09/14/2012 Market Outlook (Expect a pullback soon)

Posted by Yong Pan | Sep 15, 2012 | Free Contents | 21 |

Maintain the call made in 09/13 Market Outlook:

Expect a pullback soon, as early as the next Monday. The pullback usually is a buy opportunity as more likely a new high ahead.
An intermediate-term pullback could be around. Strictly speaking, it might not be big enough to call intermediate-term top because the pullback might last just a few weeks, so from now on I’ll refer to a few weeks pullback instead of more serious one – an intermediate-term top.
Before I’m able to spot a short-term top pattern, no matter how many evidences I blah blah for, an intermediate-term top, sorry, I should say, calling for a few weeks pullbacks, they’re just warnings. We’re in an unusual era when there’s simply too much free money around, so personally, I could hardly find any logical reason why this market wants to pullback at all!

THE EVIL PLAN:

The short-term evil plan should be clear, pullback or not, not important, although I believe we’ll see a pullback as early as the next Monday, what important is to know, the pullback, if indeed, is buy opportunity. Only when the rebound thereafter fails to make a new high then you can seriously consider my call for a few weeks pullback. Again, take the call for a few weeks pullback as what you see from your rear mirror while driving – it’s a good to know, but it doesn’t mean you need act immediately.

The big picture evil plan explained the common bear target if indeed we have a few weeks pullbacks. It also calculated a potential bull target, which could be up to SPX 1553.68. In order to help you understanding the time frame differences, I put a thumbnail of the short-term evil plan on the top. Now it should be clearer what the difference is between the short-term and the intermediate-term.

The chart below explained how I got the pullback target, as again, everything I report here should have evidence to back me up.

The chart below is the long-term evil plan. Because for now, I still cannot prove that the market won’t drop big anymore, so I simply added green up arrow saying now up huge is likely too while keep all the rest bear stuff unchanged. Again, in order to let you know the time frame differences, I put a thumbnail of the big picture evil plan on the top. Basically, the big picture and the long-term evil plan are saying the same thing, which is down then up then either up huge or down huge. So from now on, I’d mention more about the big picture evil plan.

WHY EXPECT A PULLBACK SOON, AS EARLY AS THE NEXT MONDAY?

I’ve mentioned 2 reasons in the Friday’s Trading Signals. The most important one is the bearish Monday. The statistics below is from Bespoke, interesting and crazy.

Volume decreased on Friday, which I consider as a confirmation of the Thursday’s volume surge, so still it’s possible the Thursday’s SPY daily bar is an exhaustion bar.

I didn’t mention the statistics below because the Internet was broken on Thursday. ISEE Indices & ETFs Only Index >= 100 again on Thursday, which according to the statistics below, any gains since Friday and thereafter would be erased in a single red day. In another words, if indeed the next Monday closes in red, then it should close below the Thursday’s close (so as to erase all the Friday’s gains).

The chart below argues when 47%+ NYSE Stocks 2 Standard Deviation above MA40, not only a few weeks pullback thereafter was likely (I’ll mention again later), but also the next day had 88% chances to close in red.

WHY NEW HIGH AHEAD?

We have another SPX daily bar opened and closed completely above BB top on Friday. As discussed in the 09/07 Market Outlook, it usually means fireworks, skyrocket high then fall back to the ground, such a fall back usually provides a 2nd buy opportunity.

NYSE new 52-week highs hit another new record high on Friday. Listed below are all the past extremes since the year 2000. A short-term pullback was more likely but in the majority cases, SPX had more new highs thereafter.

WHY A FEW WEEKS PULLBACK?

Now we have 47%+ NYSE Stocks 2 standard Deviation above MA40. I believe the chart is trustworthy because in this crazy money printing world if there’s only 1 indicator left still working, it’d be the Gravity – a price cannot be too high above its MA forever.

I see a bullish reversal bar formed on VIX . Usually VIX leads, so if VIX had a bullish reversal then it could imply that SPX is about to reverse (down) too. Please note, the chart is very large, you may need click twice to see the original picture.

Speaking of VIX leads, let me remind you again that SPX new high without VIX hitting new low, such a divergence may mean a top.

UUP RSI is way too low now.

SPX 60 min RSI is way too high which more likely means big pullback since the year 2009.

SPX closed too high above its BB top, as I’ve mentioned several times before, surprisingly, the pullbacks thereafter were not small.

USHL5 (US 5 day total new highs – new lows) is way too high now, could mean a few weeks pullback.

THE SHORT-TERM TREND IS UP

The short-term model believes the trend is up since 09/06/2012.

THE INTERMEDIATE-TERM TREND IS UP

Non-Stop model is long since 06/15/2012.
Cobra Impulse System is long since 08/03/2012.

THE LONG-TERM ACCORDING TO OUR SIMPLE STRATEGY IS BUY SINCE SEPTEMBER

According to the January Barometer, 80%+ chances, 2012 will end in positive territory.

CHINESE TRANSLATION

维持09/13 Market Outlook的说法：

短期要回调，最快下周一。这个回调多半是买的机会，因为还会有新高。
中期回调应该也在附近。这个中期回调，严格的讲不能算是中期回调，因为可能只有几周，所以以后改用A few weeks pullback，以免误导。
在我没有明确指出短期形成可能的top pattern前，中期，sorry，现在应该说，看a few weeks回调的证据再多，也只能是warning。我们处于一个非常时代，太多free money，我本人已经想不出来还有什么理由，这个市场会跌了。