07/29/2011 Market Outlook (Lower low then close the week in green)

SHORT-TERM: LOW WAS IN OR VERY CLOSE, BUT THE REBOUND LIKELY BE ANOTHER SELL OPPORTUNITY

Two cents:

1. Low was in or very close. However, most likely it’s just a tradable bottom not the low.
2. Bears have at least one more chance to sell the bounce.

Why was low in or very close?

• The chart below says, VIX weekly rose 40%+, 76% chances green the next week but also 76% chances there’ll be a lower low first.

• As mentioned in the Friday’s Trading Signals, Cobra Impulse System detected the low and therefore requested to cover the short position. The chart below shows all the past cases when such a low was detected. Not absolutely the low but should be close enough, shouldn’t it?

• NYMO oversold.

• QQQ hollow red bar.

Why will bears have at least one more chance to sell the bounce?

Still it’s the law of inertia, SPY down 5 days in a row means selling pressure is high therefore a V shape reversal is rare, at least the low will be revisited sometimes later. Listed in the charts below are all the past cases since year 2000 when SPY down 5 or more consecutive days, should be enough to prove what I said. The revisit of the low can sometimes be higher low but from the charts we can see that more likely it’s going to be a lower low.

INTERMEDIATE-TERM: OFFICIALLY TO ME IS IN DOWNTREND

In wait and see mode, no update.

SEASONALITY: BEARISH FIRST 9 TRADING DAYS OF AUGUST

According to Stock Trader’s Almanac:

1. First trading day in August weak, Dow down 9 of last 13, up 1.1% in 2007 and 1.3% in 2009.
2. First 9 trading days of August are historically weak.

The below seasonality char about August is from Bespoke.

The below August day by day seasonality chart is from Sentimentrader.

ACTIVE BULLISH OUTLOOKS:

• 07/01 Market Outlook: Bullish July.  Also one more evidence in 07/05 Market Outlook. Failed!
• 07/07 Market Outlook: New NYHGH high means SPX higher high ahead. Failed!

ACTIVE BEARISH OUTLOOKS:

• 07/20 Market Outlook: Multiple evidences arguing for more pullbacks ahead. Also 2 more evidences in 07/25 Market Outlook.
• 07/22 Market Outlook: Bearish on AAPL, therefore QQQ as well.

SUMMARY OF SIGNALS FOR MY  PUBLIC CHART LIST: 

TREND MOMENTUM COMMENT Long-term 2 of 2 BUY Intermediate 4 of 5 SELL 4 of 5 NEUTRAL Cobra Impulse in SELL mode; Non-Stop in BUY mode. Short-term DOWN 3 of 6 OVERSOLD

TREND COMMENT QQQ & Weekly UP 4.1.1 Nasdaq 100 Index (Weekly): SOX lags, be careful. IWM & Weekly *DOWN   SSEC & Weekly *DOWN   EEM & Weekly UP   XIU & Weekly *DOWN   DAX & Weekly *DOWN   TLT & Weekly *UP   UUP & Weekly DOWN GLD & Weekly UP   USO & Weekly UP   XLE & Weekly UP   XLF & Weekly DOWN IYR & Weekly *DOWN 4.4.3 Real Estate iShares (IYR Weekly): XHB lags, be careful. 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.