SPX target

Price: 1161

Time:  Jan 14/15

weekend review

Last week’s dramatic move turn many of my bear comrade into bull’s camp, as a super bear and I will hold my side and wait for the glory of the bears. :) 

 

In the long term, there is no doubt we are in a super bear market.  Any number in the SPX 900 range is a luxury years later…

 

For the midterm, indeed many possibilities are available at the current stage of the market.  

 

In the short term, we will see a pullback for sure based on the current overbought condition.  200 daily EMA is within inches and I don’t think bulls can take that out in the 1st time.  The retracement level will decide the midterm scenario.  My primary view is that we will still in a irregular a-b-c wave 2 correction and wave 3 will start very soon early next week, either Monday or Tuesday, leading the market down to 820 region as a initial stop.  In this way, H&S pattern is still valid and just a little tilted like mine :)

 

 

 

For the 2nd scenario, bulls are wild.  everything is in the chart below.  As I said, new high is the criteria to define this one…

 

 

Midterm picture

I’ve not update a midterm picture for a while.  but since today’s market action indeed surprises me, i need to give it revisit here. 

 

First of all, we need to have respect to the market.  We can have predictions, we can have judges, but when those are against the market, market is always right.  Just like Livermore said “Markets are never wrong, opinions often are.”   All we can do is adjust ourselves and follow the market…

 

Based on the chart below, everyone may raise the question whether early June’s high will be taken out.  That’s also my midt.erm decision point.   Before it’s broken out, i remain on the bear side; once we have new high, i will join the bull camp for a few more weeks.   It needs to be pointed out that both retracement level and time frame are already perfect for 4th wave, an extended one does not have to be necessary…

 

Energy is weak

Two months ago, we set the target for this Oil rally as the yellow circle region.  On June 11th, the peak is just tens of cents away from our target.  On Jun 16th, the white arrow area, we call this Oil rally is over.  With today’s gap down, some CNBC experts join the weak-oil side.  It’s not a bad move for them at all, energy sector still has lots of downside to go and it’s late yet to make the call.  Just a reminder this is not the buy-dip time as J Cramer is talking about on CNBC.  To me it’s short everything wildly…

 

 

06/28 weekly summary

In the past two weeks, markets gapped down on Monday and went lower.  so will third time be different?

SPX:  this chart is posted here two weeks ago when market is at the cross of red & green lines and I said I do not believe market has the strength to take out so many resistance level without a pullback.  now top is already in for the market and we can go down dramatically from here anytime.  the best case for bull is to retest the red line and kiss bye from there; good case for bear is we start falling from here right on Monday.  

 

 

Market will retest March 666 lows at least in this down wave.  this may sounds ridiculous for many, but i am so get used to this…  i shared this idea with a friend in a wedding last weekend at his request, then the whole talk after that become his bullish announcement.  He tried to save me from potential huge loss and convince me how good opportunity it is right now to buy and hold BAC and WFC for next 5 years.   I really do not have as much “facts” as he is having, like Obama policy, 401K effect, investor confidence level etc… my only evidence is my chart.   my chart told me at the end of the Feb that a huge rebound is coming while all the “facts” are saying market will never look back…  now my chart is saying financial sector will be very bloody again in the next few months and at least a few top 20 commercial banks will be removed from the trading list (nationalized). 

 

let’s just take a look at XLF:  XLF again finished the topping process a few weeks before the SPX and now is kicking off the start of wave 5.  Since wave 4 only retraces a small percentage of wave 3, i expect wave 5 will not be a truncated wave and at least take out the previous low. 

 

 

institution ACC/DIS chart is indicating something dramatic is coming… the red line could jump very high from here…

 

06/18/2009 market review

SPX is now sitting back to the 200ma, a critical juncture for bulls.  Though prices has not make a lower low (880 region), momentum already goes before the price.  Checked the chart below.  Also, negative divergence will leads to further pullback. 

 

Also you guys have witnessed our intraday wave count and where we are now in the market. After this short-lived corrective wave is done, we will see sharp selloff coming.

 

 

Let’s take a quick look at the sectors.  you may easily identify three strong white bars out of nine sectors below, right?   All of them are defensive sectors!  big money is looking for safety now and this rally won’t go anywhere.

 

Sell signal

Both SPY and XLF have sell signal generated today.  In the weekend review I wrote  “I do not believe market has the strength to break above the multi resistance level without any consolidation.  also Monday, 6/15,  is an important time level that could lead to a big reversal.”   We indeed see a sharp selloff today and it forms a MDD. 

This is the beginning of a new down leg, so build the midterm short positions slowly.  At the early stage, market can be very choopy.  

 

A little more charts are added to the trading blog for subscribers.

 

SPX weekly chart

A simple chart for this weekend.   I do not believe market has the strength to break above the multi resistance level without any consolidation.  also Monday, 6/15,  is an important time level that could lead to a big reversal.  Of course, it can be one day off the chart, so if we indeed see the reversal Tuesday again, do not surprise.

