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Market Outlook: Still It is 3 Push Up

SHORT-TERM: EXPECT PULLBACK SOON, HUGE UP MONDAY WOULD MAKE TUESDAY GOOD DAY TO BET PULLBACK

Two cents:

  • The big picture, maintain what I said in 10/14 Market Outlook, it's a 2 legged up and we're now on the very 1st leg up.
  • In the short-term, I believe the 1st leg up is near an end.

The chart below should help jogging your memory about the picture I see through my crystal ball. I see clearly 3 Push Down, so now should be 2 leg up. I've also via the signal called Selling Climax proved the possibilities are high that we'd see multi weeks rally in 10/14 Market Outlook. Except to shift the blue dashed lines (for illustrating directions) a little bit right to leave space for price bars, I didn't change anything in the chart below, so it's clear the rise of this week was expected. Well, more precisely, I didn't expect bulls to spend a whole week to reach the point I drew last week, I thought it'd be much sooner and we should've already rolled over this week. Anyway, the only plan changed here is it takes more time than I thought to unfold the pattern, so I still expect a little bigger pullback soon to mark the end of the 1st up leg.

3 Push Down
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I believe the 1st up leg would end as early as the next week. In 10/20 Market Outlook, I said a top of some kind could be near, and the Friday's huge rally wasn't enough to change my view because from the chart below, still clearly it's 3 Push Up pattern. So here is my formal evil plan as illustrated by red dashed lines below.

SPY Evil Plan
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Please be noted that in the chart above I didn't deny the possibility of a huge up the next week (well, it's typical of Cobra, always two sided, never certain on one direction) which would sure invalidate my evil plan based on 3 Push Up pattern. No, I cannot exclude such a possibility (you want to read someone always sure about what the next is, well, I'm not the one, there's absolutely no sure thing in the stock market, everything is about odds, if someone always sure and always right, he won't be blogging here, he'd pretty much the richest in the world), but I have enough evidences to prove that if indeed a huge up the next Monday, then it'd be all gone as early as the next Tuesday. So in some sense, a huge up Monday could be bears opportunity (for aggressive traders only of course, because it's against the trend). OK, now let me present my witnesses below, why up huge could be bears opportunity:

  • Friday is another up 1.65% but not even close to a Major Accumulation Day, since we're now beyond that 7 Days Rule time window, so 83% odds are certainly not something I would doubt without thinking twice, that it'd drop below the Friday's close within 2 days.

Up Big Not MAD
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  • The two of my ultimate weapons for watching overbought, NYMO and T2122, are now very close to extremes. I said several times before, although in the stock market there's no sure thing but still there're certain signals that simply cannot be argued, such as NYLOW (Hope you still remember when I mentioned this unarguable in 10/03 Market Outlook and 10/04 Market Outlook, I'm sure you all remembered what happened thereafter) and I believe NYMO is another unarguable signal (not as powerful as NYLOW, but for very short-term yet, it is the one).

NYMO
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T2122
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The last but not the least, there're 3 things I'd like your attention:

Rydex traders (mostly retailers) are way too bullish, accumulated too large bullish assets. See red lines for what happened thereafter. That said, I don't mean the market would drop immediately, but certainly it's enough to raise a red flag.

Rydex Bull Fund Asset Flow

TNX ROC(30) >= 9 was used to be a fairly reliable top signal. You can check 8.2.1a Market top/bottom by ROC30 of 10Y T-Bill Yield 2001-2004 and8.2.1b Market top/bottom by ROC30 of 10Y T-Bill Yield 2005-2008 for the past accuracy, but because of nowadays Fed's unusual behaviours, I'm not sure if I could trust this signal anymore.

TNX
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The chart below is to follow up the CPCE top signal I mentioned in 10/20 Market Outlook. It's not confirmed on Friday, so not valid anymore.

CPCE
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INTERMEDIATE-TERM: WE COULD SEE MULTIPLE WEEKS RALLY BUT MAINTAIN SPX DOWNSIDE TARGET AT 1,000

For why we could see multiple weeks rally, please see 10/14 Market Outlook for details.

For why SPX downside target at 1,000, please see 08/19 Market Outlook and 09/30 Market Outlook for details.

SEASONALITY: NO UPDATE

See 09/30 Market Outlook for October day to day seasonality chart.

SUMMARY OF SIGNALS:

  TREND MOMENTUM COMMENT
Long-term 3 of 3 SELL    
Intermediate 5 of 5 BUY 5 of 5 NEUTRAL Cobra Impulse in BUY mode; Non-Stop in BUY mode.
Short-term *UP 6 of 6 NEUTRAL  
* = New update.

 

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