01/07/2011 Market Recap: Headwind Ahead?

SHORT-TERM: 71% CHANCES A LOWER WEEKLY CLOSE WITHIN A WEEK OR TWO

SPX stuck in a trading range so the short-term direction is not clear, have to wait for the breakout before blah blah further.

My guess, based on the statistics below, is, either breakdown directly or (most likely) false breakout on the upside then fall back into the current range at least. The guess should happen within a week or two especially in January Expiration Week, which was horrible since 1999, Dow down big 8 of last 11 according to Stock Trader’s Almanac.

INTERMEDIATE-TERM: COULD BE WAVE 5 UP TO SPX 1300+, PIVOT TOP COULD BE AROUND 01/05 TO 01/12

Maintain calling for the pivot top around 01/05 to 01/12 (See 12/31 Market Recap for more details). My guess is 01/12 (and a day or two after) pivot top is more likely, although now is still too early to say that 01/05 pivot top is wrong. Again, update all the reasons below, because I managed to find more “excuses”, LOL. Trading wise, however, again and again, expectation doesn’t equal to a position, until price confirms, all the forecasts, no matter how many “excuses” I’ve found, are just speculation which can be the reason to take caution but never a reason to trade against the current trend. I want to make it very very clear.

• The statistics below is from Schaeffer, looks like the first 5 days of year is up was not a good news for the the rest of the January.

• The chart below is from Bespoke. I’ve mentioned several times in the past that statistics shows a strong Off-Season usually meant a weaker Earning Season which can be seen clearly in the chart below. Plus now even the beat rate has been trending down, but Earnings Estimate and Guidance simply keep increasing, so the chances are even higher, the coming Earning Season won’t be pleasant.

• The chart below shows what happened when SPX Bullish Percent Index was way too high.

• I’ve mentioned several times that Non Farm Payroll day was more likely a pivot day, especially if it’s a red day. Well, we’ve got it this Friday.

• In 12/31 Market Recap, I mentioned the index top could be calculated by counting 28 trading days from the TED top (See 12/31 Market Recap for more details). At least now I cannot say such a coincidence is wrong, although personally, I don’t believe this coincidence yet (need see the next week of course).

• The statistics in the Short-term Session above has mentioned that the next 2 weeks may not be pleasant, especially the Expiration Week, the seasonality was terrible.
• From chart 8.2.9c QQQQ – 2002 to 8.2.9k QQQQ – 2010, check by yourself in my public chart list, starting from the 8th trading day in January (which is 01/12) until the end of the month, QQQQ has been bearish since year 2002 without exception.
• From 08/27 bottom to 11/05 high, SPX up 49 trading day, so 49 * Fib 61.8% = 30, adding from 11/29 bottom, what we get then happens to be on 01/11. (See 12/31 Market Recap for more details)

SEASONALITY: NO UPDATE

See 12/31 Market Recap for the January seasonality chart.

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. 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.
3. * = New update; Blue Text = Link to a chart in my public chart list.
4. 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.
5. UP = Intermediate-term uptrend. Set when I see at least one higher high and higher low on weekly chart.
6. DOWN = Intermediate-term downtrend. Set when I see at least one lower high and lower low on weekly chart.