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SHORT-TERM: BEARISH BIASED, NOT SURE IF THERE STILL IS ONE MORE PUSH UP THOUGH
Another reversal like bar – a filled black bar was formed on Friday, now SPY has 5 reversal bars in a row (Bearish Reversal Bar, Hanging Man, Hollow Red Bar, Bearish Reversal Bar, Black Bar). And don’t forget, it’s the 3rd black bar, so my question is: Since the previous 2 black bars were failed, will the 3rd time be different?
Remember the chart below? Time is ticking as the Friday bar is the 5th consolidation bar which in most cases are not friendly to bulls in recent years although occasionally it did breakout on the upside.
The chart below is from StockTiming. Pay attention to black cycles, although SPX keeps having higher high but the institutional selling is increasing too. This kind of negative divergence usually led to a big correction.
Of course, either from the consolidation chart above or the institutional selling chart above, I cannot exclude the possibility that we’re repeating what happened in April and this is why in the Friday’s After Bell Quick Summary, I said the Ending Diagonal Triangle (if indeed) looks still missing one more push up. The idea is since the intermediate-term is in an clear uptrend so any bearish statement has to prepare the worst ever case for bears.
The chart below is my analysis for the potential pivot date, although the 09/30 could still be the top, but:
- Via Fib 38.2% time extension from 03/06/2009 low to 04/26/2010 high in terms of calendar day, the next pivot date is 10/02, instead of 09/29 which is calculated based on trading day.
- Use 08/27 low to calculate A = C in terms of trading day, the pivot date is 10/05 instead of 10/01 which is calculated by using 08/25 low as the low.
- The magic day 6 of every month since 2000 was most likely a pivot date.
So from the angle of time analysis, too, I cannot exclude the possibility of one more push up to 10/05. By the way, the chart below also illustrates the next possible pivot date after 10/05, could be 10/11, although now it’s hard to know whether it means a top or bottom. It would be amazingly amazing if the market does rise to 10/11 before reversing down if you still remember what I mentioned in 09/03 Market Recap. The question is: am I amazingly amazing? Chances are remote, I guess, so most likely the market won’t rise to 10/11 which leaves the most probability to 10/05, LOL.
INTERMEDIATE-TERM: SEEMS 11%+ RISE GUARANTEED BEFORE YEAR END, I’M SKEPTICAL HOWEVER
From the statistics about POMO as well as up September plus mid-term election year, it seems that the SPX 11%+ (above 1270) rise to the year end is almost a sure thing. Personally, I’m skeptical about this kind of sure thing. As mentioned in the short-term session above, except that I’m not sure if there’s one more push up, overall, I believe we’re very close to an intermediate-term correction. In another word, the top mentioned in the short-term session, either on 09/30 or 10/05 or 10/11 could be THE TOP.
Let’s take a look at the “sure thing” first.
The POMO statistics from Trading the Odds: (see Permanent Open Market Operations (POMO) for more details)
The statistics about up September plus mid-term election year from Bespoke:
Now, let me explain why I expect an intermediate-term correction.
Many people may feel that COT Report is useless, however the Nasdaq 100 commercial position is amazingly accurate. Right now the Commercial (smart money) is heavily shorting while the Large Spec (dumb money) is heavily buying. You should be scared when you see the Commercial Hedger Combo chart below. SOMETHING IS GOING ON HERE. By the way, if you still remember “the AAPL is too stretched” mentioned in 09/27 Market Recap, it should ring a bell now.
Another reason I’m not optimistic about the intermediate-term is the AAII Bull Raito (4-week Average) chart which I also find amazingly accurate.
Below is the back test since 1962, down 3 consecutive weeks then up 4 consecutive weeks (means sharp reversal from a major bottom) then down 1 week, short at the Friday close, cover 1, 2, 3, 4, 5, 6 weeks later at Friday close, looks very bear friendly. At least, with no exception, a lower low was guaranteed for the next week, in another word, the SPX 1132 will be broken the next week if history repeats itself again.
SEASONALITY: OCTOBER IS BULLISH
The following chart is from Bespoke.
The following chart is from Sentimentrader.
HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST
| TREND | COMMENT | |
| QQQQ | LA | 4.1.1 Nasdaq 100 Index (Weekly): NDX to SPX ratio too high. |
| IWM | UP | *Bearish reversal bar and black bar, pullback? |
| CHINA | ||
| EMERGING | UP | 4.1.6 iShares MSCI Emerging Markets (EEM Weekly): EEM to SPX ratio too high. |
| CANADA | UP | TOADV MA(10) too high with negative divergence, pullback? *2 black bars in a row, pullback? |
| BOND | LA | *2 hollow red bars. |
| EURO | UP | |
| GOLD | UP | |
| GDX | *UP | 4.3.1 Market Vectors Gold Miners (GDX Weekly): GDX to SPX ratio too high. |
| OIL | UP | |
| ENERGY | UP | |
| FINANCIALS | *UP | 4.4.2 Financials Select Sector SPDR (XLF Weekly): Head and Shoulders Top in the forming? |
| REITS | *UP | 4.4.3 Real Estate iShares (IYR Weekly): Home builder is lagging. |
| MATERIALS | *UP |
- 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.
- 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 specific buy/sell signals will be given in this report except the mechanical signals such as SPY ST Model.
- * = New update.
- Blue Text = Link to a chart in my public chart list.
- LA = Lateral Trend.