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The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

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Market Recap: Weekly Bearish Engulfing

  TREND INDICATOR MOMENTUM INDICATOR COMMENT (Click link to see chart)
Long-term 3 of 3 are BUY    
Intermediate 2 of 3 are BUY 5 of 5 are NEUTRAL Non-Stop Model is in BUY mode
Short-term 2 of 2 are SELL 6 of 6 are NEUTRAL SPY ST Model is in BUY mode
GANN DAY MOON/SOLAR CYCLE & TIME FIB CONCLUSION
07/07-07/11 06/26 / 07/07 07/31, 08/20-08/23 Next pivot date: 07/07?

BULLISH 0.2.1 10Y T-Bill Yield: ROC < -9%, so bottomed?
0.2.2 Extreme Put Call Ratio Watch: all 3 ratios are high, so bottomed?
*0.2.5 NYSE Total Volume: Spike high, so bottomed?
BEARISH 0.0.2 Combined Intermediate-term Trading Signals: trend line broken, so topped?
6.3.2b Major Distribution Day Watch: 2 MDD within 5 days means an intermediate-term downtrend?
*4.1.0 S&P 500 Large Cap Index (Weekly): bearish engulfing were bearish for the next several weeks.
CONCLUSION  

SPY SETUP ENTRY
DATE
STOP
LOSS
INSTRUCTION: Mechanic signals, back test is HERE, signals are HERE.
TRADING PLATFORM: SSO/SDS, UPRO/SPXU
ST Model     *Long if SPY up next Monday. The stop loss will be 1.9*ATR(10).
Reversal Bar     *Long if SPY up next Monday. The stop loss will be 0.9*ATR(10).
NYMO Sell      
Non-Stop(RSP) 06/17 L N/A See 06/17 Market Recap for more details.
OTHER ETFs TREND *DTFMS COMMENT - *New update. Click BLUE to see chart if link is not provided.
QQQQ UP    
IWM DOWN *BUY Ascending Broadening Wedge, downward breakout 73% of the time.
CHINA DOWN    
EMERGING UP    
EUROPEAN UP *BUY  
CANADA UP    
BOND UP   ChiOsc is way too high now.
EURO DOWN BUY  
GOLD UP *BUY 4.3.0 Gold Trust Shares (GLD Weekly): Head and Shoulders Bottom, target $129.99.
GDX UP *BUY 4.3.1 Market Vectors Gold Miners (GDX Weekly): GDX:$SPX is too high.
OIL UP *BUY  
ENERGY UP    
FINANCIALS DOWN *BUY  
REITS UP *BUY *4.4.3 Real Estate iShares (IYR Weekly): Pay attention to XHB weakness!
MATERIALS UP    
*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.
*DTFMS = Dual Time Frame Momentum Strategy. The signal is given when both weekly and daily STO have the same buy/sell signals. Use it as a filter, don't trade directly.

SEASONALITY: BEARISH MONDAY TO WEDNESDAY, BULLISH THURSDAY AND FRIDAY

According to Stock Trader's Almanac:

  1. Last day of Q2 bearish for Dow, down 13 of last 18 but bullish for Nasdaq, up 12 of 17, although down 4 in a row.
  2. First trading day in July, Dow up 17 of last 20.

6.5.2b Month Day Seasonality Watch, the last 2 trading day of recent month are bearish, but the 3rd last trading day, i.e. next Monday, could be bullish.

S&P500

The chart below shows the seasonality around the Independence Day. Just want to remind you: the market closed on 07/05.

Performance Surrounding Independence Day

So to summarize above, looks to me the Thursday and Friday next week are bullish.

INTERMEDIATE-TERM: NEXT WEEK NEUTRAL, NEXT NEXT AND NEXT NEXT NEXT WEEK ARE BEARISH

As mentioned in 06/24 Market Recap, officially the intermediate-term trend is up because I don't argue with my SPY ST Model which now is still in BUY mode. But as explained in the 06/21 Market Recap, lacking of secondary buy signals should keep you from on the long side, therefore till now, even I kept saying that officially the trend is up while the market kept dropping everyday, you should lose no intermediate-term positions.

