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Market Outlook: The Low May Not Be In Yet

SHORT-TERM: COULD SEE MORE SELLING AHEAD

Two cents:

  1. Chances are high that the low wasn't in yet.
  2. Although the week had 3 huge gap up in a row so needs some kind of miracles for another huge gap up the next Monday. But if indeed, then I'd say goodbye to bears, at least for short-term. Yes, I believe the low wasn't in but I also believe to trade what I see not what I believe, and so far as you know, to be a bull in this market requires no reason but imagination, so if indeed that miracle happens again the next Monday, no argue, period. The chart below explains why I think if another huge gap up the next Monday, it'll go galaxy far far away. Because for the week's 3 huge gap up, 2 were sold off hard, but the last one, got filled again, true, but came back right before the close, so it's much better, therefore logically, if the 4th huge gap up, it should do much much better, agree?

3 Gap Up
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OK, now let's talk what I believe: Why wasn't the low in?

  • In 07/14 Market Outlook, I mentioned Non-Stop model sell signal. I believe most of you didn't pay enough attention because it's simply a trend following system, so the winning rate cannot be good. However, see the back test below (Since the inception of the CPCE in year 2004), the sell signal was correct 92% of the time. Please be noted, a correct entry doesn't mean a winning trade as long as you don't have a correct exit, so I don't mean to follow the Non-Stop to short, you'd have 92% winning rate. What I want to prove here is the sell signal could mean more selling ahead, range from 3 to 20 calendar days on average until the lowest close.

CPCE Sell Signal
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  • In Friday's Trading Signals, I mentioned, except the bearish seasonality for the next week, statistically a red option expiration week means 79% chances either a lower low or red the next week.

Red OE Week
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  • Despite the Friday's roaring high at close, the chart pattern still mostly looks like Rectangle which means higher chances of continuing lower.

SPY 15-Minute Chart
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INTERMEDIATE-TERM: BULLISH JULY

See 07/01 Market Outlook and 07/05 Market Outlook for more details.

SEASONALITY: BEARISH NEXT WEEK

According to Stock Trader's Almanac, week after July expiration, Dow down 7 of last 12, 2007 -4.2%, 2008 -4.3%, but up 4.0% in 2009.

Also see 07/01 Market Outlook for July seasonality chart

ACTIVE BULLISH OUTLOOKS:

ACTIVE BEARISH OUTLOOKS:

  • N/A

SUMMARY OF SIGNALS FOR MY PUBLIC CHART LIST:

  TREND MOMENTUM COMMENT
Long-term 2 of 2 BUY    
Intermediate 3 of 5 BUY 5 of 5 NEUTRAL Cobra Impulse in BUY mode; Non-Stop in SELL mode.
Short-term DOWN 6 of 6 NEUTRAL  

  TREND COMMENT
QQQ & Weekly UP  
IWM & Weekly UP  
SSEC & Weekly UP  
EEM & Weekly *DOWN  
XIU & Weekly DOWN  
DAX & Weekly *DOWN  
TLT & Weekly DOWN  
UUP & Weekly DOWN  
GLD & Weekly UP  
USO & Weekly DOWN  
XLE & Weekly UP  
XLF & Weekly *DOWN  
IYR & Weekly UP 4.4.3 Real Estate iShares (IYR Weekly): XHB lags, be careful.
XLB & Weekly UP  
  • * = New update; Blue Text = Link to a chart in my public chart list.
  • UP = Intermediate-term uptrend. Set when weekly buy signal is triggered.
  • DOWN = Intermediate-term downtrend. Set when weekly sell signal is triggered.

 

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