10/25/2010 Market Recap: Will the 3rd black bar be different?

TREND MOMENTUM COMMENT Long-term 2 of 2 are BUY   Intermediate 3 of 3 are BUY 3 of 5 are NEUTRAL SPY ST Model in BUY mode; Non-Stop in BUY mode. Short-term Model is BUY 6 of 6 are NEUTRAL The trend is up but I hold no position overnight. GANN DAY MOON:SOLAR CYCLE CONCLUSION 10/26 10/22 : 10/23 Next pivot date: 10/21 – 10/22, 10/25 – 10/27, 11/04

BULLISH 0.1.1 SPX Intermediate-term Trading Signals: Head and Shoulders Bottom breakout, target 1242. 09/27 Market Recap: 9 POMO within 20 trading days means 14%+ up in 3 months. 10/01 Market Recap: Positive September plus mid-term election means 11%+ up to year end. 10/05 Market Recap: 16 more trading days upswing? BEARISH *1.0.6 SPY Unfilled Gaps: 21 unfilled gaps, the max is 21. 10/15 Market Recap: AAII bull ratio (4-week average) too bullish. 10/15 Market Recap: Commercial (smart money) short Nasdaq 100 heavily according to COT Report. 10/08 Market Recap: Up off-season usually means down earning season. 10/22 Market Recap: Institutions are selling into strength. 10/19 Market Recap: AAPL is way too stretched. 10/15 Market Recap: Euro may retreat which may cause US$ carry trade unwind. 6.4.2c Extreme TICK Readings Watch: TICK too low, lower low or lower close ahead? Failed! 0.0.2 Combined Intermediate-term Trading Signals: CPCE trend line breakout, topped? No confirmed! 6.4.0 SPX and NYMO Divergence Watch: New high on negative NYMO readings, topped? 4.1.0 S&P 500 Large Cap Index (Weekly): NYSI STO(5,3,3) sell signal.

SPY SETUP ENTRY DATE STOP LOSS INSTRUCTION: Mechanic signals, back test is HERE, signals are HERE. TRADING PLATFORM: SSO/SDS, UPRO/SPXU Non-Stop 09/07 L N/A Partial profits on 09/24. ST Model 09/24 L 10/12 Low

SHORT-TERM: WILL THE 3RD BLACK BAR BE DIFFERENT?

Nothing to say today. A 3rd black bar (open high close lower but still above the previous close) is formed on the SPY daily chart. Since the previous 2 didn’t work so the question is: Will the 3rd black bar be different? Frankly, bears should have the best chances this week because the seasonality is very bear friendly (See 10/22 Market Recap seasonality session).

 

1.2.0 INDU Leads Market, this is a chart worth bull’s attention because INDU is very close to its April high now, if it could breakout above it then chances are good that SPX will breakout above its April high as well.

 

0.0.2 Combined Intermediate-term Trading Signals, this is just a follow up, trend line breakout not held, so the top signal may become invalid.

 

INTERMEDIATE-TERM: BEARISH BIASED, PIVOT DATE EITHER AROUND 10/22 OR 10/26 OR 11/04

Maintain the intermediate-term bearish view, the pivot date could be either around 10/22 or 10/26 or 11/04, see 10/15 Market Recap for more details. Below are summaries of all the arguments supporting my intermediate-term bearish view:

1. As mentioned in 10/15 Market Recap, commercial (smart money) holds record high short positions against Nasdaq 100.
2. As mentioned in 10/15 Market Recap, AAII bull ratio (4-week average) is way too bullish.
3. As mentioned in 10/22 Market Recap, institution selling keeps increasing.
4. As mentioned in 10/08 Market Recap, statistically, a strong off-season could mean a weaker earning season.
5. As mentioned in 10/11 Market Recap, statistically VIX at 1 month low going into October was not a good sign.
6. As mentioned in 10/15 Market Recap, US$ may rebound which is not good for the broad market.
7. As mentioned in 10/19 Market Recap, AAPL MACD is now too stretched which could mean a top for QQQQ.
8. As mentioned in 10/22 Market Recap, NYSI Weekly STO(5,3,3) sell signal means choppy ahead.

SEASONALITY: LAST TRADING WEEK AND LAST 2 TRADING DAYS OF EACH MONTH SINCE AUG 2009 WERE BEARISH

See 10/22 Market Recap for more details.

For October Seasonality chart please refer to 10/01 Market Recap.

HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST

1. The market appears a little stretched as lots of ETFs weekly %B are way too high.
2. With possible Euro pullback, watch potential weakness on commodity related ETFs like XLE, XLB and XIU.TO.
3. Financials and home builders are lagging, so how far can IYR (realty) go?

	TREND	COMMENT
QQQQ	UP
NDX Weekly		NDX to SPX ratio too high. %B too high with negative divergence.
IWM	UP
IWM Weekly		%B too high with negative divergence.
CHINA		*Primary downtrend line breakout? To be confirmed.
CHINA Weekly		Extremely high %B.
EEM	*UP	*Triple black bar, pullback?
EEM Weekly		EEM to SPX ratio too high.
XIU.TO	*UP	TOADV MA(10) too high.
XIU.TO Weekly
TLT	LA	1-2-3 trend change to be confirmed, TLT could start an intermediate-term downtrend.
TLT Weekly
FXE	LA	*Bearish reversal bar plus double black bars, combining with weekly chart, so pullback?
FXE Weekly		Stalled at Fib confluences area, %B too high with negative divergence, too high above MA(40).
GLD	*UP
GLD Weekly
GDX	*UP	On support, BPGDM sell signal though.
GDX Weekly
USO	UP
WTIC Weekly
XLE	UP	*Black bar and Shooting Star, combining with weekly chart, so pullback?
XLE Weekly		%B too high with negative divergence.
XLF	*DOWN
XLF Weekly		Head and Shoulders Top in the forming?
IYR	UP	*Bearish reversal bar plus double black bar, pullback?
IYR Weekly		Home builders are lagging.
XLB	*UP
XLB Weekly		%B too high with negative divergence.

1. Please make sure you understand how to use the table above. The purpose of this report is to provide info so contradictory signals are always presented.
2. Position reported in short-term session of the table above is for short-term model only, I may or may not hold other positions which will not be disclosed.
3. Conclusions can be confirmed endlessly, but trading wise, you have to take actions at certain risk level as soon as you feel the confirmation is enough. There’s no way for me to adapt to different risk levels therefore offer no trading signals will be given in this report except the mechanical signals such as SPY ST Model.
4. * = New update; Blue Text = Link to a chart in my public chart list; UP/DOWN = Short-term trend; L A = Lateral Trend