10/28/2010 Market Recap: NYMO Sell Setup Triggered

TREND MOMENTUM COMMENT Long-term 2 of 2 are BUY   Intermediate 2 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, I hold both long and short 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? 10/26 Market Recap: Average 2.7% gain during the 8 trading days surrounding midterm election. BEARISH 1.0.6 SPY Unfilled Gaps: 20 unfilled gaps, the max was 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. 6.4.0 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. 6.1.9b Extreme ISEE Index Readings Watch: ISEE Indices & ETFs Only Index <= 30, top close?

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 10/19 Low NYMO Sell *10/28 S 2*ATR(10) *Short trigged on 10/28. Reference only, not meant to be followed.

SHORT-TERM: NYMO SELL SETUP TRIGGERED WHICH HAD 68% WINNING RATE

As mentioned in yesterday’s report, if bulls cannot decisively breakout 10/25 high while pullback in the middle then bears may have some hopes. So today’s action gave bear a little hope, however a breakdown below 10/27 low is a must, only in this way, a pair of lower high and lower low could then be formed thus implying a possible trend change. So tomorrow or the next week, the show is either on 0/25 high or 10/27 low. Let’s see whichever break first.

 

Overall, I’m not optimistic about bulls. The reason is too many reversal like bars are now on SPY daily chart, although most likely the market may go nowhere until 11/03 FOMC Quantitative Easing II announcement.

 

6.4.0 SPX and NYMO Divergence Watch, I’ve mentioned this chart before. When SPX is at or very close to a new high while NYMO is already in red, it could mean a top of some kind. The reason I mention this chart again is because today SPY Open > Close, so officially triggered the NYMO Sell Setup which uses similar principle to catch the top. The setup now has 68% winning rate, not bad, so see table above, from today on, I’ll follow up this setup to see how it performs this time.

 

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

	COMMENT
QQQQ
NDX Weekly	NDX to SPX ratio too high. %B too high with negative divergence.
IWM
IWM Weekly	%B too high with negative divergence.
CHINA	*Primary downtrend line breakout not confirmed.
CHINA Weekly	Extremely high %B.
EEM
EEM Weekly	EEM to SPX ratio too high.
XIU.TO
XIU.TO Weekly
TLT	1-2-3 trend change confirmed, TLT could be in an intermediate-term downtrend. ChiOsc is too low though.
TLT Weekly
FXE
FXE Weekly	Stalled at Fib confluences area, %B too high with negative divergence, too high above MA(40).
GLD
GLD Weekly
GDX	*BPGDM buy signal.
GDX Weekly
USO	*Could be a Bull Flag in the forming.
WTIC Weekly
XLE
XLE Weekly	%B too high with negative divergence.
XLF
XLF Weekly	Head and Shoulders Top in the forming?
IYR	*Testing trend line support.
IYR Weekly	Home builders are lagging.
XLB
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 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