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Thursday, October 21, 2010

10/21/2010 Market Recap: Two Top Signals

Long-term 2 of 2 are BUY  
Intermediate 3 of 3 are BUY 3 of 5 are NEUTRAL SPY ST Model in BUY mode; Non-Stop in BUY mode.
Short-term Model is BUY 6 of 6 are NEUTRAL The trend is up. I hold both long and short overnight.
10/26 10/22 : 10/23 Next pivot date: 10/21 – 10/22, 10/25 – 10/27, 11/04
BULLISH 0.1.1 SPX Intermediate-term Trading Signals: Head and Shoulders Bottom breakout, target 1242.
09/27 Market Recap: 9 POMO within 20 trading days means 14%+ up in 3 months.
10/01 Market Recap: Positive September plus mid-term election means 11%+ up to year end.
10/05 Market Recap: 16 more trading days upswing?
BEARISH 1.0.6 SPY Unfilled Gaps: 20 unfilled gaps, the max was 20.
10/15 Market Recap: AAII bull ratio (4-week average) too bullish.
10/15 Market Recap: Commercial (smart money) short Nasdaq 100 heavily according to COT Report.
10/08 Market Recap: Up off-season usually means down earning season.
10/15 Market Recap: Institutions are selling into strength.
10/19 Market Recap: AAPL is way too stretched.
10/15 Market Recap: Euro may retreat which may cause US$ carry trade unwind.
6.4.2c Extreme TICK Readings Watch: TICK too low, lower low or lower close ahead?
1.0.0 S&P 500 SPDRs (SPY 60 min): Double Top, target $114.77. Failed! 
10/19 Market Recap: IBM dropped after ER may mean SPX will be red in 5 weeks.
*0.0.2 Combined Intermediate-term Trading Signals: CPCE trend line breakout, topped?
*6.4.0 SPX and NYMO Divergence Watch: New high on negative NYMO readings, topped?
SPY SETUP ENTRY DATE STOP LOSS INSTRUCTION: Mechanic signals, back test is HERE, signals are HERE.
Non-Stop 09/07 L N/A Partial profits on 09/24.
ST Model 09/24 L *10/08 Low *Adjust stop loss.


Two top signals were triggered today, considering the first possible pivot date mentioned in 10/15 Market Recap is around 10/21 to 10/22, so there’re chances that today is the top. I know, when I said this, most of you for sure won’t believe it, even myself dare not to believe as well. However, since according to 6.5.2c Week Seasonality Watch, more likely we’ll see a red week the next week, so it might not be a bad idea for bulls to take some profits around here, especially if you followed the SPY ST Model, as the model is designed to stay in a trend as long as possible so it has no profit taking signals which is totally up to you to decide, and I think now probably is the time.

0.0.2 Combined Intermediate-term Trading Signals, 3 point validated trend line breakout, actually twice, so it should be even more trustworthy than just breakout one 3 pointed validated trend line. Those of you who followed me for a long time should know that this signal is very accurate, so be careful here, especially if the trend line could hold tomorrow.


6.4.0 SPX and NYMO Divergence Watch, SPX new high but NYMO is clearly in red. I have a similar setup called NYMO Sell that uses the same principle, see the top left corner in the chart below, the setup has 65% winning rate (since 2002) while the gain loss ratio is 5.2 which is astonishingly high and which means the setup is very effective in catching an exact top. 6.4.0 SPX and NYMO Divergence Watch, on the other hand, because it depends on my “visual contact” to trigger a sell so it has even higher winning rate, see dashed red lines vs dashed green lines below (8/11  = 73%).



Maintain the intermediate-term bearish view, the pivot date could be either around 10/22 or 10/26 or 11/04, see 10/15 Market Recap for more details. Below are summaries of all the arguments supporting my intermediate-term bearish view:

  1. As mentioned in 10/15 Market Recap, commercial (smart money) holds record high short positions against Nasdaq 100.
  2. As mentioned in 10/15 Market Recap, AAII bull ratio (4-week average) is way too bullish.
  3. As mentioned in 10/15 Market Recap, institution selling keeps increasing.
  4. As mentioned in 10/08 Market Recap, statistically, a strong off-season could mean a weaker earning season.
  5. As mentioned in 10/11 Market Recap, statistically VIX at 1 month low going into October was not a good sign.
  6. As mentioned in 10/15 Market Recap, US$ may rebound which is not good for the broad market.
  7. As mentioned in 10/19 Market Recap, IBM dropped after ER may mean SPX red in 5 weeks.
  8. As mentioned in 10/19 Market Recap, AAPL MACD is now too stretched which could mean a top for QQQQ.


For October Seasonality chart please refer to 10/01 Market Recap.


  1. The market appears a little stretched as lots of ETFs weekly %B are way too high.
  2. With possible Euro pullback, watch potential weakness on commodity related ETFs like XLE, XLB and XIU.TO.
NDX Weekly NDX to SPX ratio too high. %B too high. Neither had any edges though.
IWM Weekly %B too high.
CHINA Rejected by downtrend line, watch…
CHINA Weekly Extremely high %B.
EEM Weekly EEM to SPX ratio too high, %B too high. Neither had any edges though.
XIU.TO LA TOADV MA(10) too high.
XIU.TO Weekly Fib 61.8% plus %B too high with negative divergence.
TLT *DOWN 1-2-3 trend change? So TLT could be in an intermediate-term downtrend. Be careful.
TLT Weekly
FXE *LA *Bearish reversal bar, combining with weekly chart, so pullback?
FXE Weekly Stalled at Fib confluences area, %B too high with negative divergence, too high above MA(40).
GLD Weekly %B too high.
GDX DOWN On support, BPGDM sell signal though.
GDX Weekly GDX to SPX ratio too high, %B too high with negative divergence.
WTIC Weekly
XLE LA *Bearish reversal bar, combining with weekly chart, so pullback?
XLE Weekly %B too high with negative divergence.
XLF Weekly Head and Shoulders Top in the forming?
IYR Weekly Home builders are lagging.
XLB Weekly %B too high with negative divergence.
  1. Please make sure you understand how to use the table above. The purpose of this report is to provide info so contradictory signals are always presented.
  2. Position reported in short-term session of the table above is for short-term model only, I may or may not hold other positions which will not be disclosed.
  3. Conclusions can be confirmed endlessly, but trading wise, you have to take actions at certain risk level as soon as you feel the confirmation is enough. There’s no way for me to adapt to different risk levels therefore offer no trading signals will be given in this report except the mechanical signals such as SPY ST Model.
  4. * = New update; Blue Text = Link to a chart in my public chart list; UP/DOWN = Short-term trend; L A = Lateral Trend
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