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Sunday, December 14, 2008

12/12/2008 Market Recap: Bearish Until Proven Bullish

This week bears almost attacked for four days but couldn't take off the gain of previous two days, so bulls won.  In the week it is bulls' turn to prove themselves.  On the chart there are a few patterns against bulls, although these are not destructive but bulls have to break out before disregarding these patterns.  Therefore it is key whether the market could rally substantially in the next week.  On Monday, since the TICK is a bit extreme the market could pull back during the trading hours if the market doesn't open at low.

Over the intermediate term, there are several patterns which worry me:

0.0.2 SPY Short-term Trading Signals.  It could be a bearish rising wedge, or possibly a ascending triangle.  So a breakout is needed to give us a clear picture.  VIX ENV is close to oversold, and NYMO is nearly overbought, so you should lock profit if the market closes significantly higher on Monday.


2.0.0 Volatility Index (Daily).  It might be a symmetrical triangle, which means 75% of chance is break out at the upside.  Furthermore, VIX is nearly oversold and will bounce back up sooner or later, which means the market will pull back.


3.0.3 20 Year Treasury Bond Fund iShares (TLT Daily).  This looks like an ascending triangle.  The massive rally is really a concern.


The evidences to support short-term pullback:

1.0.3 S&P 500 SPDRs (SPY 30 min).  Take a look at TICK, note the level of blue lines is a bit high.  Previously the blue lines pulled back moderately at this level, and it's not far from big pullback.  Therefore I suggest to lock profit should big rally happens.


1.0.4 S&P 500 SPDRs (SPY 15 min).  It looks like back testing broken descending triangle.  RSI and ChiOsc are at a subtle levels and they could pull back.


1.3.7 Russell 3000 Dominant Price-Volume Relationships, 1388 stocks price up volume down, bearish.

The following is a single good news in this report, but it has a higher weight.

3.2.1 Japanese Yen (Weekly), overbought, and more importantly it has gone up for six weeks.  3.2.0 CurrencyShares Japanese Yen Trust (FXY Daily), take a look at this chart also, two black candles which have a high probability of reversal, period.



  1. Cobra, I usually study your charts of $SSEC and $HSI each day. Do you see this as a strong breakout of the down trend line? Will there be more downside before a sustainable bottom is put in? The China market lead the crash in 2007, will it now lead world markets back up?

  2. Chinese market has its own problem, so I don't think it leads the world market.

    Currently, I see it's a srong breakout. Now backtest MA50, if it holds, I expect a higher high.

  3. Hi Cobra, I just want to leave you a quick note to thank you for your superb analysis. Perusing your charts and commentary each day is a real treat, and I greatly appreciate you providing us with your insight.



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