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Tuesday, November 16, 2010

11/16/2010 Market Recap: Lower Low then Rebound?

Long-term 2 of 2 are BUY  
Intermediate 3 of 5 are *SELL 5 of 5 are NEUTRAL SPY ST Model in BUY mode; Non-Stop in BUY mode.
Short-term Model is SELL 4 of 6 are *OVERSOLD The trend is down. I hold partial short position overnight.
11/14,11/26 11/21 : 11/22 Next pivot date: 11/24 – 11/26
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.
10/29 Market Recap: The last 2 months of year are bullish.
11/05 Market Recap: SPX daily bar completely out of BB may mean bulls are safe till the year end.
11/12 Market Recap: 77% chances the 11/05 high will be revisited in 3 weeks.
*T2122 NYSE 4 week new high/low ratio is oversold relative to the recent history readings.
*0.2.3 NYSE McClellan Oscillator: Oversold.
*6.2.2b VIX Trading Signal (BB): Watch for potential buy setup.
BEARISH 1.0.6 SPY Unfilled Gaps: 20 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.
11/12 Market Recap: Too many Sentimentrader’s indicators are at bearish extremes.
11/05 Market Recap: 70%+ chances SPX will close below 1225 on weekly chart within 2 weeks.
6.4.0 SPX and NYMO Divergence Watch: SPX new high while NYMO is negative, topped?
6.4.3a SPY Bearish Reversal Day Watch: Bearish reversal day, so topped?
8.1.4 Normalized CPC: A little low.
0.0.2 Combined Intermediate-term Trading Signals: Trend line breakout confirmed, so topped? 
0.2.4 Nasdaq Total Volume/NYSE Total Volume: Too high, so topped?
1.0.0 S&P 500 SPDRs (SPY 60 min): Descending Triangle, target $118.37.
11/12 Market Recap: Smart/Dump money confidence spread too high.
11/15 Market Recap: SPX down 3 consecutive days means lower close ahead.
0.2.1 10Y T-Bill Yield: ROC(30) >= 9, topped? (Due to Quantitative Easing, I’m not sure if it still works)
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ST Model *Long setup not confirmed and no longer valid.
NYMO Sell 11/12 S *Breakeven *Adjust stop loss. Reference only, not meant to be followed.


Three conclusions:

  1. I expect 2 leg down at least.
  2. The 1st down leg is near end, we could see a rebound as early as tomorrow.
  3. Chances are good that before the rebound we may see a lower low first.

Why “expect 2 leg down”? Because the drop today was a little big, since we’re still on earth (will POMO make us no longer on earth?) so the law of inertia should apply – a forward accelerating car cannot be reserved before it slows down, see chart below, more likely we’ll repeat the past pattern for having 2 leg down at least.


Why “the 1st down leg is near end”? Because the market is oversold or very close to oversold. I’ve mentioned several times that the overbought/oversold signals I watch are no ordinary signals, so whenever I say oversold (or overbought), it can be trusted. See table above or 0.0.0 Signal Watch and Daily Highlights, 4 out of  6 no ordinary overbought/oversold signals are now oversold. Especially T2122, the NYSE 4 week New High/Low Ratio, which is my ultimate weapon for watching overbought/oversold. Although it’s not officially oversold yet but according to the most recent history readings, it should be oversold enough now.


Why “before the rebound we may see lower low first”? The same law of inertia, do you ever see a Major Distribution Day (NYSE Down Volume : NYSE Up Volume >= 9) marks exactly the bottom? The reason I mention this is to say that bears need not worry, there’re still chances to escape. Even the only one case in the chart below does happen again, the market open high goes high never turns back, don’t forget according to 1.0.6 SPY Unfilled Gaps, that’d be SPY’s 21st unfilled gap which is very likely to be filled before SPY goes very far.


Besides, chart 6.4.2c Extreme TICK Readings Watch also guarantees (well, almost) an immediate lower low ahead. A reader once commented that because the chart shows extremely low TICK in downtrend so of course a lower low is guaranteed, I should use an uptrend chart as an example. That’s partly true, the problem is, in an uptrend, seldom seldom an extremely low TICK reading happens, in another word, whenever an extremely low TICK reading is recorded, chances are the market is already in a downtrend.


6.2.2b VIX Trading Signal (BB), VIX closed out of BB top so it’s a potential buy setup (not confirmed yet of course). The reason I mention this chart is to remind you if SPY drops again tomorrow then the SPY ST Model could switch to sell mode from the current buy mode thus the VIX BB buy setup would become invalid.


Also if interested, take a look at the big annotation box in chart 0.1.0 SPY Short-term Trading Signals, as according to TradingMarkets, at least 5 buy setups were triggered, all had very high winning rate (above 80%).



See 11/12 Market Recap for more details.


See 11/12 Market Recap for more details.

For November seasonality chart please refer to 11/11 Market Recap for more details.


QQQQ *11/16 S
NDX Weekly UP NASI STO(5,3,3) sell signal.
IWM *Island Reversal, target $69.75.
IWM Weekly UP
CHINA Big red bar means more pullbacks ahead, so be careful.
EEM Weekly UP
XIU.TO *11/16 S *1.5.1 TSE McClellan Oscillator: Oversold, so should rebound soon.
XIU.TO Weekly UP
TLT Weekly DOWN %B is a little too low.
FXE *Broadening Top breakdown?
*3.1.1 PowerShares DB US Dollar Index Bullish Fund (UUP Daily): ChiOsc a little high though.
FXE Weekly UP
GLD Weekly UP
GDX *11/16 S *Island Reversal, target $54.64.
GDX Weekly UP BPGDM and GDX:SPX both are too high. Pullback?
USO *Black bar on multiple support, rebound?
WTIC Weekly UP
XLE 06/15 L
XLE Weekly UP %B is too high with negative divergence.
XLF 10/15 L
XLF Weekly UP
IYR Weekly UP Home builders are lagging.
XLB *11/16 S
XLB Weekly UP XLB:SPX a little too high.

  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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