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Sunday, June 14, 2009

06/12/2009 Market Recap: Stuck in a range


No idea about short-term, sharing some info instead.

For intermediate-term, still suggest not heavily betting on the long side. It's not the time to short either.

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

Based on some comments, I found some people don’t know that all the charts mentioned in the daily post are simply part of my public chart list at This means that you can check my charts anytime, such as 7.3.2 Firework Trading Setup or  2.8.1 CBOE Options Total Put/Call Ratio, etc etc. And I strongly recommend you to at least occasionally check the very first chart: 0.0.0 Signal Watch and Daily Highlights where I summarize daily all the trading signals I’ve been watching.


A sizeable pullback didn’t happen on Friday as I expected. From the SPX daily chart, it still looks like a consolidation pattern therefore I have no idea about the market's direction now. The bottom line, I still don’t think it’s now the time to heavily bet on either the long or the short side. As usual, let the market go first, please.


Short-term, as mentioned in the Friday’s Quick Summary, both bull and bear has its own argument. For me, I tend to believe that the “Seasonality” weights more, however a reader named Frank wrote to me with the following interesting observations:

Hello Peter, since you did a study on Put/Call ratio on one of your study.  I did some rough stat on high ISEE (indices/ETF) close.  You probably could do a better job at this.  But this is what I find.  It seems (after the March low) with ISEE (indices/ETF) close at or above 100, we have good probability (9 out of 14) of closing lower the next day or 2-3 days out.  With ISEE (indices/ETF) close at or above 110, the edge become very clear (6 out of 8 times all down).  So today we close at 110, that should be some warning signal?
March 13 176 March 14 down
March 17 113 March 18 up
March 19 131 March 20 Down
March 23 121 March 24 Down
March 27 101 March 30 down
March 31 107 April 1  up
April 1  115 April 2 up
April 13 124 April 14 down
April 14 102 April 15 up
April 16 102 April 17 up But April 20 down big wipe all from Apirl 9
May 6   114 May 7 down
May 7    132 May 8 up But may 11-13 wipe out
May 29  105 June 1 up
June 9  104 June 10 down

Here’s the chart form ISEE.


Intermediate-term, reasons for better not heavily betting on the long side are listed bellow. From my crappy TA point of view, odds favors downside correction. But if you really think that this time is different, like some of “stock gods” in my Chinese forum have been believed, that market will simply up and up, so now we should “all in” with margins. Well, I cannot say you’re wrong, after all I’m not a “stock god” instead “stock gods” seem to all agree that I’m merely a bookworm. Anyway, from “book’s” point of view, a good strategy is to earn money steadily, instead of betting heavily against odds to win really really big one time, because “bet against odds” is not always repeatable. Also from “book’s” point of view, the most difficult part of trading is not to earn money but to control the loss, therefore before every trade, the potential risk and reward should be carefully considered. Now, I see more risks, but, sure, everyone has a different risk standard, so again, YMYD.

5.0.2 S&P Sector Bullish Percent Index, overbought, the TECH has even reached a 8 years new high now.


2.3.4 Nasdaq Total Volume/NYSE Total Volume, Nasdaq is crazy. Yes, I knew, the NYSE closed for 30 minutes on Friday. But simply could a 30 minutes no trading make this huge differences? I doubt it.


8.0.1 Use NATV/NYTV to catch the market top/bottom, lots have asked for what NATV/NYTV looked like in year 2000, well here we go.


7.0.9 NYADV and NYUPV Divergence Watch, if history repeats itself again then we’re likely very close to a top, but, well, maybe, probably, possibly, this time is different…



  1. Cobra,

    I like your reminder ... don't lose money! Now is the time to be cautious!


  2. Cobra,

    concerning the 40 min glitch on Friday, it wouldn't had matter, as I watch the ratio intraday. based on past readings, before the glitch occurred the ratio would had likely closed at least minimum 1.85 or more.

    regarding the Shanghai index, when it finally broke above 1450 back in early April I was expecting a possible move toward the 1800+ resistance level. I'm have my wife and friends on notice of possible top there.

    Regards, Jimmy

  3. typos...

    1450 should be 2450
    1800 should be 2800


  4. Hi Cobra,

    Just want to share some of my thoughts with u. Read ur site everyday. thanks for your good work.

    Part one

    Where the market goes in the future will mostly depends on where the dollar goes and where the dollar goes will be determined by the policies made in DC. So the Capital Hill and the White house will dictate over any chart reading on the path of the market direction. I don't know how high or how low $spx will go in the next few months or next few years but I am pretty much sure about one thing that is if the current policies (both fiscal and monetary) are not the right cure the prices of all kind of assets will respond accordingly and the market forces eventually will push politicians and American people to make the right decisions no matter they like it or not.

    The fundamental root cause of the current problem as we all agree is overspending in governmental. corporational and personal levels. The correct cure is to control spending within its means. The Consumer is doing it (by foreclosure, default on credit card debt and spending less while saving more) and corporations are doing it accordingly (by layoffs and cutting capital investment) but the government is doing the opposite due to political considerations. The market will respond to the government policies in different stages which could be treated as a scoreboard for the outcome between the forces of government and the forces of the market:

    Stage 1. from Oct. 2008 to March 6 2009: The market forces won. Market's primary concern was deflation: therefore we saw equity , commodity drop sharply while bond and dollar rallied even though Fed injected tremendous amount of liquidity into the system and Government is bailing out everybody.