By the way, I simply provide info in my daily After Bell Quick Summary, those tricks don't represent my view of the market. For example, this week, the tricks were apparently bullish biased, but no matter what I think, I have to tell you whatever I see. In no circumstance, should I tell you, this time may be different. It's up to you to decide. I'm a believer of there's no 100% correct Holly Grain in the trading world. In order to win in the long run, I must always bet on the side that proves to have higher odds RELIGIOUSLY. If every time I see something, I always say maybe this time is different, then virtually no indicators, no statistics are needed, to trade, the only thing matters is what I FEEL. Well, I don't believe this is how I should trade. Anyway, even tricks didn't work good this week, but don't forget in 06/18 Market Recap, I said clearly, this week would very likely be a red week. And for the next day's speculation in every day's After Bell Quick Summary, I was still right on Monday and Friday. So again it's not that bad as it feels, statistics still matters.

Well, back to where we are, officially the intermediate-term trend is up, but in 06/24 Market Recap, I mentioned 3 potential top signs:

  1. 0.0.2 Combined Intermediate-term Trading Signals, CPCE trend line broken may mean a top.
  2. 6.3.2b Major Distribution Day Watch, 2 Major Distribution Day within 5 days means a short-term rebound but most likely confirming an intermediate-term down trend.
  3. 4.1.0 S&P 500 Large Cap Index (Weekly), weekly bearish engulfing.

S&P500

The chart below is a simple back test about a weekly bearish engulfing since 1988. Sell short at the Friday's close, cover at close 1 week, 2 week, 3 week, 4 week, 5 week and 6 week later at close since 1988. Looks to me the next week is neutral, but week 2, 3 and 4 are not so bull friendly.

Performance
Larger Image

So to summarize above, all I can say are, intermediate-term doesn't look bright, but officially it's not a confirmed down yet. When to confirm? I've discussed this in the 06/22 After Bell Quick Summary. Yes, when the trend is finally confirmed down, it'd be too late but it's a sad reality. For right now, bulls still have a little hope:

  1. 1.4.1 iShares MSCI Emerging Markets (EEM Daily)
  2. 1.4.2 Vanguard European VIPERs (VGK Daily)
  3. 3.1.0 Currency Shares Euro Trust (FXE Daily)
  4. 3.3.0 United States Oil Fund, LP (USO Daily)

Emerging markets, European markets, Euro, Australian Dollar and oil all held well. Those guys usually lead the US market.

EEM

4.0.5 The World Market, this chart should clearly show why I said that EEM leads the market. Believe or not, EEM is an very important leading indicator. See HERE for reasoning behind it if interested.

Wilshire 5000

So, although at the current stage, the intermediate-term doesn't look bright, but still bulls are not dead yet. A Spinning Top formed on SPY daily chart this Friday could be a potential reversal bar (50% chances). A green Monday would trigger the SPY ST Model and Reversal Bar Model buy setup which I've discussed in the 06/23 Market Recap, if indeed they're confirmed, bulls will have 67% chances.

S&P500

SHORT-TERM: COULD SEE GREEN MONDAY BUT BE CAREFUL OF NASDAQ INTRADY CUMULATIVE TICK

I've mentioned 2 reasons in the Friday's After Bell Quick Summary for a green Monday. I know they're not convincing at all but here I finally managed to find the 3rd "EXCUSE": QQQQ down 5 days in a row, buy at close, sell at the next day close since 2002, looks like not bad for bulls the next Monday.

Backscanner

6.3.2b Major Distribution Day Watch, I've discussed this in 06/24 Market Recap, 2 Major Distribution Day within 5 days although means an intermediate-term down trend but a short-term rebound usually could be expected. Here is the back test from Quantifiable Edges: Two 90% Down Days In One Week backing my idea.

So to summarize above, very short-term, bulls have hopes, but in the Friday's After Bell Quick Summary, I said I'm going to WOW here. The previous 8 WOWs were in 06/02 Market Recap, 05/26 Market Recap, 05/18 Market Recap, 05/12 Market Recap, 05/03 Market Recap, 04/29 Market Recap, 04/20 Market Recap and 04/14 Market Recap, the market all had a bigger pullback no later than the next Tuesday, so be careful. Personally, I still think the extremely high readings in the sentimentrader's Nasdaq Intraday Cumulative TICK chart simply means a change in trading characters, not because people are too much in love with Nasdaq stocks. I think you can clearly see this in the chart below, the Friday's WOW now is within a recent NORMAL range even shouldn't be counted as a WOW now because it's still not higher than the solid red line above. Well, of course, I don't mean to ignore this chart, I simply want to say that don't treat WOW as bear's Holly Grain like people in my forum do.

NASDAQ Intraday Cumulative Tick

 

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