06/12/2009 Market Recap: Stuck in a range

Summary:

No idea about short-term, sharing some info instead.

For intermediate-term, still suggest not heavily betting on the long side. It's not the time to short either.

Based on some comments, I found some people don’t know that all the charts mentioned in the daily post are simply part of my public chart list at www.stockcharts.com. This means that you can check my charts anytime, such as 7.3.2 Firework Trading Setup or  2.8.1 CBOE Options Total Put/Call Ratio, etc etc. And I strongly recommend you to at least occasionally check the very first chart: 0.0.0 Signal Watch and Daily Highlights where I summarize daily all the trading signals I’ve been watching.

A sizeable pullback didn’t happen on Friday as I expected. From the SPX daily chart, it still looks like a consolidation pattern therefore I have no idea about the market's direction now. The bottom line, I still don’t think it’s now the time to heavily bet on either the long or the short side. As usual, let the market go first, please.

Short-term, as mentioned in the Friday’s Quick Summary, both bull and bear has its own argument. For me, I tend to believe that the “Seasonality” weights more, however a reader named Frank wrote to me with the following interesting observations:

Hello Peter, since you did a study on Put/Call ratio on one of your study.  I did some rough stat on high ISEE (indices/ETF) close.  You probably could do a better job at this.  But this is what I find.  It seems (after the March low) with ISEE (indices/ETF) close at or above 100, we have good probability (9 out of 14) of closing lower the next day or 2-3 days out.  With ISEE (indices/ETF) close at or above 110, the edge become very clear (6 out of 8 times all down).  So today we close at 110, that should be some warning signal?
 
March 13 176 March 14 down
March 17 113 March 18 up
March 19 131 March 20 Down
March 23 121 March 24 Down
March 27 101 March 30 down
March 31 107 April 1  up
April 1  115 April 2 up
April 13 124 April 14 down
April 14 102 April 15 up
April 16 102 April 17 up But April 20 down big wipe all from Apirl 9
May 6   114 May 7 down
May 7    132 May 8 up But may 11-13 wipe out
May 29  105 June 1 up
June 9  104 June 10 down

Here’s the chart form ISEE.

Intermediate-term, reasons for better not heavily betting on the long side are listed bellow. From my crappy TA point of view, odds favors downside correction. But if you really think that this time is different, like some of “stock gods” in my Chinese forum have been believed, that market will simply up and up, so now we should “all in” with margins. Well, I cannot say you’re wrong, after all I’m not a “stock god” instead “stock gods” seem to all agree that I’m merely a bookworm. Anyway, from “book’s” point of view, a good strategy is to earn money steadily, instead of betting heavily against odds to win really really big one time, because “bet against odds” is not always repeatable. Also from “book’s” point of view, the most difficult part of trading is not to earn money but to control the loss, therefore before every trade, the potential risk and reward should be carefully considered. Now, I see more risks, but, sure, everyone has a different risk standard, so again, YMYD.

5.0.2 S&P Sector Bullish Percent Index, overbought, the TECH has even reached a 8 years new high now.

2.3.4 Nasdaq Total Volume/NYSE Total Volume, Nasdaq is crazy. Yes, I knew, the NYSE closed for 30 minutes on Friday. But simply could a 30 minutes no trading make this huge differences? I doubt it.

8.0.1 Use NATV/NYTV to catch the market top/bottom, lots have asked for what NATV/NYTV looked like in year 2000, well here we go.

7.0.9 NYADV and NYUPV Divergence Watch, if history repeats itself again then we’re likely very close to a top, but, well, maybe, probably, possibly, this time is different…