11/12/2010 Market Recap: 77% chances the SPX 11/05 high will be revisited

SHORT-TERM: COULD SEE MORE PULLBACKS

We may see more pullbacks in the short-term, besides the arguments mentioned in the Friday’s After Bell Quick Summary, the Descending Triangle plus Bear Flag plus bearish Monday seasonality, the Sentimentrader still has too many indicators at bearish extremes. However, at the current stage, I’d consider the pullback is merely for the short-term which reason will be discussed in the intermediate-session below as chances are high that 11/05 high will be revisited at least.

0.0.2 Combined Intermediate-term Trading Signals, this is just a follow up. Trend line held for 2 days already so the top signal is confirmed. Of course, as mentioned above, this may just mean a short-term top.

INTERMEDIATE-TERM: THE FIRST 2.5%+ PULLBACK AFTER A 40+ STRAIGHT UP TRADING DAYS WAS USUALLY A BUY

After 48 trading days without 2.5% pullbacks, SPX finally fulfill the forecast mentioned in 11/08 Market Recap: “2.5%+ pullbacks now or never”, now the question is what happened thereafter?

From the statistics below, 10 out of 13 cases (exclude 2 cases when SPX up 150 trading days without 2.5%+ pullbacks, both cases had just a very short-term pullback anyway) since 1991, the SPX would revisit the previous high in 3 weeks. In another word is that 11/05 high is unlikely the intermediate-term top, so at least bulls could wait until the revisit of the SPX 11/05 high before deciding what to do the next.

However, let me remind you that the sentiment now is very high which can be seen from the Smart/Dump Money Confidence chart below, so if indeed we see the revisit of the high in a very short time, the sentiment would very likely fly to the sky which for sure is not good for bulls.  I’ll keep eyes on this as well as the institutional buying and selling actions (courtesy of stocktiming) which now is lukewarm at best.

Listed below are all cases when SPX up 40 or more trading days without 2.5%+ pullbacks, for your references. Looks to me, the pullbacks were just short-term in most cases.

SEASONALITY: BEARISH MONDAY, BULLISH FRIDAY, BULLISH THE WHOLE WEEK

According to Stock Trader’s Almanac:

1. Monday before November Expiration, Dow down 7 of last 10.
2. Week before Thanksgiving, Dow up 13 of last 16.
3. November expiration day, Dow up 4 straight and 6 of last 7.

For November seasonality chart please refer to 11/11 Market Recap for more details.

HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST

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. Position reported in short-term session of the table above is for short-term model only, I may or may not hold other positions which will not be disclosed.
3. 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 trading signals will be given in this report except the mechanical signals such as SPY ST Model.
4. * = New update; Blue Text = Link to a chart in my public chart list.
5. Trading signals in OTHER ETFs table are mechanical signals. See HERE for back test results. 08/31 L, for example, means Long on 08/31.
6. UP = Intermediate-term uptrend. Set when I see at least one higher high and higher low on weekly chart.
7. DOWN = Intermediate-term downtrend. Set when I see at least one lower high and lower low on weekly chart.