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Sunday, November 16, 2008

11/14/2008 Market Recap: No follow-through but still a hope there is

It's a pity that there was no follow-through to the Key Reversal Day on Friday, and pattern of single up day holds very well.  Since it was Friday and the selling-off near the market close was very sharp, and the market closed at the low of the day, it might be an overreaction ( first two articles), and the Monday may not be very bad.  You may remember that on Oct 17th the market also sold off near market close before the weekend, and then rallied significantly on Oct 20th.  Even if the market plunged on Monday, it might not be so terrible because the 2.4.2 NYSE - Issues Advancing is oversold.

On 0.0.3 SPX Intermediate-term Trading Signals there are several positive divergence which could be the last hope for the bulls.  In this weekend I did a research on rallies potentially caused by these positive divergences, and the result is not promising.  Unless the market is at a many-year bottom, very likely these divergences would only cause the rally to the starting point of November -- if we could ever see a rally -- for SPX, it is about 1000.

Conclusion: hopefully bulls who were trapped at 1000 could get out, but I have no idea if the Thursday low is a beginning of a tradable rally.

Firstly take a look at the oversold NYSE - Issues Advancing, and see how long the delay could be before a rally.  In the worst case (3 days of delay like what happened in October), long at Friday close should be able to get out.


0.0.2 SPY Short-term Trading Signals.  Take a look at oversold short-term signals.  Besides NYADV is oversold, VIX also breaks out ENV on Friday.  By the way, the potential target of bulls is 95.53 which looks a bit tough, but you never know.  If the intraday high by next Tuesday could be higher than 95.53, the situation will look fine enough.


1.0.4 S&P 500 SPDRs (SPY 15 min).  The pattern looks like a double top, and the potential target is almost the Thursday low.  But maybe it's not that bad.


1.5.0 Shanghai Stock Exchange Composite Index (Daily).  Some readers ask whether it's time to get in the Chinese stock market.  Frankly speaking, I have no idea.  On the chart, RSI is overbought, STO reaches a level where the rally were rejected many times by the 50-day moving average.  Also consider the descending channel and the resistance around 2000, the market should be due for a pullback, and then we can see if it can break the 50-day moving average.


Following is the research result on mid-term positive divergence.

0.0.3 SPX Intermediate-term Trading Signals, many positive divergence.


2.4.7 NYSE Advance-Decline Volume, obvious positive divergence on Breadth.


8.0.8 SPX and MA200 in 2000-2003 Bear Market.  Let's take a look at how those positive divergences played out in 2000 Bear Market.  Conclusion, except for the last pullback in 2003 (note that it was a higher low, which is different from the lower low at the time being) other positive divergences indeed caused rally but no rally formed a higher high.  So don't expect too much to the positive divergence on the mid-term signals.  On the other hand, I am not saying there won't be a year end rally.  On the chart 8.0.8, 200-day moving average are challenged many times by the bear market rally.  Hereby I want to show you that my research result disrespects the positive divergence as an evidence for mid-term bullish outlook.



  1. Thanks for your work, I am not a chartist, thought I look often at others work; yours is among the best I view. I think the market will go up, basically because gas is cheep and retail sales will improve, xmas will be fine. That is not technical, just true. This is more of a wall street recession in my world. I also believe with no history to go on that max pain is probably true. Your thoughts or charts would be of interest. Steve J

  2. Good work!!
    On very short time (7 days) are waiting to see EMA5 rocket into the space.
    What do you think about?

  3. Hello Cobra,,

    Is there a problem with to many visitors to your other site? I have noticed that 'some' are nervous about all the new clicks,
    or maybe they just are using the new clicks to go "members Only"
    which i have seen many times already..(usually paid membership)

    just wondering if nervous,,, or
    maybe just wanting to make a little money (a good thing)


  4. Hi, Mac,

    Sorry, I don't quite understand what you mean. Perhaps you mean the click rate for Thanks. That's fine, I'm satisified with the click rate now. I don't earn any money for someone cliking on it, just I don't want to fall behind Mr. Walker who is now just behind me on the click rate.


  5. i posted the reply in wrong comments..

    i was referring to the chinese site
    (forum), i enjoy reading the site, however a few are




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