SHORT-TERM: EXPECT SOME WEAKNESS AHEAD
- Still expect a pullback, but it’s difficult to time now. One thing I’m relatively sure is, pullback or not, we should see more new highs anyway.
- Cannot exclude the possibilities that the market was topped (or very close) (either short-term or intermediate-term top).
- Trading wise, before seeing a sharp sell off, the name of the game still is to buy dips.
Why should we see more new highs ahead? Because, the RSI in chart 1.0.0 S&P 500 SPDRs (SPY 60 min) shows very strong up momentum so should be more new highs ahead until a clear RSI negative divergence is formed. Trading wise, accordingly, the very first dip is buy. Why? Because only after a pullback, the price makes a new high while RSI cannot make a new high then a negative divergence can be formed. Then why is a negative divergence needed? It’s the law of inertia. A forward accelerating car cannot be simply reversed without reducing the forward speed first. The process of reducing the speed is equivalent to negative divergence.
In 04/27 Market Outlook and 04/28 Market Outlook, my major reasons for calling a pullback is SPX closed above BB for 2 to 3 days in a row which had very good chances of leading to a pullback since year 2003. Unfortunately (or fortunately) SPX closed above BB top again on 04/29 which had only one occasion since 2003, therefore the argument is no longer reliable anymore. (By the way, there’re 10 cases since 1991 that SPX closed above BB top for 4 days in a row, there’s no apparent short-term bearish edges. I generally don’t read such a long history anyway) This is why I said, although I still expect a pullback but cannot time it anymore.
Listed below are the reasons why I’m still looking forward to a pullback.
T2112, keeps rising. Everyone knows such a rising will be reversed someday so if only I keep yelling for a pullback, I’d be right one day. But this does not help in trading at all so this is why I don’t wan to time the pullback anymore. Should be sooner than later, that’s all I can say.
T2122, as I mentioned before, this is my ultimate weapon for monitoring overbought/oversold. Now it’s very close to the “recent” extremes.
Dollar down 8 days in a row plus volume surge and too stretched below MA(200), so we should see a short-term rebound soon. The statistics below is from Bespoke. Although the original purpose of Bespoke is to say that in the intermediate-term the dollar is bearish, but it also clearly says that there’ll be a rebound in the short-term. The rebound of the dollar would mean a pullback of the stock market. Besides, interestingly, take a look at what happened on EUO before the Friday close although the correspondent FXE didn’t drop much. Euro weights almost 75% in the dollar index, so if EUO didn’t lie than Euro should drop sharply the next week which in turn means a sharp rebound of the dollar.
Why cannot I exclude the possibilities that the market was topped? Because 0.2.4 Nasdaq Total Volume/NYSE Total Volume surged to a new high which is a very reliable top signal. Combining with the SPY ST Model top signal mentioned in the 04/28 Trading Signals, there’s a chance that the market was topped, although any top calling looks ridiculous now and it conflicts with the RSI negative divergence mentioned above.
The chart below is the NORMALIZED Nasdaq Total Volume / NYSE Total Volume Ratio. Also argues for a top.
I’m not confident about such a top calling for now although I believe a short-term pullback is due. The Friday’s money flow is very interesting. AAPL Block Sell to Total Sell ratio is 2582 / 4398 = 59%. Either it’s because of QQQ rebalancing or those big buys knew something terrible is about to happen. And it also could be the reason that Nasdaq Total Volume / NYSE Total Volume Ratio surged, which is why I’m not confident about the top calling. By the way, INDU is very strong those days, but interestingly, for 2 days in a row DIA had a very high Block Sell to Total Sell ratio, 246 / 327 = 75%, 345 / 414 = 83%, something suspicious is going on.
Anyway, top or not, let’s watch the CPCE trend line the next week. Breakout and hold then we’d have 2 reliable top signals and that would be something worth serious attention.
INTERMEDIATE-TERM: SPX NOW IN 1352 TO 1381 WAVE 5 PRICE TARGET AREA, WATCH FOR POTENTIAL REVERSAL
See 04/27 Market Outlook for more details.
SEASONALITY: BULLISH MONDAY AND FRIDAY
According to Stock Trader’s Almanac:
- First trading day in May, Dow up 10 of last 12.
- Friday before Mother’s day, Dow up 10 of last 15.
The following May seasonality statistics is from Bespoke.
The following May seasonality chart is from Sentimentrader.
ACTIVE BULLISH OUTLOOKS:
- 09/27 Market Recap: 9 POMO within 20 trading days means 14%+ up in 3 months.
02/23 Market Recap : Pullback could last 4 weeks, then 02/18 highs will be revisited.
- 03/11 Market Recap: Bullish in 3 to 6 months.
04/01 Market Recap : Bullish April.
- 04/21 Market Recap: QQQ weekly Bullish Engulfing is bullish for the next 6 weeks.
ACTIVE BEARISH OUTLOOKS:
03/18 Market Recap : 03/16 lows will be revisited.Failed!
- 04/21 Market Recap: SPX will close below 04/20 close soon.
HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST: