Thursday, May 04, 2006

Don't fight if the market turns up here

VST, my view has not changed that we get a move here to about SPX 1290. But the resilence of this market has been frustrating to short or hold any shorts here. Here's some comparison between 2003 and 2006 purely from momentum and internals perspective. Will history repeat itself ? Time will tell....

The fractal we are witnessing from Oct 05 is an exact mimic of the A-B-C Fractal that we witnessed from March 03 - Jan 04. July 03 thru Oct 03, we were in this running triangle and then broke out of it and melted-up.

We see the same running trianlge here from Feb 06, which is about to finish and switch into a terminal move. My custom Full Stochastic has the exact same signature, flatlining about the 80 line and turning up. Remember overbought weekly indicators turn down. They rarely don't. On those rare instances when they don't turn down and instead turn up, price goes parabolic. That's what we are seeing on the Full Stoch.The CCI has the exact similar signature prior to the beginning of the running triangle and then showing hesitation (i.e chopping around the 100 line) before the big move. Price action then was around the 8 EMA, which is the case now. Similarities are just uncanny.

Sentiment-wise, there was this tremendous disbeleif then, like we have today. Folks were expecting a 9-month cycle bottom then. Now the talk is all centered around the 20-week bottom. Every messageboard i visit, i see this talk about the 20-week cycle bottom. Then in 2003, the internals bottomed during the 9 month cycle bottom while the price made a higher bottom. We are seeing the same again. The summation index is making it's trip to the zero line, i.e the internals are bottoming while the price keeps moving higher.

The NYSE MCO has moved above the zero line. Now if we see a good breadth thrust day, that would create a zero-line rejection on the summation index and would be a good intermediate term buy signal. For now, waiting and watching for the resolution...

Tuesday, May 02, 2006

Get ready for a fast move down !

My expectation over the last few days has been for a move up to SPX 1320 cash and then a move to 1290. The reason i expect 1320-23 is because that's where the weekly resistance bands passes. Generally markets love to kiss those bands before they make a big move. Given all the hesitation and the overlapping action over the last few days, my best guess is that the uncertainity will resolve down towards the 1290 area. The NYSE summation index would also have completed a trip to the zero line by then.

Markets can always throw a curve ball. If for any reason we get a daily close above SPX 1320 then this scenario is wrong and i will have to turn neutral and reasses the situation. Will the market hit the 1320 resistance band ?. I am not completely certain. There's always a possibility of a failure below that level. This is one heck of a nervous market, until the Fed meeting is done with. Bottomline, any sell on 30-min tommorow will get me aggresively short.

Sunday, April 30, 2006

Not ready to break out yet

My best take on the market at this moment is that the overall structure remains constructive for a bullish case. But the ingredients from a momentum perspective and from the internals configuration doesn't allow for a breakout just yet !. In the VST (over the next couple of days) we could see NQ test the 1740 area and the SPX cash test the 1320 area followed by a failure. The failure should retest the SPX 1290 area which is now a solid support.

My expectation is largely based on the momentum and EMA configuration that i am seeing on the SPX daily charts. From the internals perspective, the markets have been rallying in the face of the NYSE summation index drifting lower. This means the money is leaving the markets without causing much price damage, which is not necessarily bearish relative to the overall strength of the weekly cumulative A/D line itself. LOL, i was right about the summation index making a trip to the zero line. I thought that would have been accompanied with severe price damage. Boy, was i wrong ! This market seems stronger than i thought. Now once the zero line trip is complete, by which time we should see a minor price damaage, which i mentioned earlier i.e a trip to 1290 on the SPX.

Now the million dollar question in my opinion begins after that ? Will the summation index turn up from the zero line ? If it does, imagine what would happen to the sideline money, the bears etc ? I think that would create some serious upside pressure. I guess it's not clear at this point whether we cross thru the zero line or have a rejection at the zero line. So it's putting the cart in front of the horse. We will deal with it when we get there.

For now, my expectation is a a VST move higher to about SPX cash 1320 and a failure, a retest of 1290 and then.....