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Wednesday, April 29, 2009

04/29/2009 Market Recap: The 5th Unfilled Gap

  Trend Momentum Comments - Sample for using the trend table. Warning: This is NOT a trading recommendation!
Long-term Down   Idea for trading intermediate-term under primary down trend.
Intermediate Up Neutral According to $NYA50R and $CPCE, the market might be topped.
Short-term Up Neutral  
Report Focused On Buyable dip or the market topped?
Today’s Summary Firework trading setup was triggered, but not sure this time as a pullback is expected as early as tomorrow.

Today’s report contains some speculation, please take these with a grain of salt:

  1. The market made a higher high today, but I suspect it’s a fake head;
  2. If the market gaps down tomorrow, the gap may not be filled since the 3rd time is the charm.  Monday and Tuesday were both gap down and immediately going higher, so don’t expect the 3rd time is the same.
  3. SPY has now 5 unfilled gaps, and the probability of filling the 5th gap is very high, which means SPY has a need to pullback in the near term.  Also if tomorrow the market gaps up again, don’t expect the 6th gap could hold.
  4. Still maintain the “seesaw” forecast. Unlike yesterday, today bears have more edges so at least expect a short term pullback as early as tomorrow.

Firstly let’s review bulls’ edge:

7.0.4 Extreme CPC Readings Watch, 2.8.3 SPX:CPCE, CPC < 0.8, so 64% chances the market may close in green tomorrow,  CPC < 0.8 also has triggered the firework trading setup which so far worked very well.  However I am not sure about this time, as for reasons, please refer to the “Bears’ Edge” bellow.


Now bears’ edge:

0.0.2 SPY Short-term Trading Signals, higher high and Symmetrical Triangle breakout, but three evidences make me think it might be a fake head:

  1. Unable to close above 875, a long shadow was left and it seems like being rejected by the overhead resistance.
  2. The first move out of a volatility contraction (in this case a Symmetrical Triangle) is usually a "false" move, leading to a larger and more sustained trend in the direction opposite the initial break.
  3. Too many and too long period of negative divergences.  Like a volcano, the market will burst out eventually.


1.0.2 S&P 500 SPDRs (SPY 60 min), 5 unfilled gaps plus a couple of negative divergences.  The speculation about gaps is mentioned in the beginning of this report, anyway, this chart looks very bearish.


T2103 of Telechart, Zweig Breadth Thrust.  You should know how accurate this indicator is now.


Intraday Cumulative Tick - NYSE from  Recently this chart is also quite accurate.  TICK is at such a level that the market won’t go much higher even if it does go up tomorrow.


Lastly check out what happened the next day after the Fed Days.  Especially when the market soared up on the Fed Day, what happened the next day?



  1. Another seesaw battle on top of the mountain.

  2. "Clarity of Perception...

    yields Accuracy of Response."

    Master Cobra-

    many thanks for teaching us to SEE more clearly.

  3. If you are going to trot out quotes, then I want a turn, and this one is deep and meaningful.

    The "Theme of the Bulls" today:

    "Today was a good day. I didn't have to use my AK."

    Okay, so its only meaningful if you are familiar with 90's pop culture, and it isn't deep at all, but it is more interesting than yours.


  4. Cobra, thank you again for all the work you put into these analysis. We greatly appreciate you!

  5. One more seems like your blog has gotten even better over the last few weeks!

    It is very cool that you are turning out analysis seven days a week now. I even read the Canadian market report despite not trading in that market. On that subject, please answer the following two questions:

    1. Of all markets from which to choose, why did you select the Canadian market?

    2. From a global market perspective, what nations' (plural) markets do you believe to be the easiest to predict/trade and why?

    Although I naturally will be looking forward to your answers, perhaps there is enough raw material there that it might make more sense to address them in more detail as a "bonus" weekend post.

  6. It will be very risky and very tough to make any money if keep trading in the next week or two. Wait for more clarity. TA shows the market shall peak at 875 and fall off to at least 820 or less didn't happen today. Tough to go against with the government's force and lies when bad news translated into good news. I sold some longs and pick up some FAZ and average down SRS, still with my axp short. Plan to do nothing and if sxp go over 926, I will consider to nibble more FAZ and SRS. Think about this, more and more jobless people out on the street and increasing consumer spending, what does this tell you? Go figure.

  7. the market is in a state of flux. This is due to the dollar. Dollar keep falling, and market keep rising. When bad news comes out, it usually affects the dollar to the negative. A negative dollar (decline) means that the market is undervalued....ya know...inflation. That's why we rally on bad news. And why we might see DOW 20000

  8. Hi. Love your site. Thought I should let you know that my virus protection software does not like it when I click on a chart to get the magnified version. For your info, I give you what it tells me:

    Threats found: 3
    Here is a complete list:
    Threat Name: Trojan.Giframe

    Threat Name: Trojan.Maliframe!html

    Threat Name: Trojan.Maliframe!html

    I hope you find this helpful which is how it is intended.


