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Thursday, November 4, 2010

11/04/2010 Market Recap: Clear Breakout

Long-term 2 of 2 are BUY  
Intermediate 3 of 3 are BUY 5 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 partial long position overnight.
10/26, 11/04 11/06 : 11/07 Next pivot date: 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.
10/26 Market Recap: Average 2.7% gain during the 8 trading days surrounding midterm election.
10/29 Market Recap: The last 2 months of year are bullish.
1.0.0 S&P 500 SPDRs (SPY 60 min): Ascending Triangle breakout to be confirmed, target $122.24.
BEARISH *1.0.6 SPY Unfilled Gaps: 21 unfilled gaps, the max was 21.
10/29 Market Recap: AAII bull ratio (4-week average) too bullish.
10/29 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. Failed!
10/29 Market Recap: Institutions are selling into strength.
6.4.0 SPX and NYMO Divergence Watch: New high on negative NYMO readings, topped? Failed!
4.1.0 S&P 500 Large Cap Index (Weekly): NYSI STO(5,3,3) sell signal.
6.1.9b Extreme ISEE Index Readings Watch: ISEE Indices & ETFs Only Index <= 30, top close? Failed!
6.4.2c Extreme TICK Readings Watch: Extremely low TICK guarantees a lower low/close ahead? Failed!
*T2111, percent of NYSE stocks 2 std dev above MA(200) is a little bit high.
*T2112, percent of NYSE stocks 2 std dev above MA(40) is a little bit high.
*11/04 Market Recap: Percent of SPX stocks 1 std dev above MA(50) is too high.
*11/04 Market Recap: 41% of the Sentimentrader’s indicators are at bearish extremes which is too high.
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 *10/27 Low *Adjust stop loss.
NYMO Sell 10/28 S 2*ATR(10) Reference only, not meant to be followed. *Stopped out with loss on 11/04.


No argue, we had a clear breakout and also because today is a Major Accumulation Day (NYSE Up Volume : NYSE Down Volume >= 9), so an immediate higher high was almost guaranteed and bears will have to wait until the next consolidation area before considering any possible counterstrikes. And also therefore my intermediate-term bearish view needs to be reassessed. Although my call for the pivot time window could be as late as 11/08 (see 10/29 Market Recap), but I think the chances are remote unless a red day tomorrow (will discuss this if indeed so). I FEEL TERRIBLE FOR BEING WRONG, however, I do hope all of you have noticed what I mentioned in 10/05 Market Recap, a possible 16 more trading days upswing after 10/05 breakout and in 10/22 Market Recap, I also reiterated that bearish intermediate-term view doesn’t equal to a short position, please use my position listed in the table above as reference. So trading wise, if strictly follow my report, bears shouldn’t lose much. Anyway, from now on, I’ll change the way of expressing my expectation to avoid misunderstandings.


About Non Farm Payroll day tomorrow, 2 things to say:

  1. Generally bullish.
  2. Intraday pattern usually open high close lower or open low close higher.


The following intraday statistics is from Bespoke:

If Friday’s report comes in significantly stronger and the market opens up, history says not to chase it. If the report comes in much weaker than expected and the market opens down, investors should buy on weakness.


I see lots of bearish extremes today, however as per the current bullishness, I feel all those extremes may not be extreme enough, so to expect a pullback, we may have to wait for a few more days. Below are some of those bearish extremes:

Percent of SPX stocks 1 std dev above MA(50), see bars highlighted in red.


T2111, percent of NYSE stocks 2 std dev above MA(200), the blue horizontal line is the all time high before year 2009, so the reading we have today actually is pretty high.


T2112, percent of NYSE stocks 2 std dev above MA(40), the same wise, the blue horizontal line is the all time high before year 2009, so again the reading we have today actually is pretty high.


Indicators at Extremes from sentimentrader, in a simply sentence, 41% of sentimentrader indicators are now at bearish extremes which is a very high number.



The SPX had a clear breakout of its 3 weeks range on the upside, so the intermediate-term bearish view was a failed call. Will reassess the intermediate-term trend in the weekend report.


See 10/29 Market Recap for more details.


QQQQ 10/15 L
NDX Weekly UP %B too high with negative divergence. NASI weekly STO(5,3,3) sell signal.
IWM Weekly UP
CHINA 07/15 L
EEM *ChiOsc is too high.
EEM Weekly UP
XIU.TO 08/31 L TOADV MA(10) too high.
XIU.TO Weekly UP
TLT ChiOsc is too low.
FXE Weekly UP
GLD Weekly UP
GDX 10/29 L
GDX Weekly UP
WTIC Weekly UP
XLE 06/15 L
XLE Weekly UP
XLF 10/15 L *Complex Head and Shoulders Bottom or Double Bottom breakout, target $16.74.
XLF Weekly UP
IYR Weekly UP Home builders are lagging.
XLB 11/02 L
XLB Weekly UP

  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 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.
  5. Trading signals in OTHER ETFs table are mechanical signals. See HERE for back test results. 08/31 L, for example, means Long on 08/31.
  6. UP = Intermediate-term uptrend. Set when I see at least one higher high and higher low on weekly chart.
  7. DOWN = Intermediate-term downtrend. Set when I see at least one lower high and lower low on weekly chart.
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