09/21/2009 Market Recap: Firework Triggered

Summary:

Firework trading setup was triggered today.

Still possible a short-term top is very close.

INTERMEDIATE-TERM: NO UPDATE

Intermediate-term, my view is mainly in 1.2.1 Dow Theory: Averages Must Confirm, both BPSPX and NYA200R are way too high so could repeat what happened in the beginning of year 2004 – there will be about 10% correction. No idea when though。

SHORT-TERM: A FIREWORK WAS TRIGGERED

CPC reading was adjusted from 0.82 to 0.75 in AH. This means:

1. 6.1.1 Extreme CPC Readings Watch, 28 out of 35 times a green close tomorrow.

2. 6.1.3 Firework Trading Setup, a firework was triggered.

Chart pattern also supports an up view: 1.1.5 PowerShares QQQ Trust (QQQQ 30 min), could be a Triangle pattern in the forming, target $43.07. While 1.0.2 S&P 500 SPDRs (SPY 60 min), could be a Bull Flag in the forming which also means a higher price.

Overall, my short-term view is mainly in 1.1.3 QQQQ Short-term Trading Signals. A black bar formed last Friday means 2 things. A gap down was fulfilled today. Now it’s the “top is close” part. Pay attention to the blue cycles, the last 2 times when black bar happened, QQQQ didn’t go up much thereafter, so if this time it doesn’t go up much either then probably the 2nd prophecy of a black bar would be fulfilled again.

INTERESTING CHARTS:

2.0.0 Volatility Index (Daily), as mentioned in the After Bell Quick Summary, a black bar formed on VIX daily chart could mean a reversal. Below is the visual back test for a longer period. 3.1.0 PowerShares DB US Dollar Index Bullish Fund (UUP Daily), take a quick look if interested, also closed with a black bar today which means that US$ could fall. When VIX and UUP both go down, the stock market will generally be up.

P.S. BLACK BAR = Open high close lower but the close is till higher than the previous close. This means an intraday reversal happened and therefore the bar has good chances of leading to a reversal on the daily chart.