Objective Trader

Trading Week Ahead, 21-25 Nov 2011

As said in my earlier article, the odds are good that we will re-visit  SPX 1240 area being 38% bounce. The hourly is very oversold and a bounce is imminent.  

A possible move I am looking for is bounce to 1240 area and from there we continue the down move into early December ( Full Moon) . A break above 1260 would cancel below scenario. 

1292 - 1215 = 77 points down (A),  1215 - 1277 = 62 points up (B) ,

C can be 1.38 x B = 1191 and , 1.5 x B = 1184 or 1.62 x B = 1176/1177

 

As above chart shows, the 1209 is exact 38.2% retracement of the move 1074 - 1292 and can be sufficient as well. This scenario would require the SPX to move strong next week above 1250/1260. It will be an exiting week indeed.

Considering that NYSE and NASDAQ SUMMATION INDEX have a sell signal as of Thursdays close, we shall consider a move towards 1191-1177 range as a possible outcome. 

SUMMARY :

The target set early October was SPX 1254-1276 range and so far profits have been realized and some sector rotation done as well. The Model Portfolio is very much in positive territory since start May 2011 simply because rules are obeyed.  We are not in a top guessing business and act as the market dictates.  The plan as discussed in prior article is to scale down positions with the next move up. Once positions have been scaled down, some Swing Shorts will be entered with a stop above 1260. The target area would be 1191-1185 to exit the shorts. 

Hereunder the steps ...

a)  Scale down portfolio with next bounce towards 1240

b) Enter Swing Shorts with Stop just above pivot 1261

c) Target area is 1192 - 1185 , exits shorts accordingly if not stopped out

d) Enter at the same time slowly longs between 1191-1185-1177 ( 1177 less odds )

 

 

 

 

Weekend Thoughts 19 Nov 2011

With the break of the triangle everbody was watching, the week ended on a bearish note. That being said, the hourly chart is very oversold and a move towards 1240-1245 is still in the cards. 

SPX HOURLY is oversold and should bounce towards 1240-1245

SPX 3 Month Hourly shows Wave 1 from 1074 t0 1292 and an A-B-C move down as Wave 2. Within the A-B-C was a small triangle as above 40 Day Hourly Chart. This is a possibility we MUST consider too. To confirm this theory or chart, the SPX must rally throughout next week strong.

SPX DAILY 

The 50 EMA is ca 1205/1206 and we have closed above it. It would need to take the SPX back above 1250/1260 to change the bearish tone

SPY WEEKLY is showing either break 125 up or break 120 down. This is the area to watch before jumping too early into conclusions. The area 120-125 is currently neutral and prudent investors are cash or move with next bounce into cash. Either break can be used to enter the directional move. Lets not forget we already enjoyed a stunning return by staying long since early October.

SPX BEARISH SCENARIO

If we go below the 50 EMA or SPY 120, the new few month would most likely end up with a drop toward the last October low first.  The so called C would target 943. This shows us to wait for the confirmation first before getting too exited as there will ample profits on the short side once the market gives us the direction. Meanwhile, sit on hands and wait.

SPX BULLISH SCENARIO

With a rebreak of 1250-1260 the door opens to the rather bullish outlook and also here is still time to re-enter long with the directional break. Again, we shall remember we enjoyed most of the rally and it is okay to scale down at 1220-1240 to ensure the risk is under control. With break 1250-1260 buying back longs is sufficient. The investor would only miss between 20-40 points by staying neutral in between.

TED SPREAD & LIBOR

The banks start again not trusting each other and LIBOR and TED is very high. Considering all the bad news of late, the SPX actually held up well.  Naturally, once we would see a spike in TED & LIBOR similar to 2008 fear the game changes and a major sell off would occur. Being aware the EU will QE away as much as they can, the LIBOR should drop again. This would bring confidence back to the markets.

TLT is showing us that investors seek safehaven and 20+ Year is rising and on a buy signal

VIX 3 Year Weekly Chart

We can see that a level above 30 does not show confidence amongst investors and is a sign of fear. To change back to bullish the VIX would need to drop below 30 again

 

 

 

 

Stages of a Perma Bear

STAGE 1

STAGE 2

STAGE 3

STAGE 4

STAGE 5

STAGE 6

Darn, I went long breakout and sold with  a loss. Back to SHORT with DOW 6000 by February 2013. Bears know best because we made one time money in 2008 and lost 3 years in a row.  We need this to break even. Perma Bears can look into the future with HOPIUM.

Stage 7

End of Day Summary, 18 November 2011

The week ended with a pullback and all hourly charts below are very oversold and ready to bounce strong. My guesstimate is that we see a counter rally towards Thanksgiving.

Dow Jones Hourly

S&P500 Hourly

Nasdaq 100 Hourly

Russell 2000 Hourly

GLD Hourly

SLV Hourly

HUI  Hourly

GDX  Hourly

 

Summary:

Considering the fact that all above charts are in very oversold conditions , the odds that we see a rally into Thanksgiving are very high. The targets for each hourly chart is the RED LINE representing the  60 EMA .  Exception for me is the USO ETF as this one is overbought in Daily Chart. XLE however is oversold in hourly and energy sector can rally despite a pullback in Crude.

SPY WEEKLY

Arthur Hill of Stockcharts emailed out today an interesting chart and scenario that makes total sense to me. Herewith would like to show my version of the chart

If we look at September 2010, we saw that the breakout area held and the market never looked back and rallied 30%+ . Aroon of course is currently in bearish territory and we should recognize that. As soon as we see a move similar to September 2010 in Aroon, the market has made up his mind and the next 6 month will be bullish. If we go below the breakout support, the chances are very high that the market will take another 6 month to make a bottom. This can be anywhere between 20-25% moves.

Bottom line is, a move below 120 in SPY is very bearish and a move above 125 is very bullish.