 

 

 

Also next week is the OE week.  June is big month for options and many leaped calls will be expired.  Both equity and index put/call ration has been staying in a very low range for the past three months.  Option mm have to do something next week, or their loss on the calls they wrote could be a horrible number. 

 

Ending diagonal is still my current view and i tend to believe 1) market peak is 6/11; 2) the peak is next Tuesday and we reverse at the end of that trading day.  I prefer 1 more.

 

One more daily chart below:  momentum negative divergence and volume is fading.  This rally won’t sustain any more.

 

 

EWI has a different count, just paste below for your reference.  

 

Ending diagonal

They try to make me go bullish, I rejected “NO!  NO!” 

 

I mentioned in yesterday’s intraday analysis I was wrong when the previous high 930 is taken out.  I did not expect the wave get extended here.  But, do not take me wrong.  I am not yielding to bulls yet.  No way this is the begin of the new bull market as the Cramers talked about.  Also I doubt seriously whether 1000 will be touched in the upward move.   My take is below, let next 10 days tell the truth…  5th wave could be truncated or popped out.

 

 

 

Ever since this bear market kicks off in 2007, financial lead.  check the charts below, green line is the top for financials and blue is for SP500.   Though major index has made new high in past few days, financials still lag behind.  Does this hint for something?… just for your reference

 

05/31/2009 weekend summary

Here I would post a few possible scenarios for the coming weeks.

 

 

The 1st one has been my primary count for quite some time and I won’t change my mind until the previous high is taken out.  So next week is really critical in judging the big picture to me.  We need to be flexible in the market, but we need to have principle as well.  When many signals conflict with each other, there is something you need to stick to.  

 

 

 

If my picture is clear, there is a very high chance we fall from here directly.  After revisiting last session’s peak in Friday, it really looks like a short squeeze to me.  Many stop orders are set @ key pivot point 912 and a sharp popup triggered all these orders…   There is another possibility that we have having a diagonal consolidation here and that take another one week or two hanging in the 890-930 zone.  I will update the chart once that one plays chart.  Usually diagonal consolidation occurs @ wave 4, but in wave 2, it indeed happens in rare cases.

 

 

A bullish count is listed below.  Again the previous high is the key to watch to validate this scenario.  There are some key levels to watch if this scenario plays out and i will update them when this happens.  I give a 10% possibility to the upward breakout. :)

 

 

I will not update more charts.  there are already tons of bullish chart online there, like “XLF breaks out!” and “200MA coming”…  Have the big picture clear and make the trade when set up is there.

Bond yield

Treasury yield will be the key topic in the coming days.   The Treasury yield curve has literally never been as steep as it is today (275 bps between the 2- and 10-year notes).  

 

Some have suggested that the magnitude of movement is due to convexity selling in the mortgage market.  Even if this explains the recent declines, it does not detract from the fact that - absent the Federal Reserve stepping up its purchases of Treasuries or another panic - the Treasury will be issuing record amounts of debt and investors are likely to be increasingly concerned about the nation's deficit and the potential for inflation.

 

 

The sharp increase in 10 year note has a dramatic impact on the mortgage rate as I mentioned in weekend review.  I would believe we have a long way to go in the house market recovering…

 

With the 7-year note issuing tomorrow, i guess we would see more pop  up in the notes yield.

My count

Have fun with it.  Do not trade on it.   The chart goes wrong theoretically when the high on last Thursday is take out.

 

 

Another version of RH&S

Just list another possibility though i have little faith in it.  If the pullback we have in the past two weeks is treated as the right shoulder, then we have a very unsymmetrical reverse head and shoulder pattern in formation here.  Who said two shoulders have to be symmetrical?  My left shoulder is indeed higher than my right ones.  But not in the way like this……

 

 

If market take out the high on May 7th, I will reconsider the whole picture.  To me, the chance of that happening is very small.  Again, if you can not beat them, join them. 

 

 

05/25 weekend review

Review summary: next week down

I hope you guys were having a wonderful long weekend and now are ready for a new trading week.   I reviewed many charts this afternoon and would like to share with you a few interesting ones.  I sense that market is going to fall hard soon, may just start from tomorrow

Midterm top signals are shown up and momentum are heading lower.  Two reversal bars printed on the weekly candles.  You can see such scenarios on many Index. Based on the weekly STO strength, this upward wave is on the same level as the 2008 march-may wave; thus it’s pretty consistent with my labeling that my this is the wave 4 of major wave a.  wave 5 is now underway.  we still have a long way to go, a very long one.

 

 

 

I mentioned in last intraday update that key thing to watch is the close and important level is 20 DMA.  Finally bears, for the 1st time since this rally, has solidly close the last session under the support level.  Momentum has closed at a lower level and I would expect price to follow.  Just follow the chart carefully you will see the momentum is leading the price nicely these days.  This is some old TA, but it still rocks! :)

 

 

 

potential heand & shoulder pattern?  this is a scenario that many traders are talking about, but i keep it as my 2nd choice.  just put it here for your reference.  I seriously doubt if market will join the majority this time.

