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Wednesday, August 6, 2008

08/05/2008 Market Recap: CPC readings are little too bullish

Today the market soared but there is an issue: 2.8.1 CBOE Options Total Put/Call Ratio. The CPC reading reached the new low this year, and the sentiment is extremely bullish. I am not saying the market is making a U-turn now, but it cannot keep bullish for very long. In term of trading practice, I think it is a nice hedge to make counter-trend short whenever the market gets overbought.

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1.1.B QQQQ and VXN. The old friend NAMO went up again and is close to overbought region at the moment. If tomorrow the market goes up further, short will have a high probability of success.

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1.1.C TRINQ Trading Setup. I would usually like to use an indicator once it is proved to have an edge recently and as far as it still has. According to the chart, the success rate of the TRINQ setup is 10/14, which is quite impressive. So I do think today's reading 0.32 is over bullish, and tomorrow the market will likely go down.

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1.0.4 S&P 500 SPDRs (SPY 15 min), 1.1.A PowerShares QQQ Trust (QQQQ 15 min), 1.2.7 Diamonds (DIA 15 min). The 15-min chart of all three major indices are overbought now. According to my experience, the market will unlikely rally up significantly considered the RSI at such a high level.

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1.1.6 PowerShares QQQ Trust (QQQQ Daily). This is still Bearish Rising Wedge. Note that the volume is confirming this pattern.

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1.1.8 PowerShares QQQ Trust (QQQQ 60 min). Note the resistance on the RSI indicator.

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1.1.4 Semiconductor Holders (SMH Daily). The important component of Nasdaq is overbought and testing the major downtrend line. In addition, the volume is quite bearish, and RSI(14) is testing the resistance, too.

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As a summary, it will be a good chance to short if QQQQ does not pull back tomorrow.

3.1.0 US Dollar Index (Daily). The US dollar is super strong, but it is getting tough test -- major downtrend line, RSI(2) overbought, and STO got back to the resistance. Even it passes the test, Fibonacci 50% and MA(200) are waiting right ahead. Considering that the US dollar is overbought, it could be tough to pass both tests. Anyway the market is invincible, and I am merely human. Although it looks unlikely or probably hopeless, you never know.

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3.2.0 Japanese Yen (Daily). The Japanese Yen is very strong and still on the major support.

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3.2.3 US Dollar/Japanese Yen Ratio. The battle between US dollar and Japanese Yen is at a key point, and the resistance is significant.

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Usually aforementioned factors mean the market is due for a pullback.

3.3.0 streetTRACKS Gold Trust Shares (GLD Daily), the GLD is oversold. On the weekly chart 3.3.1 streetTRACKS Gold Trust Shares (GLD Weekly) RSI is already on the support.

Posted by Cobra at 1:21 AM

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