06/14/2011 Market Outlook (Huge Gap Down Tomorrow or the 3rd Time is Charm?)

SHORT-TERM: THE REST OF THE WEEK MIGHT NOT BE PLEASANT

Whether the low was in, I’ll have to wait and see. For now, I still think this is just a rebound therefore a sell opportunity. Two reasons:

• The statistics mentioned in 06/03 Market Outlook, weekly IWM Bearish Engulfing and SPX down 5 consecutive weeks means unpleasant the next week.
• According to Stock Trader’s Almanac, week after June Triple Witching, Dow down 11 in a row and 18 of last 20, average loss since 1990, 1.2%.

About tomorrow morning, the chart below is very interesting. Looks like the Bearish Engulfing formed in the last couple of hours means a huge gap down tomorrow. The bull’s question though: Will the 3rd time be the charm?

For the rest 3 days of this week, so far the evidences I’ve collected are arguing for up one more day AT MOST, either tomorrow or the day after tomorrow.

Why up either tomorrow or the day after tomorrow, but not both? Two reasons:

• NYADV too high, see chart below, more likely down tomorrow, or small green the most and if up tomorrow, then the day after tomorrow would be down.

• ISEE Indices & ETFs Only Index < ISEE Equities Only Index AND ISEE Indices & ETFs Only Index >= 100, sell short at today’s close, hold until the very first down day, since year 2006 the inception of the ISEE Indices & ETFs Only Index, you have 74% chances. Noticed that on average winners took 1.8 trading days, so it’s logic to say down day the day after tomorrow at the latest.

Then why down Friday? This is according to Stock Trader’s Almanac, June Triple Witching Day, Dow down 7 of last 12, average loss 0.5%. Besides, from the chart below, looks like all the recent Fridays were not very bull friendly.

INTERMEDIATE-TERM: STATISTICALLY BEARISH FOR THE NEXT 2 WEEKS

See 06/03 Market Outlook for more details.

SEASONALITY: BEARISH MONDAY AND FRIDAY

According to Stock Trader’s Almanac:

1. Monday of Triple Witching Week, Down down 8 of last 13.
2. June Triple Witching Day, Dow down 7 of last 12, average loss 0.5%.

Also see 06/01 Market Outlook for June day to day seasonality.

ACTIVE BULLISH SIGNALS:

• 8.1.5 Normalized CPCE: Too high, so bottomed?

ACTIVE BEARISH SIGNALS:

• N/A

ACTIVE BULLISH OUTLOOKS:

• 09/27 Market Recap: 9 POMO within 20 trading days means 14%+ up in 3 months.
• 06/10 Market Outlook: 75% to 81% chances a green next week.

ACTIVE BEARISH OUTLOOKS:

• 06/03 Market Outlook: IWM weekly Bearish Engulfing and SPY down 5 consecutive weeks were bearish for the next 3 weeks.
• 06/08 Market Outlook: The very first rebound most likely will fail.
• 06/10 Market Outlook: 83% chances a lower low the next week.

HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST: 

TREND COMMENT SPY & Weekly DOWN Clear breakdown, target March lows as well as MA(200). QQQ & Weekly DOWN   IWM & Weekly DOWN Head and Shoulders Top breakdown, target $74.57. SSEC & Weekly DOWN Hammer on retest of the previous low, so may be bottomed? EEM & Weekly DOWN   XIU & Weekly DOWN Double Top breakdown, target $17.69. TOADV MA(10) oversold though. DAX & Weekly DOWN TLT & Weekly UP   UUP & Weekly DOWN Breakout down trend line then kiss the trend line good-bye? GLD & Weekly UP   USO & Weekly DOWN   XLE & Weekly DOWN Could be a Complex Head and Shoulders Top in the forming. XLF & Weekly DOWN   IYR & Weekly DOWN Double Top breakdown, target $57.34. XLB & Weekly DOWN

* = New update; Blue Text = Link to a chart in my public chart list. UP = Intermediate-term uptrend. Set when weekly buy signal is triggered. DOWN = Intermediate-term downtrend. Set when weekly sell signal is triggered.