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Sunday, August 23, 2009

08/21/2009 Market Recap: Major Accumulation Day


Some observations about post Major Accumulation Day.

Expect a pullback next Monday at least in the morning.

A few interesting charts.

  Trend Momentum Comments - Sample for using the trend table.
Long-term Up    
Intermediate Down Neutral Intermediate sell signals still need further confirmation.
Short-term Up Neutral  
My Emotion Up*    

Common believes are that the last C up leg has started. Some expect it to go much much higher and some say it’ll be short lived. I couldn’t see that far, just since the Friday was a Major Accumulation Day (90% up day), so we can gather some clues from the past about what had happened after a Major Accumulation Day.


7.0.A Major Accumulation Day Watch.

  1. See blue thick lines, if 2 Major Accumulation Days happened within 5 days, then it signals a tradable bottom. So within a very short time, if we have the 2nd Major Accumulation Day, then odds are very high that the market will go much much higher.
  2. From dashed red lines, the next day if closed in red, usually was shallow. The key to watch is the next next day, if still closed in red, then odds are high that this is a tradable top.


Well, I think the above 2 tips should enough to guide the recent trade. If you really really are afraid of missing this train to north, you could long any time, just do not average down if the market dropped. Simply wait for your position to be out of water because according to the recent experiences, no matter when to long, the only thing needed was patience, pretty soon the position would be out of water. So if this time (or any time thereafter) is different then something must have changed, in this case no average down strategy will at least make you loss less.

Some charts below arguing for a short-term pullback.

The Friday’s After Bell Quick Summary mentioned that CPC and CPCE were way too low and the last time CPCE was this low was 01/24/2006. The following chart is a longer history normalized CPC. It looks like a short-term top, at least very close.


1.0.4 S&P 500 SPDRs (SPY 15 min), lots of negative divergences, so could be a pullback at least Monday morning.


2.0.0 Volatility Index (Daily), 3.1.0 PowerShares DB US Dollar Index Bullish Fund (UUP Daily), red hollow bar usually leads to a reversal. The rebound of VIX and/or UUP (if they do on Monday) usually means a pullback of the stock market.

VIXDaily UUPDaily

T2103 Zweig Breadth Thrust from Telechart, overbought.


The following charts are for your info only.

Rydex Bull/Bear RSI Spread, Rydex bears are vey active therefore this chart looks like we’re at a market bottom now.  (yes, it’s “bottom”, not a typo.)


0.0.1 Market Top/Bottom Watch, a reader commented that according to this chart, the top is very close. Personally, I trust only NYDNV. I’m not sure about the other 2 conditions whether they are extreme enough.


1.1.0 Nasdaq Composite (Daily), the divergence between COMPQ and SOX worked very well in the past for catching the market top/bottom. Now a negative divergence was formed which could mean a top is in the forming. Well, divergence can only be treated as a warning, it’s by no means a signal to act upon.


5.0.5 S&P Sector Bullish Percent Index I (Weekly), 5.0.6 S&P Sector Bullish Percent Index II (Weekly), lots of “very overbought”. For your conveniences I put all the “overbought” together on the same chart.



  1. Market is very close to a top.
    Be Careful!

  2. Insiders at extreme high levels of net selling during the previous four weeks, this confirmation is an additional extremely bearish signal.

  3. Cobra, What did John Murphy say this weekend. I had heard he was saying the market was very over bought ?

  4. Gordon, title is here:


    I don't see he said very overbought.

  5. I was quoting what Art Cashin said on cnbc Friday morning. That did not include this weekend. Also we touched the top of the daily rising wedge friday, what are your thoughts if we break to the upside? It's suppposed to be called a bearish rising wedge. Thanks

  6. Rising wedge could be broken on the upside, so it doesn't guarantee a drop.

    As I said in today's report, if we get 2 days drop in a row, then it's bearish, otherwise no points to fight against mad bulls.

  7. Cobra:

    Since you pay so much to CPC's, you ought to know that there are two sides to each trade, as a call bought by one party means that a call is sold to someone else.

  8. Teich, does it really matter if they are buys or sells? i believe what is important, is if there is a noticeable pattern with such readings in terms of future ST performance. i think that is the point of paying attention to them. You take whatever edge the market throws your won't always produce a favorable trade, but better than flying blind.

  9. First of all - Cobra - great work. I can't thank enough for putting all this together. I am out of words for all your hardwork.

    As per John Murphy, the market is overbought from a long time. He asked his readers to be cautious and do not commit to new money in this market. But I don't recall exactly when - whether is it this week or before he went on a vacation.

    Now here is the question - The traders may be buying call to protect their short positions. Just like traders buy PUTs to protect their long positions. Doesn't it means that the traders are expecting the market to go down. Thus, buying Calls as a cheap protection to their short positions?

    Just FYI - Bill McLaren thinks that Aug 22nd or Sep 7th (+/- a day) would be a good day for the
    market top. The early Sept day is much powerful. So far, he is right on the target. Let's see whether his speculation about early Sept holds or not.

    - EW Guy

  10. If you look thru each Rydex fund you will see that the bearish increase was almost all in a single fund - the inverse S&P 500 which was up $218M. I believe it is a single trade and have seen that $200+ amount come off and on in a day multiple times. All the other funds had insignificant changes if any. Ignore it.

  11. I would also add that inverse Nasdaq 100 and Midcap fund assets remain right at or near record lows and inverse smallcap assets are very close to record lows.

  12. Even Jim Cramer said SELL SELL SELL !

  13. UUP is at the bottom! The S&P rally is done!

  14. Two more days with closes (and bodies) in this new high range (above highs of 8/7) and we're done a/la the January top (and Aug. '87 SP top/Nasdaq March 2000top). An esoteric indicator has issued a sell signal on Friday for SP or is about to and it could issue a sell signal for Nas on Tues.' close. We have written about this on the Final Surge thread over at I'll add more later.

    ------Mr. Panic

  15. UUP chart suggests we may get at least 2 to 3 up days for the dollar ahead.

  16. Lot of people watching UUP for direction.

    Most requested quote.

  17. Cobra
    Why the change from "off the cliff similar to 1929" (your "emotional trend") to now green UP?

  18. That's just for short-term. I still belive the bear market isn't over yet.

  19. So you really believe we could see a big corretion that would take us lower than the 667 on the S&P?
    What would be the catalyst from where we are now?
    I have been watching the markets in awe and I really don't like what I see (not because I'm not in - I am but I have scaled my positions back recently and am letting others run with tight stops) but have been hearing from others that there could be a big correction and in your past posts it could get worse than that?
    Your thoughts?



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