  9. BIG WARNING!!!!

    There's a Dow 10,000 headline today on the news.

    There was a Dow 5,000 headline the day the market bottomed back in March!.

  10. Michael, try use the link provided in my report instead of click directly on the chart. The link has the same chart. My software doesn't detect the virus, but I'll see if I can get a better software.

    As for why Canadian market? Simple, because I live in Canada. :-) And since I have lots of info/indicators/subscribes about the US market, so I think the US market is a little easier to read.

  11. Canada: our far more civilized neighbor to the north.

    A nation that consistently runs budget and trade surpluses while offering national healthcare and a broad social safety net.

  12. Cobra, you are the man! I love your analysis. Among many I have read so far, you have by far the best credibility and analysis. I don't mean others are bad, although your analysis and your perspectives have the best details and closer accuracy. Keep them coming please. Many thanks.

  13. Re: Dow 10,000.

    Anonymous, you are right, I checked and sure enough, CNBC is touting Dow 10,000. Sure sign of top.

    Another remarkable thing is the triumph of Cobra's TA over the markets. The futures were up over 2% this AM with SP500 registering almost 890 intraday (888 to be exact), yet we closed lower (except for Nasdaq). It was a scary moment for me as I heavily short at the moment. I spent several hourts this AM perusing all possible charts and sure enough everything looked like we topped over already.

    I see only 2 possible reasons we did not top yet:

    1. beginning of new bull market, a la 2003 (big question mark).
    2. too much bullishness, a la late bull market (end of 2006 comes to mind, obviously not the case now).

    Cobra, how your current analysis compares with 2003?

    Some of my indicators show some similarities to April-May 2003, while most do not and point more to Dec. 2002 situation.

    My theory is institutions are catching up on market exposure in case we had THE bottom, to invest the numerous 2008 IRA contributions, and to dress the windows at the end of month. Now, it should be over soon and big reversal should come.

    Any comments anyone?


  14. Jack, even it were 2003, there's will be a retest the low (with a higher low though), that're all my points here. I never see a bull market stands upon one leg.

  15. One more thing re: trojan warnings.
    I check cobras posts on different PC with different AV software and never had a warning. Sounds like a false positive. Regardless, I googled for Maliframe and Giframe and those are low severity and low impact threats according to Symantec's website.

  16. Cobra, I was referring to the May 2003 situation when TA and sentiment analysis showed a major top and all that happened was more or less a flat consolidation.

  17. Jack, I know what you mean. Believe me, I have tons of signals pointing to either top or bottom, so it's really difficult to say which one is correct. And so I have a very simple bottom line: Any big bottom should be a Double Bottom and I only see one here so got to be another one.

    And thanks for that "trojan" explain.

  18. Oh, even I'm expecting another down leg, but I also said I don't trade against my signals and right now they're mostly on the "buy" side. So even I'm wrong about the next leg, I'd have no problem with it.

  19. Cobra,
    sentimentrader's II BULLRATIO is a good example of my point. The drop in the ratio goes tegether with drop in SPX, except for early or late bull phase. Thus, it makes no sense to have it now. Very confusing. One can see the same thing on RYDEX BEAR FLOW and similar charts.
    BTW, I'm glad your signals work. My system did nor work very well lately, lost some money and puting together new system.

  20. Analysis of today should be a good one. Open high and trace all the way down and end up in red. The bulls really trying hard to pull everyone over 880 line.

    About the gaps analysis. You've done very well with this call!

  21. "Any big bottom should be a Double Bottom and I only see one here so got to be another one."

    What about November low and March low. Two bottoms?

  22. Hi Cobra,

    A big round of applause. The quality of your work is obvious and we're lucky to have you share it with us. Every day is more impressive than the previous--especially considering the difficult terrain.

    Sometimes I wonder how bored you might be when trust and solid fundamental growth return to the markets.

    Thank you,

  23. Flax, counting Nov low and Mar low, it's more likely a potential Head and Shoulders Bottom is in the forming so this means we still need see a right shoulder. And this is more logic as the final down leg shouldn't make a lower low like what had happened in year 2003.

  24. CObra, thanks a lot for your good work and diligent studies. The bull market can't stand upon one leg as you have said. We see it finally let go from standing on leg too long. I am interested in your point of buyable dip. So to what point that it will be a safe bottom for us to go long after its retrace? I know many bears would like to see it below 780, is it unrealistic or actually possible next week? To what point that you will feel comfortable to go long from this level? Your opinion will be greatly appreciated. Thanks.

  25. Manday, no idea now. Let's wait until the market does start to pullback which at the current stage still seems a dream to bears. :-)



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