 

 

 

US Dollar ETF UUP has bleached the mid-term uptrend a few weeks ago and last Friday, it closed right on a key support level.  If the US dollar is going a free fall here, the same thing will happen to the US equities.  Maybe some of you may argue with me that a weak US dollar is good for the commodity sector and benefit the gold/Oil related sectors.   That’s correct.  But, a free-fall US dollar is damaging to the economy and market in many ways.  A most straightforward impact is the tank of investor’s confidence, which will result in outflow of the capital from US equity and bond market.  another consequence is the rise of the interest/mortgage rate to leverage the inflation… housing price further down… bank bad asset further devastating… finance/credit risk… one more round of…

 

 

 

VIX reversal pattern:  VIX finishes a classical three-step reversal pattern last week.  For a $VIX confirmed signal you need 3 things:

 

1. a close outside of the 2.0 Bollinger Band (20 day, SMA (check - happened on Friday)
2. a close back inside the 2.0 Bollinger Band - this issues the signal (check - happened today)
3. a higher close (sell) or lower close (buy) than the close of the day back inside the 2.0 Bollinger Band

 

 

 

Another CPC topping signal for your reference:

 

 

05/20 market review

Review summary: down tomorrow 

 

Market goes lower on higher volume today.  The edge favors that we will see lower low the next day in the coming days based on this price/volume relationship. 

 

Both SPY daily, both price and RSI retest the broken trendline and then head lower.  One the 20 day moving average is taken out, I believe we are going to see some wafterfalls across the broader market.  Again, my view is that we have the top already on May 8th and midterm trend is down.

 

 

 

Also, I’ve seen so many traders talking about 200ma and the general idea is that at least we will test the line this time before going lower.  So it’s likely truth is against the mass again…     STO already gives the top signal on May 8 as I posted this chart at the time.

 

 

 

Solar ETF, TAN, gives out the buy signal today.  It’s a very nice bottom pattern and can lead to cup & handle break out.  As I mentioned, the energy sector may have different trend with the general market in the coming days and if I go long on something, solar is one of the choices.  I will list the count on USO this weekend.

 

5/19 market review

Tomorrow: down

 

Financial is weak today and during most of the trading sessions in the day, SPX is in green and XLF in red.  Simply, financials lead the market.

 

Also check the big money flow below:  big money are not pursuing yesterday’s rally at all.  That’s a good explanation for its low volume.  also blue line and red line at getting closer now, bulls be careful.

 

 

                           

Retest

Where kiss of death happens…

 

 

5/18 market review

My take on tomorrow: down

Despite today’s huge rally, no buy signal on my system yet. Also, the low volume makes the rally very suspicious. The high of the day hit exactly 61.8% retracement of this pullback and this satisfies the wave 2 condition, which usually retrieves most of the wave 1. We might open higher tomorrow but the gap won’t hold if we have any. Now we have too many unfilled gaps since 666.

Weekend review

Good thing for bear is that finally we have a solid down one in the past 10 weeks.  But it could be better if we take out 879, which is the low of a week before, which would make the move more meaningful.  Now we form a inside bar, which means whole body of the candle bar is within the previous one.  Inside bar is usually an indecisive pattern and the edge to either side is 50-50.

 

 

 

In the near term, RMO system gives out the sell signal on SPX.  same thing happens to all major US stock index and sector ETFs.  however, RMO is still in the bullish zone and bears need to push further more to get it red.  In the bullish zone, like in a bull market, the strategy in buy dip and sell high.  But i won’t take it this time since the big picture is still down on weekly chart.

 

 

MACD also gives the sell signal.  Some midterm player trade on this signal should kick in now.  20 MA, the mid of the BB line, still serve as a good support for last Friday’s close.  This line has supported this market really well since the rally starts.  If bears have some concern, this should be a big one.  What if we are retesting again and then moving higher towards the upper boundary @ 950?  200 MA is in that area and a test is indeed possible.   we need to keep our minds open…

 

VIX is forming a bullish wedge and both sides of the wedges have been tested at least three times.  If the wedge get broken.  I would expect a retrace at least 50% of the wedge and would not surprise if we fully retrace it based on the large positive divergence on MACD histogram we have.  Also read this from reuter:

 

"About 73,000 call options on the CBOE Volatility Index have changed hands, already exceeding their norm ahead of next week's expiration, according to Trade Alert. 'It looks like traders are placing upside bets on higher volatility in May and June,' said Chris McKhann, analyst at optionMonster.com. The May 42.50 strikes are among the busiest contracts with 19,861 traded against an open interest of 25,767 lots, Reuters data showed. Some traders might be closing positions ahead of next Wednesday, when VIX May options go off the board, said WhatsTrading.com options strategist Frederic Ruffy. The June 37.5 and 55 VIX calls have also attracted interest, with more than 10,000 and 31,700 contracts traded, respectively”

 

 

Institution buying and selling vice, the tide is changing.  the accumulation (blue curve) is dropping sharply, meaning some big money are not chasing this game any more.  I would expect very sharp drop off kicks in till the blue curve and red curve cross each other. 

 

                               

Another Scenario

This could also be a head and shoulder pattern, which by measured move, will lead the market to 87.  Today’s action can be interpreted as neckline retest.