Live Update

Thursday, April 30, 2009

04/30/2009 Market Recap: Back Test or Head and Shoulders Top?

  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, the market might be topped.
Short-term Up Neutral  
Report Focused On Buyable dip or the market topped?
Today’s Summary The 5th unfilled gap and negative divergences still are bulls’ major concern.
Don’t chase high if tomorrow is up again.

Today’s report is similar with yesterday's, so take the speculation with a grain of salt:

  1. Higher high again, but still failed to close above 875 and SPY formed a black candle which often means a reversal, so I still cannot rule out the possibility of a fake head.
  2. Should the market gaps down tomorrow, the gap may not be filled because the 3rd time is the charm.  On Monday and Tuesday the market gapped down and rallied immediately, so I won’t expect the 3rd time is the same.
  3. SPY still has 5 unfilled gaps, so the 5th gap has a good chance to be filled in a very near term.  Again, if the market gaps up tomorrow, don’t expect the 6th gap to be held.
  4. Intermediate-term, I still expect the market to seesaw. I don’t see much edge today for either bulls or bears. However, if the market goes up tomorrow, don’t chase high because several accurate signals will get overbought again, therefore the market may pullback on Monday.

0.0.2 SPY Short-term Trading Signals.  As aforementioned, it could be a fake head.  Furthermore, the negative divergence is my biggest concern.


1.0.2 S&P 500 SPDRs (SPY 60 min), still 5 unfilled gap plus a couple of negative divergences, it looks very bearish to me.


1.0.3 S&P 500 SPDRs (SPY 30 min).  The market has to resolve this puzzle, it could be a retest after the symmetrical triangle breakout, or a head and shoulders top.  I don’t know.


Here are two interesting charts.

3.0.0 10Y T-Bill Yield, market could be topped.  Please notice that the top given by this chart may be a month earlier.  For the back test of this signal, please refer to 8.0.4 Market top/bottom by ROC30 of 10Y T-Bill Yield 2005-2008, 8.0.5 Market top/bottom by ROC30 of 10Y T-Bill Yield 2001-2004.  Since 2001 this chart only gives one false signal in predicting a top.  By the way, some readers may not understand the numbers preceding every of my charts.  Let me explain one more time, all charts in my report come from my chart book at  By the way, the click rate of my chart book has been a No 1 in for the past several months, and about 6,000 readers read my market recap (including the Chinese version) on a daily basis.  I am not bragging here, what I mean is that my market recap should have some credit. Well, maybe view it from a contrarian’s perspective could get a better results, LOL, but anyway, credit is a credit. Again, the market recap is different from giving the actual buy/sell signals, as this report tries to detect the trend change as early as possible, while for the real world trading, it’s better to let market go first. Therefore, sometimes this report may seems against the trend, so you should really pay attention to the trend table.  For instance, now the intermediate term and short term are up, which means short selling must be taken with great caution unless bears have very convincing edges mentioned by the report.  For more information, please refer to Sample for using the trend table.


5.0.2 S&P Sector Bullish Percent Index.  Technology sector (BPINFO) and Consumer Discretionary (BPDISC) are almost 8 years high at this moment.



  1. fake head = headfake?

  2. Headfake? Is it a real word? How come I couldn't find it in my English dictionary? Forgive my English, though. :-)

  3. Watch that Head and Shoulders neckline, it's the tell. But Classic Bull Traps, are made that way....

  4. Just to confirm, head fake (two words, I believe) originated from a basketball move and is a common reference when describing certain situations. Your English is just fine and thanks for the great summary.

  5. watch the gap fade on a down gap tomorrow or a gap up will be a solid attempt at an entry.... Short.

  6. good stuff cobra, been reading your site for the past 6 months

  7. I have a hunch that market is looking 200-DMA.

  8. Headfake is slang. By the way and just for your own benefit, T-Bills are used only to describe maturities under one year. Up to 10 years are Notes and bonds are further out.

  9. *Sigh*

    Lead a horse to water....

  10. Thanks, "Head Fake".

    Mark, that T-Bill name is offical name from, I just use that. But thanks.

  11. Cobra,
    thanks for explaing your system and the trend table. I will study it more.

    Coming back to out discussion yesterday RE: higher lows vs lower lows. It occured to me that we had a number of higher lows since Nov 08 in a number of markets: China, NASDAQ, gold miners, $WTIC, etc. Maybe SP500 will never go into a bull phase anymore and be just a trade range or worse. That has happened before with Japan since 1990.

    Maybe we are following wrong markets?

  12. I have no idea. Someone did tell me to follow the Chinese market because it's a leader. But I know that the Chinese market is kind of policy related market where it goes as the governemnt wishes.

    If SPX goes sideline, Nasdqa cannot go high along, I think.

  13. I'm dying to know if anyone is willing to be short, or bearish?

  14. As far as I know almost nobody dare to declare he's a bear publicly now. Is this enough to answer your question?

  15. Tks cobra... I'm happy to say more bearish than bullish.... At the moment..

    but I'm fickle that way..

  16. In my Chinese forum a hardcore bear which was a hero before, now is a joke to everyone.

    Hmm, by the way, that's the reason I have a forum. Just I'm not sure if I should have a English forum, too busy and too time consuming to maintain a forum. I have the forum registed and hosted here though:, no talk is allowed now. Still I'm thinking: where do I want to go!

  17. It's easy to be a Perma bear or Perma Bull... Kudlow vs. Schiff.

    It's the turns that are tough...

    and you are a total hero... until the market turns.

  18. How is that Neckline?

    They will start chasing it on Monday...

    Only to get blown out on a retrace..

  19. I agree with Eric...being a perma bull or perma bear is stupid.

    Who wants to be a "Hero," anyway? The closest thing we have to a hero around here is Cobra, because he lets the charts guide him, instead of imposing a bias on the markets. Anyway, even he probably doesn't want to be a "hero."

    All we want to do is make some good trades. Glory-seekers ultimately get hosed.

  20. Cobra: where is the weekend report? You've spoiled us lately, and now we are in withdrawal without your analysis.


  21. Because it's fun...

    'We' don't know Jack shit. there are too many butterflies fluttering over Japan or Spain, Creating Variables we can't forecast. The further into the future you look the more variables, there are.... So, your most useful forecasts are Tomorrow or maybe next week, or the next couple weeks. Anything beyond that is just Chaos.... But if you make sure you put your energy into tomorrow or next week.

    Instead of making Macro predictions about Inflation, or Armageddon or Recovery.....

    You are just waisting your time with that stuff.



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