Market Recap: Is 11%+ Up Guaranteed Till the Year End?

By: Peter Pan | Sun, Oct 3, 2010
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  TREND MOMENTUM COMMENT
Long-term 2 of 2 are BUY    
Intermediate 3 of 3 are BUY 4 of 5 are NEUTRAL SPY ST Model in BUY mode; Non-Stop in BUY mode.
Short-term Model is CONFUSED 6 of 6 are NEUTRAL The trend is not clear. I hold short position over the weekend because the mini price target hasn't met, not because it's safe to hold.
GANN DAY MOON:SOLAR CYCLE CONCLUSION
10/10-10/11 10/07 : 10/08 09/28 Next pivot date: 09/28 - 10/05, 10/11

BULLISH 09/17 Market Recap: Down 3 weeks then up 3 weeks, the 8th and 9th week is statistically 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.
BEARISH 1.0.6 SPY Unfilled Gaps: 18 unfilled gaps, the max was 18.
09/23 Market Recap: AAII is way too bullish.
09/23 Market Recap: SPX 3 down days in a row means 79% chances to close below 09/23 close in 10 days.
6.1.9a Extreme ISEE Index Readings Watch: ISEE Indices & ETFs Only Index > 100, pullback?
6.5.2b Month Day Seasonality Watch and 6.5.2c Week Seasonality Watch: Bearish this week.

6.4.3a SPY Bearish Reversal Day Watch: Bearish at least short-term?
09/27 Market Recap: AAPL is now too stretched.
10/01 Market Recap: AAII bull ratio (4-week average) too bullish.
10/01 Market Recap: Commercial (smart money) short Nasdaq 100 heavily according to COT Report.
10/01 Market Recap: Down 3 weeks up 4 weeks then down 1 week, not so bright for the next 6 weeks.

SPY
SETUP
ENTRY
DATE
STOP
LOSS
INSTRUCTION: Mechanic signals, back test is HERE, signals are
HERE.
TRADING PLATFORM: SSO/SDS, UPRO/SPXU
Non-Stop 09/07 L N/A Partial profits on 09/24.
ST Model 09/24 L 1.9*ATR(10)  

SHORT-TERM: BEARISH BIASED, NOT SURE IF THERE STILL IS ONE MORE PUSH UP THOUGH

Another reversal like bar - a filled black bar was formed on Friday, now SPY has 5 reversal bars in a row (Bearish Reversal Bar, Hanging Man, Hollow Red Bar, Bearish Reversal Bar, Black Bar). And don't forget, it's the 3rd black bar, so my question is: Since the previous 2 black bars were failed, will the 3rd time be different?

SPY Reversal Bars

Remember the chart below? Time is ticking as the Friday bar is the 5th consolidation bar which in most cases are not friendly to bulls in recent years although occasionally it did breakout on the upside.

SPX Consolidation Bars
Larger Image

The chart below is from StockTiming. Pay attention to black cycles, although SPX keeps having higher high but the institutional selling is increasing too. This kind of negative divergence usually led to a big correction.

SPX Institutional Selling is Increasing

Of course, either from the consolidation chart above or the institutional selling chart above, I cannot exclude the possibility that we're repeating what happened in April and this is why in the Friday's After Bell Quick Summary, I said the Ending Diagonal Triangle (if indeed) looks still missing one more push up. The idea is since the intermediate-term is in an clear uptrend so any bearish statement has to prepare the worst ever case for bears.

SPY Ending Diagonal Triangle
Larger Image

The chart below is my analysis for the potential pivot date, although the 09/30 could still be the top, but:

  1. Via Fib 38.2% time extension from 03/06/2009 low to 04/26/2010 high in terms of calendar day, the next pivot date is 10/02, instead of 09/29 which is calculated based on trading day.
  2. Use 08/27 low to calculate A = C in terms of trading day, the pivot date is 10/05 instead of 10/01 which is calculated by using 08/25 low as the low.
  3. The magic day 6 of every month since 2000 was most likely a pivot date.

