11/02/2010 Market Recap: FOMC Day Pattern

TREND MOMENTUM COMMENT Long-term 2 of 2 are BUY   Intermediate 2 of 3 are BUY 5 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, 11/04 11/06 : 11/07 Next pivot date: 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. 10/26 Market Recap: Average 2.7% gain during the 8 trading days surrounding midterm election. 10/29 Market Recap: The last 2 months of year are bullish. BEARISH *1.0.6 SPY Unfilled Gaps: 21 unfilled gaps, the max was 21. 10/29 Market Recap: AAII bull ratio (4-week average) too bullish. 10/29 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. 10/29 Market Recap: Institutions are selling into strength. 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? 6.4.2c Extreme TICK Readings Watch: Extremely low TICK guarantees a lower low or close ahead?

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 *10/20 Low *Adjust stop loss. NYMO Sell 10/28 S 2*ATR(10) Reference only, not meant to be followed.

SHORT-TERM: FOMC DAY WAS GENERALLY BULLISH

Not much to say today. The market virtually has been consolidating for the past 3 weeks, tomorrow via the most anticipated FOMC Quantitative Easing II announcement, we may finally get the direction. Purely from chart pattern perspective, I see an Ascending Triangle in the forming, therefore 70% chances the breakout will be on the upside with the text book target at $122.24 which will be far above the April highs.

 

There’re lots of discussions about the Quantitative Easing II to be announced tomorrow, the consensus is 500B at minimum. The discussion is far beyond the scope of this report, so all I can tell you are that from the past pattern, FOMC day was generally bullish and the intraday pattern was also likely a continuous rising pattern from the start to the end and typically after 2:15pm ET FOMC announcement we had roller coaster show. Well, that’s it, good luck everyone!

 

INTERMEDIATE-TERM: BEARISH BIASED, PIVOT DATE EITHER ON 10/25 OR AROUND 11/04

Maintain the intermediate-term bearish view. We may have passed the pivot day on 10/25 or the next pivot day could be 11/04. Below are summaries of all the arguments supporting my intermediate-term bearish view:

1. As mentioned in 10/29 Market Recap, commercial (smart money) holds record high short positions against Nasdaq 100.
2. As mentioned in 10/29 Market Recap, AAII bull ratio (4-week average) is way too bullish.
3. As mentioned in 10/29 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 10/22 Market Recap, NYSI Weekly STO(5,3,3) sell signal means choppy ahead.

SEASONALITY: LAST 2 MONTHS OF YEAR ARE BULLISH

See 10/29 Market Recap for more details.

HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST

	SIGNAL	COMMENT
QQQQ	10/15 L
NDX Weekly		%B too high with negative divergence. NASI weekly STO(5,3,3) sell signal.
IWM
IWM Weekly
CHINA	07/15 L	Primary downtrend line breakout not confirmed.
CHINA Weekly		High %B with negative divergence plus stalled under primary bear trend line. Pullback?
EEM		*Symmetrical Triangle breakout?
EEM Weekly
XIU.TO	08/31 L	Breakdown trend line then back test the previous high? *TOADV MA(10) too high.
XIU.TO Weekly		Testing Fib 61.8%.
TLT		1-2-3 trend change confirmed, the intermediate-term trend is down. ChiOsc is too low though.
TLT Weekly
FXE		*Symmetrical Triangle breakout? Pay attention to volume surge on UUP, US$ may very close to a bottom.
FXE Weekly		Stalled at Fib confluences area.
GLD		Watch for potential 1-2-3 trend change! Bump and Run Reversal in the forming? Bearish reversal bar.
GLD Weekly
GDX	10/29 L	Watch for potential 1-2-3 trend change! *Bearish reversal bar plus black bar.
GDX Weekly
USO		*Bull Flag breakout confirmed.
WTIC Weekly
XLE	06/15 L
XLE Weekly		%B too high with negative divergence.
XLF	10/15 L
XLF Weekly		Head and Shoulders Top in the forming?
IYR		Testing trend line support.
IYR Weekly		Home builders are lagging.
XLB	11/02 L
XLB Weekly

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
5. Trading signals in OTHER ETFs table are mechanical signals. See HERE for back test results.