Live Update

Saturday, May 23, 2009

05/22/2009 Market Recap: No Title


Could be more pullback next Tuesday. SPX 878 is the key to watch if the pullback does happen.

From seasonality statistics, Wednesday will be the 2nd most bullish day in May.

  Trend Momentum Comments - Sample for using the trend table.
Long-term Down   Idea for trading intermediate-term under primary down trend.
Intermediate Down Neutral  
Short-term Down Neutral  

Very short-term neutral to overbought plus the day after the Memorial day usually is bearish, so probably more pullbacks next Tuesday.


According to 7.1.0 Use n vs n Rule to Identify a Trend Change, if we do get a pullback Tuesday, watch SPX 878, bears must push the SPX down bellow it to prove themselves.


Wednesday, by the way,  is the 2nd most bullish day in May.



Not much else to say. Maintain “not bull friendly” view on intermediate-term. Refer to 05/21/2009 Market Recap: Follow Through for more details.

1.1.1 Nasdaq Composite (Weekly), looks bearish with 3 reversal bars in a row.


OEX/Equity Spread from, this is the same as my 2.8.2 Normalized CPCI:CPCE. If the spread between the OEX put/call ratio (representing big players) and the equity only put/call ratio is too large, the intermediate-term is usually not so good for bulls.

OEXEquitySpread  CPCIvsCPCE

3.0.0 10Y T-Bill Yield, breakout! Lots of people believe that the US government could bring us a bull market, but if the stock market keeps going up then the bond yield will skyrocket too and therefore the long term mortgage rate and my question is how the real estate market is supposed to recover? Bellow is the comment form,just for your reference.

  • 30 Year Yield:   Market forces want higher yields even as the Fed is trying to work 30 year mortgages down to "a target" of 4.25% to 4.5%.   The Fed's buying for the sole purpose of driving rates down, makes this an "interfered-with or manipulated" market.   As the Fed tries to drive down rates to below 4.5%, they are creating a bond bubble that will have a bad ending.  *** On April 29th, we started mentioning the probability that the 30 year yields would move up to 41.45.  On Friday, May 8th., 41.45 was hit on a spike up that took us even higher with a closing of 42.61
  • Yesterday, the 30 year yields jumped up again and closed at 43.13.  This was above both long term resistance levels.  The Fed still has over 250 billion to use in trying to keep yields and mortgages down ... we wish you luck, Ben.


Institutional Buying and Selling Trending from,again for your reference.



  1. Dear Cobra,

    The bulls are facing so many headwinds that it seems we have no place to go other than down--or at least that's how pervasive most TA blogs are today, but how would you handicap the odds we've completed some sideways consolidation and thus the contrarian play would be to buy (say BGU) on Tuesday's weakness and hold while as another push to the upper end of the channel attempts to jump the 200SMA? Doing so might explode the indicies higher as the institutional investors who are still underweight equities have to finally start chasing... At that point S&P 1000-1200 is assured by the end of summer and many people who didn't participate will be greatly disappointed

    Just trying to play devil's advocate and be open to all scenarios.

    Thanks for your insight,

  2. A.

    You wish to play devil's advocate using a 3X? You'll be open to all scenarios for sure then...if it tanks you'll tank that much faster..hopefully it doesn't blow through your stop..


  3. Please take a look around at all the examples of negativity. It is clear the world's markets are bullet proof (at least for now). The appetite for risk is so great that even a nuclear test by North Korea couldn't budge the Asian markets.

    I am as bearish as they come but even I understand these markets won't reflect reality for quite some time. S&P 878 support is extremely strong no matter how much we think this market is ready to rollover and make us rich beyond our wildest dreams.

    My sense is that we'll go through maybe one more round of consolidation trading between 930 and 878 before eventually moving higher. Banks will be attempting to repay TARP all summer long and Q2 earnings will again be off the charts with all those underwriting fees and trading profits. These will all be seen as positives even as the real economy is tanking. We probably won't see another market scare until much later this year or even next year. Of course by then, we'll be sitting north of S&P 1100.

    Any sudden air pockets of support like we might see if 878 is breached will be a major hit to public confidence and result in further contraction of consumer spending.

    My two pesos,

  4. Actually I think the news about North Korea is a good news - any bad news is a good news. :-)

    No idea if the market could go up to 1100 or not. Simply I don't argue with my indicators which are mostly on the sell side.

    I'm a little worried about the bond yield, the $TYX sits at around 44 now which is the upper boundary of the Fed's target. Treasury is about to sell 101B in debt this week, we'll see how things unfold.

    And please don't forget, treasury needs to issue more debt.

    If a government's intervention could prevent the market to fall then there'll be no bear market at all.

  5. Cobra:

    What is the black line in the $CPCI:$CPCE CHART?

  6. I've noted that all the emerging market ETF's are showing negative divergences with their MACD and RSI as the prices are making new highs without the indicators. We should expect a pullback considering how much they've gone up without a pause.


  7. The black line is MACD(10,200,1) which is normalized $CPCI:$CPCE.

  8. Looking like today is Fiesta Day for the bulls.

  9. Wow! I can only hope this week plays out just like the last. There's money to be made in this range; just not sure how long this will last before the inevitable breakout. One more ride around this merry-go-round would be great.

    Best to all,

  10. Cobra. Could the 4th or 5th or 6th time be the charm?

  11. Good call, Cobra.




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