Stock Market Analysis

Friday, October 30, 2015

Fake Bearish Day

I would call today a "Fake Bearish Day" for even though the market closed negatively, the internals were actually very bullish! In fact long term bond yields rose as investors move out of bonds into equities. Total equities put call ratio also remained stalwartly in the bullish zone. In fact, the worse than expected GDP number (as well as all of the other negative surprises today) should have caused the market to take back all of yesterday's gains, but it didn't. All of these tell me that the bulls are indeed very strong at this point and is aimed at challenging the 2100 points level as soon as tomorrow. However, resistance should be expected at that level with the market in such short term overbought condition. I maintain my view that every dip right now should only be used for the exit of losing shorts. I do not even recommend buying on the dips for short term trading for the moment.

Market Crash Timer: ORANGE

For now, the market remains in short term bull trend within an intermediate and primary neutral trend.

Monday, October 26, 2015

Classic Uncertain Day...

US market received a wake up call today as both New Home Sales and Dallas Fed surprised negatively in huge amounts. However, like I always said before, one or two bad numbers do not erase the effects of a string of previous good news. Housing market has been strong all year and numbers have been great all the way up to last week's Existing Home Sales. The much lower than expected Dallas Fed also did not erase the effects of last Friday's great PMI number. As such, we saw a largely muted response in the market today with a huge tee off in trading volume as neither investors nor traders knew what to do at a time like this when the market is too short term overbought for a good trading setup nor is today's number encouraging enough for investors to jump in on. Such is what a truly uncertain day is about.

Long term bond yields were down as investors take some profit and take a more long term bearish stance but keeping short term bond yields completely still, reflecting the short term uncertainty. Total equities put call ratio returned to the uncertain zone as well. All of these along with the low volume, small daily change and limited trading range makes today a textbook uncertain day.

So, what's going to happen tomorrow?

First of all, lets not forget that the market has already staged a bullish breakout on a double bottom reversal pattern. Within this framework, the market is expected to have higher upside potential than downside potential, meaning even if it goes downwards, it is expected to be very limited and the clever money really should be buying rather than shorting even right now. However, I still expect a bit of a pull back from this point in order to set up better entry points for traders over the next few days. However, this is not a move I would put my money on. In fact, I would only use such a move to get out of my losing shorts. The short term overbought condition and the 2100 points resistance level both warrant such a relief this week and this could be catalyst-ed by worse than expected economic data this week. Its really funny how economic data tend to move largely in tandem, when one or two numbers start to come in bad, the rest of the data for the week do have a high chance of turning in bad as well.

This is truly one of the most tricky times to be putting your money in the market, both for the short term and the intermediate term and definitely the time to be taking some short term profit off your table just like how my Master's Stock Options Picks Subscribers took a 46.7% profit off COG put options last Friday (Join my Master's Stock Options Picks Service now!)

Market Crash Timer: ORANGE

For now, the market remains in short term bull trend within an intermediate and primary neutral trend.

Thursday, October 22, 2015

Topside Breakout

The market action today was once again exactly how I predicted it yesterday in my report to paid subscribers:

"Today's market action also suggests that investors are not overly optimistic about tomorrow's numbers and that it has not been overly priced in yet, which pretty much removes the possibility of profit taking despite good numbers, which means good numbers could still move the market upwards...Which means from how these numbers are expected to move, odds are now in favor for an upside breakout if there are no negative surprises."

And so it was. Most of the major economic data today pretty much turned out how I predicted it yesterday:

"Looking at Leading Indicators, it made the biggest downwards jump for years last month, which means that odds of it turning out higher than last month is extremely high. Jobless claims have been dropping for a couple of weeks so the current consensus for a higher number is pretty much in line with how this number behaves so even if jobless claims are higher, the impact would not be dramatic unless it is really unexpectedly higher. Existing home sales were lower last month which puts the odds in favor of a higher number this month, especially with how the other housing data has behaved lately, the consensus of a higher data isn't hard to meet. "

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Even though the topside breakout has been made, it doesn't mean the market is going to shoot straight up from here. In fact, it won't be surprising to see a bit of profit taking over the next few days especially since there isn't any strong market moving data tomorrow.  So, does this spell the end of this supposed market crash? Well, at this point, the market does look like its making a classic reversal out of an intermediate correction on a rising double bottom. However, the macro picture still remains that the stock market cycle is imminent and the market still has major resistances to break. This is definitely the time for extremely short term trading strategies and the short term for now is definitely bullish.

