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Market Recap: Weekly Bearish Engulfing

  TREND MOMENTUM COMMENT
Long-term 1 of 2 are SELL   Sell signal to be confirmed.
Intermediate 2 of 3 are BUY 5 of 5 are NEUTRAL SPY ST Model in BUY mode; Non-Stop in SELL mode.
Short-term Model is SELL 5 of 5 are NEUTRAL Shorted on 08/11, hold partial overnight.
GANN DAY MOON/SOLAR CYCLE CONCLUSION
8/26 08/24 / 08/23 8/23 Next pivot date: 08/23 - 08/26

BULLISH 6.3.2c Major Distribution Day Watch: NYDNV:NYUPV > 35, bottomed?
BEARISH 0.2.3 NYSE McClellan Oscillator: Hindenburg Omen? So market will crash?
*T2105 too high.
*0.2.5 NYSE Total Volume: a little low, still topped?

SPY SETUP ENTRY DATE STOP LOSS INSTRUCTION: Mechanic signals, back test is HERE, signals are
HERE.
TRADING PLATFORM: SSO/SDS, UPRO/SPXU
Non-Stop 07/15 L N/A *Close long and sell short the next Monday. For general direction guide only.
ST Model     *Setup no confirmed on Friday but still valid. Long if up day the next Monday.
*The stop loss will be 1.9*ATR(10) if long signal confirmed.
*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 NEXT MONDAY AND FRIDAY ARE BULLLISH

According to Stock Trader's Almanac:

  1. Monday before August expiration, Dow up 11 of last 14.
  2. August expiration day bullish lately, Dow up 6 in a row 2003-2008.


INTERMEDIATE-TERM: BEARISH BIASED

The conclusion:

  1. The correction since 04/26 isn't over. See 07/30 Market Recap for more details.
  2. The 07/01 low may be tested. *Why 07/01 low? Because the Bearish Rising Wedge text book target is at 07/01 low. See 1.0.0 S&P 500 SPDRs (SPY 60 min).

As mentioned in the Friday's After Bell Quick Summary, because the SPY ST Model is still in buy mode so officially to me, the intermediate-term trend is still up. However, since there're quite a few not so bull friendly signals on the horizon, therefore, even you truly believe that we're in 3 of 3 primary bull, at least don't be too aggressive in buying this dips yet.

Now, let's talk about all those not so bull friendly signals.

4.1.0 S&P 500 Large Cap Index (Weekly), statistically, a weekly Bearish Engulfing is bearish. I've discussed this in 06/25 Market Recap and 04/30 Market Recap, so I'll not bother to blah blah again here. Simply from the chart below, we can see that all the recently weekly Bearish Engulfing were not at all bull friendly, and also the NYSI STO at bottom at least argues that there's not much room left on the upside (even if you really believe 3 of 3 primary bull) and furthermore, the RSI seems in a bear market position.


Larger Image

The statistics below is what I listed in the 06/25 Market Recap. Short at 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 like although the next week is neutral, but the next next week, the next next next week and the next next next next week are generally bearish. As for the fact the next week is neutral, I'll mention it again in the short-term session below, which fits very well what I mentioned in the 08/11 Market Recap - there could be a tradable bottom around 08/17.


Larger Image

In 08/12 Market Recap, I mentioned the Hindenburg Omen, although theoretically, to be really really bearish, a cluster of Hindenburg Omen is needed, however, from the table below (courtesy of sentimentrader, back tested since 1965), looks to me, even a single Hindenburg Omen is bearish enough.

  1 Day
Later
1 Week
Later
2 Weeks
Later
1 Month
Later
3 Months
Later
Avg Return -0.2% -0.5% -1.0% -1.6% -2.6%
% Positive 45% 33% 39% 35% 29%

0.0.2 Combined Intermediate-term Trading Signals, although the SPY ST Model is in buy mode, but another one of my important intermediate-term model is in sell mode now. The sell signal in this model is accurate which can be proven from the statistics below since year 2004 (when the first official CPCE record started). Short at Friday's close, cover 2 weeks later at close, the winning rate would be 73%. So strictly speaking, by the way, I should say that according to my intermediate-term trading model, the intermediate-term trend is mixed.

Now look at the T2105 mentioned in 08/12 Market Recap. A new high reached on Friday. Pay attention to the general uptrend of the T2105 while at the same time the market correction is getting bigger and bigger! So be careful.


SHORT-TERM: PULLBACK TO 08/17 THEN REBOUND TO 08/23 OR STRAIGHT SELL OFF TO 08/23?

I believe there's at least one more drop ahead. I'm not sure if the market would pullback to around 08/17 then rebound to around 08/23 or the worst case, go straight down to around 08/23. The straight down to 08/23 is more speculative then bottoms around 08/17 then rebounds to 08/23. I'm pretty sure that around 08/23 would be an very important pivot date either top or bottom.

Why I think there is at least one more drop? 1.0.0 S&P 500 SPDRs (SPY 60 min) shows a possible Bear Flag or Pennant in the forming, plus no positive divergence yet on the RSI above, so likely the pullback isn't over yet.

0.2.5 NYSE Total Volume, very low volume is generally a top sign, no bottom ever acts like this. A sharp pullback like we're having now should end at certain oversold level while volume down is not at all a characteristic of an oversold condition. Another simple way is to take a look at the table above, short term has not a single oversold signal yet, right?


Larger Image

The Fib confluences area in the chart below could be the most possible pullback target. As for time target, I've explained in the 08/11 Market Recap, because 6.3.2c Major Distribution Day Watch, NYDNV:NYUPV > 35, so within 2 to 4 trading days, there could be a tradable bottom, considering the Fib 23.6% time resistance and the fact all the recent pullback lasts 3 to 8 trading days, so around 08/17 turnaround Tuesday could be a tradable bottom. The market will rebound to around 08/23 thereafter.


Larger Image

Why rebound to 08/23? The chart below illustrates that from various time calculating method, the confluences area is from 08/22 to 08/24, so very likely, 08/23+- could be a pivot date. Although strictly speaking, whether the market pullbacks to around 08/17 then rebounds to around 08/23 or go straight down to around 08/23, is hard to say, but considering all the reasons mentioned above about why the 08/17 could be the pivot date and the statistics about weekly Bearish Engulfing mentioned in the intermediate-term session above that the next week is not bearish, so the chances for the market to pullback to around 08/17 then rebound to around 08/23 are a little bit higher.


Larger Image


HIGHLIGHTS OF THE OTHER ETFS IN MY PUBLIC CHART LIST

  TREND COMMENT - *New update. Click BLUE to see chart if link is not provided.
QQQQ UP  
IWM UP  
CHINA UP  
EMERGING UP 4.1.6 iShares MSCI Emerging Markets (EEM Weekly): EEM to SPX ratio too high.
EUROPEAN UP  
CANADA UP  
BOND UP *Breakout?
EURO UP  
GOLD UP  
GDX DOWN  
OIL UP  
ENERGY UP  
FINANCIALS UP  
REITS UP 4.4.3 Real Estate iShares (IYR Weekly): Home builder is lagging, be careful.
MATERIALS UP  

 

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