So from the angle of time analysis, too, I cannot exclude the possibility of one more push up to 10/05. By the way, the chart below also illustrates the next possible pivot date after 10/05, could be 10/11, although now it's hard to know whether it means a top or bottom. It would be amazingly amazing if the market does rise to 10/11 before reversing down if you still remember what I mentioned in 09/03 Market Recap. The question is: am I amazingly amazing? Chances are remote, I guess, so most likely the market won't rise to 10/11 which leaves the most probability to 10/05, LOL.

Pivot Dates
Larger Image

INTERMEDIATE-TERM: SEEMS 11%+ RISE GUARANTEED BEFORE YEAR END, I'M SKEPTICAL HOWEVER

From the statistics about POMO as well as up September plus mid-term election year, it seems that the SPX 11%+ (above 1270) rise to the year end is almost a sure thing. Personally, I'm skeptical about this kind of sure thing. As mentioned in the short-term session above, except that I'm not sure if there's one more push up, overall, I believe we're very close to an intermediate-term correction. In another word, the top mentioned in the short-term session, either on 09/30 or 10/05 or 10/11 could be THE TOP.

Let's take a look at the "sure thing" first.

The POMO statistics from Trading the Odds: (see Permanent Open Market Operations (POMO) for more details)

SPY Quarterly Returns

The statistics about up September plus mid-term election year from Bespoke:

S&P500 Positive Septembers

Now, let me explain why I expect an intermediate-term correction.

Many people may feel that COT Report is useless, however the Nasdaq 100 commercial position is amazingly accurate. Right now the Commercial (smart money) is heavily shorting while the Large Spec (dumb money) is heavily buying. You should be scared when you see the Commercial Hedger Combo chart below. SOMETHING IS GOING ON HERE. By the way, if you still remember "the AAPL is too stretched" mentioned in 09/27 Market Recap, it should ring a bell now.

NASDAQ COT
NDX E-Mini COT

Another reason I'm not optimistic about the intermediate-term is the AAII Bull Raito (4-week Average) chart which I also find amazingly accurate.

AAII Bull Ratio

Below is the back test since 1962, down 3 consecutive weeks then up 4 consecutive weeks (means sharp reversal from a major bottom) then down 1 week, short at the Friday close, cover 1, 2, 3, 4, 5, 6 weeks later at Friday close, looks very bear friendly. At least, with no exception, a lower low was guaranteed for the next week, in another word, the SPX 1132 will be broken the next week if history repeats itself again.

Backtesting
Larger Image

SEASONALITY: OCTOBER IS BULLISH

The following chart is from Bespoke.

Seasonality: October is Bullish

The following chart is from Sentimentrader.

S&P500 and NASDAQ Seasonality

HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST

  TREND COMMENT
QQQQ LA 4.1.1 Nasdaq 100 Index (Weekly): NDX to SPX ratio too high.
IWM UP *Bearish reversal bar and black bar, pullback?
CHINA    
EMERGING UP 4.1.6 iShares MSCI Emerging Markets (EEM Weekly): EEM to SPX ratio too high.
CANADA UP TOADV MA(10) too high with negative divergence, pullback?
*2 black bars in a row, pullback?
BOND LA *2 hollow red bars.
EURO UP  
GOLD UP  
GDX *UP 4.3.1 Market Vectors Gold Miners (GDX Weekly): GDX to SPX ratio too high.
OIL UP  
ENERGY UP  
FINANCIALS *UP 4.4.2 Financials Select Sector SPDR (XLF Weekly): Head and Shoulders Top in the forming?
REITS *UP 4.4.3 Real Estate iShares (IYR Weekly): Home builder is lagging.
MATERIALS *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. 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 specific buy/sell signals will be given in this report except the mechanical signals such as SPY ST Model.
  3. * = New update.
  4. Blue Text = Link to a chart in my public chart list.
  5. LA = Lateral Trend.

 


 

Author: Peter Pan

Peter (Yong) Pan
Cobra's Market View

Peter is the author of www.cobrasmarketview.com and several none-English web sites.

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