According to Stock Trader’s Almanac:
- Monday before August expiration, Dow up 11 of last 14.
- August expiration day bullish lately, Dow up 6 in a row 2003-2008.
INTERMEDIATE-TERM: BEARISH BIASED
The conclusion:
- The correction since 04/26 isn’t over. See 07/30 Market Recap for more details.
- The 07/01 low may be tested. *Why 07/01 low? Because the Bearish Rising Wedge text book target is at 07/01 low. See 1.0.0 S&P 500 SPDRs (SPY 60 min).
As mentioned in the Friday’s After Bell Quick Summary, because the SPY ST Model is still in buy mode so officially to me, the intermediate-term trend is still up. However, since there’re quite a few not so bull friendly signals on the horizon, therefore, even you truly believe that we’re in 3 of 3 primary bull, at least don’t be too aggressive in buying this dips yet.
Now, let’s talk about all those not so bull friendly signals.
4.1.0 S&P 500 Large Cap Index (Weekly), statistically, a weekly Bearish Engulfing is bearish. I’ve discussed this in 06/25 Market Recap and 04/30 Market Recap, so I’ll not bother to blah blah again here. Simply from the chart below, we can see that all the recently weekly Bearish Engulfing were not at all bull friendly, and also the NYSI STO at bottom at least argues that there’s not much room left on the upside (even if you really believe 3 of 3 primary bull) and furthermore, the RSI seems in a bear market position.
The statistics below is what I listed in the 06/25 Market Recap. Short at Friday’s close, cover at close 1 week, 2 week, 3 week, 4 week, 5 week and 6 week later at close since 1988, looks like although the next week is neutral, but the next next week, the next next next week and the next next next next week are generally bearish. As for the fact the next week is neutral, I’ll mention it again in the short-term session below, which fits very well what I mentioned in the 08/11 Market Recap – there could be a tradable bottom around 08/17.
In 08/12 Market Recap, I mentioned the Hindenburg Omen, although theoretically, to be really really bearish, a cluster of Hindenburg Omen is needed, however, from the table below (courtesy of sentimentrader, back tested since 1965), looks to me, even a single Hindenburg Omen is bearish enough.
| 1 Day Later | 1 Week Later | 2 Weeks Later | 1 Month Later | 3 Months Later | |
| Avg Return | -0.2% | -0.5% | -1.0% | -1.6% | -2.6% |
| % Positive | 45% | 33% | 39% | 35% | 29% |
0.0.2 Combined Intermediate-term Trading Signals, although the SPY ST Model is in buy mode, but another one of my important intermediate-term model is in sell mode now. The sell signal in this model is accurate which can be proven from the statistics below since year 2004 (when the first official CPCE record started). Short at Friday’s close, cover 2 weeks later at close, the winning rate would be 73%. So strictly speaking, by the way, I should say that according to my intermediate-term trading model, the intermediate-term trend is mixed.
Now look at the T2105 mentioned in 08/12 Market Recap. A new high reached on Friday. Pay attention to the general uptrend of the T2105 while at the same time the market correction is getting bigger and bigger! So be careful.
SHORT-TERM: PULLBACK TO 08/17 THEN REBOUND TO 08/23 OR STRAIGHT SELL OFF TO 08/23?
I believe there’s at least one more drop ahead. I’m not sure if the market would pullback to around 08/17 then rebound to around 08/23 or the worst case, go straight down to around 08/23. The straight down to 08/23 is more speculative then bottoms around 08/17 then rebounds to 08/23. I’m pretty sure that around 08/23 would be an very important pivot date either top or bottom.
Why I think there is at least one more drop? 1.0.0 S&P 500 SPDRs (SPY 60 min) shows a possible Bear Flag or Pennant in the forming, plus no positive divergence yet on the RSI above, so likely the pullback isn’t over yet.
0.2.5 NYSE Total Volume, very low volume is generally a top sign, no bottom ever acts like this. A sharp pullback like we’re having now should end at certain oversold level while volume down is not at all a characteristic of an oversold condition. Another simple way is to take a look at the table above, short term has not a single oversold signal yet, right?
The Fib confluences area in the chart below could be the most possible pullback target. As for time target, I’ve explained in the 08/11 Market Recap, because 6.3.2c Major Distribution Day Watch, NYDNV:NYUPV > 35, so within 2 to 4 trading days, there could be a tradable bottom, considering the Fib 23.6% time resistance and the fact all the recent pullback lasts 3 to 8 trading days, so around 08/17 turnaround Tuesday could be a tradable bottom. The market will rebound to around 08/23 thereafter.
Why rebound to 08/23? The chart below illustrates that from various time calculating method, the confluences area is from 08/22 to 08/24, so very likely, 08/23+- could be a pivot date. Although strictly speaking, whether the market pullbacks to around 08/17 then rebounds to around 08/23 or go straight down to around 08/23, is hard to say, but considering all the reasons mentioned above about why the 08/17 could be the pivot date and the statistics about weekly Bearish Engulfing mentioned in the intermediate-term session above that the next week is not bearish, so the chances for the market to pullback to around 08/17 then rebound to around 08/23 are a little bit higher.
HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST
| TREND | COMMENT – *New update. Click BLUE to see chart if link is not provided. | |
| QQQQ | UP | |
| IWM | UP | |
| CHINA | UP | |
| EMERGING | UP | 4.1.6 iShares MSCI Emerging Markets (EEM Weekly): EEM to SPX ratio too high. |
| EUROPEAN | UP | |
| CANADA | UP | |
| BOND | UP | *Breakout? |
| EURO | UP | |
| GOLD | UP | |
| GDX | DOWN | |
| OIL | UP | |
| ENERGY | UP | |
| FINANCIALS | UP | |
| REITS | UP | 4.4.3 Real Estate iShares (IYR Weekly): Home builder is lagging, be careful. |
| MATERIALS | UP |
