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Sunday, October 4, 2009

10/02/2009 Market Recap: The Primary Wave 3 Down?


The primary wave 3 down may have started according Elliott Wave International.

CPCE held above trend line for 3 days, could be a confirmation of an intermediate-term top.

SPX pullback target could be around 875 on the intermediate-term.

Short-term buy on reversal bar model will be triggered if SPX could close in green next Monday.

VIX daily black bar argues for a short-term rebound but the breakout of the weekly Bullish Falling Wedge is "bear" friendly.

  TREND MOMENTUM   COMMENT - Sample for using the trend table.
Long-term Up      
Intermediate Down Neutral    
Short-term Down Neutral    
SETUP DATE INSTRUCTION STOP LOSS Mechanic trading signals for reference only. Back tested since 2002.
Index ST Model I     Stopped out long with gain on 10/01. No position held now.
Index ST Model II 09/29 Sell next open 09/29 High Short position initiated on 09/30.
VIX ENV   Watch   Long signal could be triggered soon.
Reversal Bar   *Watch   *Long if green Monday (Risky)


1.0.8 SPX Cycle Watch (Weekly), according to Elliott Wave International, the catastrophic primary wave 3 down has started. The arguments are listed below:

  1. Four of Three is usually where trend reverses. From my chart, yes, SPX has already passed the point, but INDU is right at the position and I hope you still remember my argument for 1.2.0 INDU Leads Market.
  2. The primary wave 2 lasted 28 weeks which is right a Fib 38.2 of the total 74 weeks of the primary wave 1.


Personally, I cannot see that far, just 2.8.0 SPX:CPCE has been above its trend line for 3 days. This never has happened since the March rebound, so chances are good that the intermediate-term top has confirmed.


0.0.3 SPX Intermediate-term Trading Signals, if indeed the intermediate-term was topped then the text book target for a broken Bearish Rising Wedge is along the dashed blue line. My guess is 875 area.


0.0.0 Signal Watch and Daily Highlights, take a look at the overview signals. Short-term is a little bit oversold, intermediate-term signals are all “for sale” and most breadth signals are still in overbought area.


0.0.2 SPY Short-term Trading Signals, hollow red bar plus oversold (especially the NYMO at the bottom is a very reliable signal) plus Index ST Model I is still not “for sale”, so if we have a green Monday then this is a long setup, target could be $104.


Below is the back test summary for the long setup mentioned above. The 71% winning rate is not bad. Just it’s a little bit risky now as we may well in the trend change transition period.

LongSummary IndexShortTermModel

2.0.0 Volatility Index (Daily), solid black bar also support a short-term rebound. However 2.0.1 Volatility Index (Weekly), looks bearish. The Bullish Falling Wedge was broken on the upside so the target could be around 37.

 VIXDaily VIXWeekly


3.4.1 United States Oil Fund, LP (USO Daily), 2 reversal bars in a row (solid black bar plus hollow red bar) plus it looks a lot like a back test of a broken trend line, so oil could pullback. And on the intermediate-term basis, I’m bearish on the oil too.


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