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Saturday, February 20, 2010

02/19/2010 Market Recap: Key Week the Next Week

Long-term 3 of 3 are BUY    
Intermediate 2 of 3 are SELL 5 of 6 are NEUTRAL SPY ST Model is in SELL mode
Short-term 1 of 1 are BUY 5 of 8 are OVERBOUGHT  
BULLISH 0.0.3 SPX Intermediate-term Trading Signals: CPC MA10 is too low.
1.0.3 S&P 500 SPDRs (SPY 30 min): Ascending Triangle confirmed. Target $111.72.
BEARISH 6.4.A SPY Bottom Shape: Could be another leg down to test the low.
2.4.2 NYSE - Issues Advancing: Overbought.
SPY SETUP ENTRY DATE STOP LOSS INSTRUCTION: Mechanic signals, back test is HERE, signals are HERE.
ST Model    
Reversal Bar      
NYMO Sell      
VIX MA ENV     Short if SPY Open > Close and VIX rise back into MA ENV
See 6.2.0b VIX Trading Signals (ENV).
OTHER ETFs TREND COMMENT – *New update. Click BLUE to see chart if link is not provided.
QQQQ   *Hollow red bar, could pullback.
IWM   ChiOsc and STO too high.
CHINA Down Double Top.
EMERGING Down *Multiple reversal bars, could pullback.
CANADA *Doji or Shooting Star.
FINANCIALS Down *BPFINA failed to confirm the recent rally. STO too high.
REITS   *Hollow red bar, could pullback.
MATERIALS   ChiOsc too high.
ENERGY Down *Broadening Top in the forming, the breakout direction is unknown.
OIL   *ChiOsc and STO too high.
GOLD Down 3.3.1 Market Vectors Gold Miners (GDX Daily): *Multiple reversal bars, could pullback.
DOLLAR UP Head and Shoulders BottomChiOsc too low. *Black bar, could pullback.


OK, the mad cow is back, but before opening a bottle of champagne, please take a quick look at the chart below. Three points:

  1. Mad cow usually “mad” for 10 trading days. And our current mad cow so far has “mad-ed” for 10 trading days.
  2. After the first 10 trading days, 20% chances the mad cow keeps mad, 20% chances the market consolidates and 60% chances the market pullbacks.
  3. So far, the current mad cow is the weakest one.

So the conclusion is, a mad cow doesn’t guarantee a big rise the next week. Bulls need show more muscles, therefore the next week is very critical.


The bottom line, according to the chart 6.4.A SPY Bottom Shape, I still think the market cannot simply stand on one foot, so eventually the Feb 5th lows will be tested. However, because according to II Survey, there’re too many people expecting a correction, so according to the past pattern (see red lines), the market may rally big once more before any meaningful pullback. So far, the past 10 mad cow days complies well with the past pattern. Now the question is whether we’ll see a new high? I have no idea. So again, the next week is important.


What if the market simply consolidates the next week? Well, according to the chart 1.0.7 SPX Cycle Watch (Daily), we’ll see the market real direction at the beginning of the March because there’re lots of cycles due at that time. Seasonality wise, usually an important bottom/top is formed in March. Plus 1.0.8 SPX Cycle Watch (Moon Phases), the next full moon is on Feb 28, so most likely the 1st day of March could be a turning point.


2.0.0 Volatility Index (Daily), could be a Double Top, which means mad mad cow ahead. I know some will argue because there’re no actual supply and demand so VIX chart pattern is meaningless. Well, I don’t think that way, VIX indirectly reflects the real supply and demand so the chart pattern should apply to VIX too.


On the other hand, bears should not be too sad after seeing the VIX Double Top, because I have NYSI Head and Shoulders Top to please you.


Double Top vs Head and Shoulders Top, who’s going to win? I have no idea. So again, on the intermediate-term, there’s no clear direction, need see the next week.


As mentioned in the Friday’s After Bell Quick Summary, the next Monday is generally very very bullish (see 6.4.6 Weekday Seasonality Watch). Here’s an interesting chart, 6.4.2b Extreme TICK Readings Watch, because TICK closed above 1,000 the last Friday, so counting the dashed green lines, it looks most likely we won’t see a big rally on the next Monday. Well, I don’t mean a red Monday, I just mean the coming Monday may not rise big.


1.0.3 S&P 500 SPDRs (SPY 30 min), bearish Rising Wedge plus lots of negative divergence, especially, the breadth (black bars) below, apparently becoming weaker and weaker, so if we don’t see the breadth improving the next week, then sooner or later we’ll see a pullback.


3.1.0 PowerShares DB US Dollar Index Bullish Fund (UUP Daily), black bar, so dollar could pullback, but I don’t think the pullback, if any, could go very far because the ChiOsc above is too low, this by the way, is not good for the stock market. 0.0.2 SPY Short-term Trading Signals, 1.3.0 Russell 2000 iShares (IWM Daily), take a look if interested, both ChiOsc are too high which again are not good for the stock market.


3.4.2 Financials Select Sector SPDR (XLF Daily), the Bullish Percent Index below is interesting, for record only, I have no idea what it implies. 5.1.6 Technology Select Sector SPDR (XLK Daily), the Bullish Percent Index below has the same problem. Feels not very bull friendly though.


So to summarize, technically, bears are not over yet, so again as mentioned in the intermediate-term session, bulls need show more muscle to prove indeed the mad cow is back.

STOCK SCREENER:  For fun only, I may not actually trade the screeners. Since SPY ST Model is in SELL mode, only SHORT candidates are listed. For back test details as well as how to confirm the entry and set stop loss please read HERE. Please make sure you understand the basic risk management HERE.

According to the entry rule, 4 stocks found Thursday were not confirmed. Since the intermediate-term direction is not clear, so no stock screeners from now on until the dust settles.

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