03/26/2010 Market Recap: Rydex trader are very bullish

TREND INDICATOR MOMENTUM INDICATOR COMMENT (Click link to see chart) Long-term 3 of 3 are BUY     Intermediate 3 of 3 are BUY 4 of 6 are NEUTRAL SPY ST Model is in BUY mode Short-term 1 of 1 are BUY 6 of 6 are NEUTRAL

ATTENTION 2.4.4 NYSE McClellan Oscillator: Negative divergence. BULLISH 4.1.0 S&P 500 Large Cap Index (Weekly): Head and Shoulders Bottom, target 1246 1.0.2 S&P 500 SPDRs (SPY 60 min): Head and Shoulders Bottom, target 119.42. BEARISH 1.0.2 S&P 500 SPDRs (SPY 60 min): 15 unfilled gaps. (max was 16) 1.1.0 Nasdaq Composite (Daily): 9 unfilled gaps. (max was 10) 0.0.3 SPX Intermediate-term Trading Signals: CPCE MA(10) too low. 4.0.4 Dow Theory: Averages Must Confirm: NYHILO too high. 1.1.0 Nasdaq Composite (Daily): NDXA50R is way too high. 03/25 Market Recap: Smart/dumb confidence spread is too large. 4.1.0 S&P 500 Large Cap Index (Weekly): *BPSPX too high. CONCLUSION Bearish signals are accumulated enough to justify a short sell. For aggressive traders only. 03/25, another Bearish Engulfing and the NYMO Sell setup was triggered.

SPY SETUP ENTRY DATE STOP LOSS INSTRUCTION: Mechanic signals, back test is HERE, signals are HERE. TRADING VEHICLE: SSO/SDS, UPRO/SPXU ST Model 02/26 L 03/15 low Reversal Bar   NYMO Sell 03/25 S 03/25 high VIX MA ENV     OTHER ETFs MID TERM INDICATOR COMMENT – *New update. Click BLUE to see chart if link is not provided. QQQQ UP 3 of 3 BUY *6.4.6 QQQQ Black Bar Watch: doesn’t look good. *4.1.1 Nasdaq 100 Index (Weekly): BPNDX too high. IWM UP 2 of 2 SELL CHINA ? 1 of 1 BUY *4.1.4 Shanghai Stock Exchange Composite Index (Weekly): Symmetrical Triangle, wait to see to which direction it will breakout. *Hits multiple MA resistance.   EMERGING ? 2 of 2 SELL *Could be a Roof pattern, 83% chances of breaking on the downside. CANADA UP 2 of 3 SELL *4.1.5 iShares CDN S&P/TSX 60 Index Fund (XIU.TO Weekly): 3 Doji under important resistance. Lots of negative divergence plus BPTSX is too high. Expect pullback. BOND DOWN 2 of 2 SELL Symmetrical Triangle breakdown. Expect more pullbacks ahead. DOLLAR UP 2 of 2 BUY Head and Shoulders Bottom, target $24.28. *3.1.1 PowerShares DB US Dollar Index Bullish Fund (UUP 30 min): Could be Head and Shoulders Top, target $23.74. *4.2.1 PowerShares DB US Dollar Index Bullish Fund (UUP Weekly): FXY breakdown below its long term trend line which is enough to set the intermediate-term from up to down. GOLD DOWN 2 of 2 SELL Black bar and on a MA support, could rebound. GDX DOWN 2 of 2 SELL Small Double Top, target $41.52. OIL ? 1 of 2 SELL *Roof or Double Top? ENERGY ? 3 of 3 SELL *Sell signals by MACD and BPENER. FINANCIALS UP 3 of 3 BUY *Double black bar plus Shooting Star followed by a Spinning Top, expect a pullback. *4.4.2 Financials Select Sector SPDR (XLF Weekly): Fib confluences area is at $16.76 - $16.97, could be the intermediate-term target. REITS UP 2 of 2 BUY *False breakout on narrow range so the real breakout could be on the downside. MATERIALS ? 2 of 3 BUY *4.4.4 Materials Select Sector SPDR (XLB Weekly): BPMATE too high.

*Please make sure you understand how to use the table above. The main purpose of this report is to provide information so contradictory signals are always presented.

SEASONALITY: THE LAST 3 TRADING DAYS OF MARCH ARE BEARISH WHILE APRIL 1ST IS VERY BULLISH

According to Stock Trader’s Almanac:

1. The last trading day of March, Dow down 10 of Last 15.
2. The first trading day in April, Dow up 12 of last 15.
3. the last 3 trading days of March is bearish, see Trading Trends: Last Four Trading Days of March.

In fact for the recent 7 months, almost all the last 3 trading days were not so bull friendly.

 

CYCLE ANALYSIS: PULLBACK FROM 03/25, REBOUND ON 04/01 THEN PULLBACK TO 04/12?

Let me list all the important date first:

1.0.7 SPX Cycle Watch (Daily), potential cycle turn date are 03/31 and 04/01.

4.1.9 SPX Cycle Watch (Weekly), potential cycle turn week this week or the next week.

The most repeated Gann Days in April are 04/11, 04/14 and 04/15. Also I mentioned the 04/10 in the 03/22 Market Recap, it actually should be 04/12. It’s Fib 50% extension from 10/10/2002 low to 10/11/2007 high which according to the Gann Theory, is an very important point. So combine all those days together, looks like 04/12 to 04/15 are very important.

4.1.0 S&P 500 Large Cap Index (Weekly), see solid red lines, BPSPX too high means at most the SPX could rise for another week, it’ll then pullback at least for a week or two.

 

So to summarize above, considering the first 3 trading days of the next week are generally bearish while Thursday is bullish as mentioned above in the seasonality session, my guess is a Doji next week then SPX starts to pullback the next next week until around 04/12. Why couldn’t that SPX drop to 04/01 then rise to 04/12? Well, don’t forget 4.1.0 S&P 500 Large Cap Index (Weekly), the BPSPX is too high so SPX should pullback for a week or two which also conform with the chart 4.1.9 SPX Cycle Watch (Weekly).

INTERMEDIATE-TERM: EXPECT ROLLER COASTER AHEAD

Nothing new, according to the II Survey, too many people expected a correction, so the stock market should rise to a new high first before actually pulling back. Basically, my guess is that we’ll repeat the year 2004 roller coaster pattern. See 03/19 Market Recap for more details.

SHORT-TERM: EXPECT PULLBACK AS EARLY AS THE NEXT MONDAY

As mentioned in the Friday’s After Bell Quick Summary, QQQQ black bar means 74% chances a red day the next day.

 

1.0.4 S&P 500 SPDRs (SPY 15 min), could be a Head and Shoulders Top breakdown while the Friday’s intraday rebound looks like a Bear Flag.

 

Rydex Enthusiasm Index, retailers buying dips were too aggressive.

 

% of Rydex Sector Assets Above MA(50), again retailers are too bullish.

 

The chart below is from Bespoke. This kind of  no decline for more than 1% will not last forever, won it?

 

STOCK SCREENER:  For fun only, I may not actually trade the screeners. Since SPY ST Model is in BUY mode, only LONG candidates are listed. For back test details as well as how to confirm the entry and set stop loss please read HERE. Please make sure you understand the basic risk management HERE.

Looks like it’s too late to long stocks now as the market is way too overbought. Waiting for a better chance.