Live Update

Sunday, May 17, 2009

05/15/2009 Market Recap: Sell in May?


Expect more pullback on longer term.

64% chances to close in green on Monday.

  Trend Momentum Comments - Sample for using the trend table.
Long-term Down   Idea for trading intermediate-term under primary down trend.
Intermediate Down* Neutral All but one intermediate-term sell signals are confirmed.
Short-term Down Neutral  


Intermediate-term, 4 reasons, I believe more pullback ahead.

0.0.0 Signal Watch and Daily Highlights, all intermediate-term are SELL while short-term are mostly neutral. This argues for no big rebound in the horizon yet.


0.0.2 SPY Short-term Trading Signals, 1.1.3 QQQQ Short-term Trading Signals, looks like a continuation pattern to me.

SPYShortTerm QQQQShortTerm

1.3.7 Russell 3000 Dominant Price-Volume Relationships, 1156 stocks price down volume down, confirms the continuation pattern mentioned above.

7.1.3 Major Accumulation/Distribution Days, already discussed here: Major Distribution Day and the Magic Number Three. If the 3rd time is the charm, then I expect at least there’ll be another Major Distribution Day ahead.


Short-term, 3 reasons, I expect a rebound Monday with 64% chances of closing in green.

7.0.4 Extreme CPC Readings Watch, CPC < 0.8, this is the main reason that I believe there’re 64% chances Monday will close in green. 2.8.3 SPX:CPCE, also because of CPC < 0.8, a firework trading setup was triggered. This setup, so far, only failed twice.


1.0.3 S&P 500 SPDRs (SPY 30 min), lots of positive divergences, arguing for a rebound.


Intraday Cumulative TICK from, very very oversold.



If we do get a rebound Monday, there’re 2 things to consider:

1.0.4 S&P 500 SPDRs (SPY 15 min), ChiOsc is a little bit too high, so I suspect if any gap up open could be held. Also 1.3.3 Russell 2000 iShares (IWM 15 min), 5.2.1 Energy Select Sector SPDR (XLE 30 min), both have a very high ChiOsc readings.


1.0.2 S&P 500 SPDRs (SPY 60 min), the major trend line for the March rally was broken Friday and I believe this trend line could be the target for the rebound.



Lastly, I’d like your attention for 3 more chats.

2.0.1 Volatility Index (Weekly), whether the trend line could hold is critical to bulls. From the STO and RSI, it looks  not very good.


3.0.0 10Y T-Bill Yield, again, whether the trend line could could is critical to bulls.


3.1.0 PowerShares DB US Dollar Index Bullish Fund (UUP Daily), breakout from a down price channel. US dollar has an inversed relationships with the stock market recently, so if US dollar keeps going up from here would be very bad for the stock market.



  1. Hey Cobra,
    Great charts. Do you know any blogs and websites talking about Gann Timing and Cycle?


  2. Gavin, I have no idea. If you know later, please let me know. Thanks!

  3. Great stuff as usual. At this point what percentage are you long/short? Currently I'm sitting 40% Short 40 % Cash and 20% long (mostly preferred bank and energy stocks)

  4. Mostly short, only a little long left.

  5. Some info, posted by Clayton in my older post today:

    By: Nadeem_Walayat..Editor of Market Oracle.

    Jim Willie of the Hat trick Newsletter has just sent an urgent message of a potential imminent big bank failure that would be expected to hit the financial markets hard - message as follows - just got word from a reliable source with an excellent track record
    he calls me every several weeks when he has something very critical to share
    he wants me to put the word out and to see what comes back to confirm or add to the story
    an extremely large overnight bank transaction loan failed last night, gathering major attention
    it started in US west coast, went to Hong Kong, then Singapore, then London
    it failed in London, by that is meant no return was given on the overnight loan
    he guessed the size was something like $10 to $30 billion
    he suspected (without much direct evidence) that it was Citigroup
    he believes the failing bank is a London subsidiary for a giant US-based bank
    he likened it to a plumbing blockage with extreme backup consequences
    he expects a ripple effect to cause shock waves, or a flood of sewage
    we wondered if it could have Commercial Paper consequences, since often used in overnights
    he has five expert friends watching for specific market reactions, like LIBOR

    so be on the lookout
    in February, this source said that in May June timeframe, foreign creditors
    will put the screws to the US bankers, who are recognized as totally corrupt, NOW HOW CAN THAT BE?
    foreigner big bankers want to remove some power levers from US control

    my source remains anonymous
    / jim
    By Nadeem Walayat

  6. Cobra,
    Interesting info on the bank rumor.
    These things are hard to know for sure, but could be true.
    This reminds me mid 2007 when a Porche mechanic in UK learned from his investment banking customer that LIBOR would soon skyrocket and bad things would happen. The Porche mechanic posted a question on asking what that means. At that time I was trying to short banks and DSL with some painfull results (stopped out regularly), but I did not think much of that post from unknown new member. When the markets finally slided down in the last week of July 2007 I booked limited gains from my shorts and I did not anticipate the severety of the selloff. The rest is history.
    After saying that, I note that US futures are down some and Nikkei is down more than 2% right now. My plan is to hold my shorts (inverse ETFs) till the retest of 666 or charts showing a reversal.

  7. I just wanted to comment on this imminent big bank failure brewing under the lid... First of all- what kind of motivation was that to share this unfounded rumour in the first place? "To put the word out and to see what comes back to confirm or add to the story"?? I mean- the source should be rather certain about this event, otherwise he would not be posting "urgent" alerts all over the place, correct? Unless this is product of wild imagination and loads of frustration over the banks rallying recently inspite of this person's short exposure I presume... This is just plain instigation. I'm not saying there is no way a bank may go down overnight, but the odds of this are just as big as any other day and this rumour is not adding anything with this respect. The oryginal message was from Wed 13 May, so the loan was said to fail at least a day earlier. So with USD 10-30 billion (great precision by the way, let me tell you when a huge overnight loan goes bad, people familiar with the situation know down to the single penny how much is missing)evaporated from a bank and after a week, there is still nothing about it in the mainstream news??

    Other than that- great work Cobra, keep it up!

  8. Cobra - bank failure fits with what we have been looking for. In my EUREKA moment blog post on 5/12 I highlighted and article "FDIC preparing for large bank failure?". I have no updates on the banks. News this weekend was dead.

    Great work with the charts. You really have excellent presentation. Kenny and Dan both have a scenario with a small pop up and then further weakness. I personally don't trust the markets anymore and the extreme short positions may have been a set up by the puppet masters for the next squeeze. I said may have. We'll see. I'll be adding to shorts at the next intermediate top.

    Do you ever disclose your trades?



  9. Shanky, I had bad experiences of disclosing my trades because I'm suppose to be neutral in my report. Well, I know, I know, I cannot be neutral, but by not disclosing my position and talking about the signals only, it could be a little bit "seems" neutral.

  10. LOL - I got it and understand. I rarely disclose myself. I have found it much safer to just report what I see. Thanks.

  11. Ugh. Not sure the short-term or intermediate term trends are "down". Yes, we were deeply oversold heading into today, but the constant consolidation and push forward appears to be very bullish. This market just doesn't want to correct much, huh?

    To many TA's feel the market has broken trend, but maybe this was just another side step for another staircase higher.



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