Market Recap: When VXN Opened and Closed Below BB Bottom

By: Peter Pan | Mon, Apr 12, 2010
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  TREND INDICATOR MOMENTUM INDICATOR COMMENT (Click link to see chart)
Long-term 3 of 3 are BUY    
Intermediate 3 of 3 are BUY 4 of 6 are OVERBOUGHT Non-Stop Model is in BUY mode
Short-term 1 of 1 are BUY 6 of 6 are NEUTRAL SPY ST Model is in BUY mode

ATTENTION 2.4.4 NYSE McClellan Oscillator: Negative divergence.
BULLISH 4.1.0 S&P 500 Large Cap Index (Weekly): Head and Shoulders Bottom, target 1246.
BEARISH 1.0.2 S&P 500 SPDRs (SPY 60 min): 17 unfilled gaps. (max was 17)
1.1.0 Nasdaq Composite (Daily): 9 unfilled gaps. (max was 10)
*0.0.3 SPX Intermediate-term Trading Signals: CPCE MA(10) too low.
4.0.4 Dow Theory: Averages Must Confirm: NYHILO too high.
1.1.0 Nasdaq Composite (Daily): NDXA50R is way too high.
4.1.0 S&P 500 Large Cap Index (Weekly): BPSPX too high.
*0.0.9 Extreme Put Call Ratio Watch: CPCE MA(5) too low.
04/05 Market Recap: Too much call buying. See 04/09 Market Recap for the most recent data.
*8.1.5 Normalized CPCE: New record low.
04/06 Market Recap: Smart/dumb confidence spread is too large.
04/06 Market Recap: Too many bearish extreme signals at sentimentrader.
04/08 Market Recap: Intermediate-term Indicator Score at sentimentrader is too high.
*6.2.3 VIX:VXV Trading Signals: New record low.
CONCLUSION So far no bearish signals worked but they are simply too many. I won't attempt any short until the next NYMO Sell setup is triggered. Still hold the SPY ST Model long position, but no more equities long will be added.

SPY SETUP ENTRY
DATE
STOP
LOSS
INSTRUCTION: Mechanic signals, back test is HERE, signals are HERE.
TRADING VEHICLE: SSO/SDS, UPRO/SPXU
ST Model 02/26 L *03/31 low *Adjust stop loss.
Reversal Bar  
NYMO Sell    
Non-Stop     Newly added setup, will give signal on this setup the next time it's triggered.
OTHER ETFs TREND TRADE COMMENT – *New update. Click BLUE to see chart if link is not provided.
QQQQ UP   4.1.1 Nasdaq 100 Index (Weekly): BPNDX too high.
1.1.5 PowerShares QQQ Trust (QQQQ 30 min): Negative divergence too large.
IWM UP    
CHINA ?    
EMERGING UP    
CANADA UP   4.1.5 iShares CDN S&P/TSX 60 Index Fund (XIU.TO Weekly): BPTSX is too high.
BOND DOWN  
DOLLAR UP   Head and Shoulders Bottom, target $24.28.
GOLD UP  
GDX UP   Ascending Triangle, target $54.2.
OIL UP
ENERGY UP  
FINANCIALS UP   4.4.2 Financials Select Sector SPDR (XLF Weekly): Fib confluences area from $16.76 to $16.97 could be the target. Up 9 weeks in a row tied the past record of streak up weeks.
REITS UP
MATERIALS UP   4.4.4 Materials Select Sector SPDR (XLB Weekly): BPMATE too high.
*Please make sure you understand how to use the table above. The main purpose of this report is to provide information so contradictory signals are always presented.

SEASONALITY: THE LATER HALF OF THE NEXT WEEK IS GENERALL BULLISH

According to the Stock Trader's Almanac:

  1. 04/15 income tax deadline, Dow down only 5 times since 1981.
  2. April expiration day, Dow up 11 of last 13.

CYCLE ANALYSIS: CYCLE TOP COULD BE AROUND 04/11 TO 04/15

See 04/08 Market Recap for more details.

INTERMEDIATE-TERM: EXPECT ROLLER COASTER AHEAD

Nothing new, according to the II Survey, too many people expected a correction, so the stock market should rise to a new high first before actually pulling back. Basically, my guess is that we'll repeat the year 2004 roller coaster pattern. See 03/19 Market Recap for more details.

SHORT-TERM: A STRONG EARNINGS OFF-SEASON USUALLY MEANS A WEAKER EARNINGS SEASON

See 04/09 Market Recap, the statistics about the Earnings Season plus the cycle analysis and plus too many bearish extremes accumulated in the table above, so my guess is that we'll see typical sell on news in the coming earnings season.

There're 3 very unique things today:

  1. VIX:VXV new record low.
  2. VIX/VXN opened and closed out of BB bottom.
  3. Normalized CPCE new record low.

All above are topping signals, plus all the bearish extremes in the table above the market simply has too many top signals. I have no idea when those top signals will strike back but for sure there'll be a payback time, so be careful here.

6.2.3 VIX:VXV Trading Signals, new record low today. Pay attention the vertical red lines, when VIX:VXV is too low, usually it means a top.


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6.2.5b VIX Body Completely Out Of BB Watch, VIX opened and closed below BB bottom usually means a top, especially for VXN (VIX for Nasdaq). Take a look at what happened in the following date below if interested.

  1. Date when VXN opened and closed out of BB bottom: 04/12/2010, 06/29/2009, 05/16/2008, 02/17/2006, 09/22/2003.
  2. Date when VIX opened and closed out of BB bottom: 04/12/2010, 01/11/2010, 04/09/2009, 08/18/2006, 08/16/2006, 09/12/2005, 04/12/2005, 04/11/2005.


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8.1.5 Normalized CPCE, new record low, see red vertical line, extremely low reading also means a top. (The so called "normalized" is to use the spread between MA(10) and MA(200) instead of using the absolute value so as to eliminate the bias the equity put/call ratio exhibits depending on what type of market we are in, therefore the effectiveness is better than simply using CPCE MA(5) and MA(10)).


Larger Image

STOCK SCREENER: For fun only, I may not actually trade the screeners. Since SPY ST Model is in BUY mode, only LONG 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.

Looks like it's too late to long stocks now as the market is way too overbought. Waiting for a better chance.

 


 

Author: Peter Pan

Peter (Yong) Pan
Cobra's Market View

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