    Stage 2: from march 6 to a near future (most likely to Sept. 2009): The Government wins. Market's primary concern is government spending when the financial system is seemingly stabilized ( which is not and we will see the financial system collapses again in stage three) therefore dollar weakened, bond yield jumped, equity rallied. Although the government policies win so far the market is giving warning signals to the government by testing the limit of how weak the dollar can go and how much weak dollar induced inflation the US economy can withstand. The yield of 10 year treasury note and crude oil will keep climb (my guess is 10 year yield around 5 to 5.5% and 30 year mortgage around 7.25 to 7.75%. as for oil little bit hard to project but it could go to 105 to 110 level) until the economy turns into a nose dive mood again. I don't know the exact time frame but I suspect b4 Labor Day we will see oil peaked by then and all the economic indicators pointing to deteriozation in a fast pace.

  5. part 2

    Stage 3: market forces win again. $SPX down another 50% or so from its peak in stage 2 (probably around 1050 as its peak). Commodities tank again. Dollar and bond rally again. Unemployment rise above 12% and heading to 15%. The second wave of foreclosures(mostly prime loans) and credit card defaults and commercial real estate defaults will hit the banks harder once again. Now what the government will do will once again determines the outcome of next stage.

    If by this time the government could adopt the correct policies and let those should fail fail then the healing process will start from here and we will see a start of a bull market pretty soon or at least the market low reached in this stage will be the LOW.

    If the government instead does not learn the lessons and increase the magnitude of the wrong polices implemented in the stage 2 (more spending and more bailout), we will see a repeat of stage 2 with hyperinflation this time. The dollar could lose its reserve status and there will be large scale social and political unrests until American people really wake up and decide to take bitter medicines that they should take at the first place. I was so mad at the politicians at DC and their stupid policies that I was too biased to think the American Century is gone and this country will end up falling apart. However I strongly believe we human beings are able to learn from our own mistakes and are adaptive to the new challenges. The American people may not be able to convince themselves now that less government spending and live a simpler life is the best solution but they will realize they have to to do so when they see otherwise their country will be falling apart and they will have no life instead of a simpler life. The market dynamics will force American people to adopt the correct policies in the end and will rebuild the great American experience. It's just too sad to foresee the Americans could go through this tough period with less cost and pain instead the luck of the will of both its citizen and their leaders will cause them to go through much bigger ordeal.

    Watch California. What happens in California will indicate what will happen to the whole country.

    For short term, just watch dollar, bond yields, commodities and be ready to short the stocks.

    Just remember there is no green shoots. Also remember the run on oil, bond yields and commodities will not be sustainable because their own rise will lead to their own free fall. They are used as a pressure by the market dynamics to force government to revert back to correct policy making. Buy them when government issues wrong policies and sell them when the bad outcomes from these policies become obvious to everybody.

    I believe a large part of the slopers will share the same view as I described above and hope this could make you feel better about the big picture and will not be confused or frustrated by the daily market fluctuations.

    frank zhao

  6. Thank you Frank! Great insight, really appreciate it.

  7. "Watch California. What happens in California will indicate what will happen to the whole country"

    Hey great! So California is now pretty much broke as BK, therefore US of A will BK too! Ya baby!

  8. But WAIT! US of A is ALREADY FU**ING BROKE! We are broke 10 times over already! Our debt is TWICE OF WORLD GDP! Ya!

  9. Never has it been more clear that humongous bank and broker are holding up the markets. Day after day of consistent purchases of large SPY, QQQQ, and IWM ETF blocks. There is also growing concern that the government is intervening on an ongoing basis in equities markets (see reading number #1 below.) All so obvious. Hold up the markets as more secondary stock offerings are issued with the support of the administration who is aggressively working to engineer an economic recovery (or at least avert a further melt down). A win win for Wall Street and Washington. Have you wondered why there have been weeks of false TA signals indicating an immanent FiB retracement while no correction has occurred?

    LONG TERM MARKETS: The markets will not roll over until virtually all of the secondary stock offerings are complete. Hardford has now announced a secondary along with the receipt of TARP bail out funds (in fact several insurance companies have now been bailed out). This bear market rally (now largely a sideways slide) will clearly continue through June. As the people on ToutTV know all this the bullish drum will continue to be beaten to death and toxic economic data glossed over. The interesting side effect of this market manipulation may be to magnify the size and duration of the next leg down. In specific, as economic data proves that the US+World is continuing to economically degrade, downside pressure on stock fundamentals is building. At some point the growing disparity between forward looking P/Es and economic reality needs to align. In other words, the engineered disparity between reality and fantasy has limits.

  10. I'm ashamed to be an American. This country is a joke and a fraud.

  11. "This country is a joke and a fraud", I think the latter is more true. We are a nation of fraud and an economy build on DEBT by DEBT...

    To anonymous above. Yes, government is proping up this market alright. And we can all play along with it like a game of musical chair. The only problem, there is only 1 chair when the music stops... and even that chair is broke with only 1 leg standing...

  12. Hi Cobra!
    What about the "withdraw economic stimulus"!!!??? Why? Are we not in a recession? Are we recovering, or falling at a slower pace? Big dilema ahead! Big countries are going short of money, with great deficits now, shouldn't they save some for unthinkable scenarios! Have we seen the worst? On the other hand, if big countries withdraw economic stimulus, couldn't this "recovery" derail? Is it too soon or too late to withdraw the economic stimulus? I'm not feeling very optimistic right now!



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