Market Crash Timer: ORANGE

For now, the market remains in a short term bull trend within an intermediate and primary neutral trend.

Tuesday, October 20, 2015

Another Weird Bullish Day...

Another very weird "bullish" day where only the price was bullish but none of the internals were.

The pattern has been consistent today and the past two weeks... lots of selling for the bulk of the day with accumulation during the final hours. If the good old adage is true that smart money buys at the end of the day, then we are indeed seeing alot of very smart buying over the past few weeks indeed. However, I am very hesitant about this "rally" because the internals continue to look rather empty, like this is a hot air balloon. Bond yields barely nudged, total equities put call ratio continue to be in the uncertain zone, economic data continue to be largely mixed, and volume is falling. On top of all these, the SP500 is at the top of that sideways price channel ceiling... everything shouts "Danger" and is definitely not the time to be newly long if you are a derivatives trader who cannot hold on forever in the event of a correction.

This is when I will continue to be careful, maintaining my previous outlook of a 30MA retest before I can be sure of anything.

Market Crash Timer: ORANGE

For now, the market continues to be in a short term bull trend within an intermediate and primary neutral trend.

Thursday, October 15, 2015

Bewildering Rally

US market did a surprising rally today even as economic data continue to deteriorate. It is clear so far that investors are truly more concerned about a rate hike than worsening economic data. That as long as the Fed does not hike rates, the currently level is attractive to investors who expect the stock market to continue upwards from here when economic data starts to turn for the better again. However, with major leading indicators pointing forward to worsening economic data in the near future, its hard to see that recovery in economic data happening anytime soon especially with the Feds already out of bullets. The only thing that the Feds could do is to resume the dreaded quantitative easing which will no doubt once again push budget deficit into the trillion zone, putting US credit rating once again in danger, which will then take that final line of defense for investors away which are bonds, the effect would be an all out recession, just like what happened during the last recession.

Looking at today's rally, we see that internals are still conflicting, total equities put call ratio rose in favor of put options, so not everyone's on board with this. The SP-500 is also once again up again that price ceiling it turned around from a week ago. This is when I like to be cool and see what happens on Friday or the next few days. I would rather look for evidence and ride a trend right after it has begun than to make a commitment at this junction. Yes, even though I am of the opinion that we are in a  market crash type of market pattern but even within such a framework, one could expect sideways or upwards movements which could last weeks.

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Market Crash Timer: ORANGE

For now, the market turns a short term, intermediate and primary neutral trend.

Monday, October 12, 2015

Uncertain Start of the Week...

A day without any major economic data and another quiet and uncertain day in the market. Volume was down, bond yields barely nudged, total equities put call ratio neatly in the uncertain zone, felt like a heavy mood just set over the market like a funeral parade.

Like I mentioned to paid subscribers yesterday, (Yes, I only publicly post my report every other day at best but paid subscribers get my reports DAILY for LIFE... sign up now! Only $99 for LIFE! And it takes only one winning trade to make that back and MORE, you know it!) the 2020 level is a significant resistance level as it marks the ceiling of this volatile sideways price channel. My Star Trading System is also producing an avalanche of bearish trades rather than bullish ones now despite it being a positive day today. As such, it is evident that the market is currently short term overbought and once again at a decisive junction. Does the potential of a topside breakout from this point make this past two months nothing more than just an intermediate correction from which the market is going to continue this historical bull run? I don't think so. The potential for market crash exists even if the market decides to go significantly higher from here before coming back down again just like it did in 2008, as such, this is still not the time to think otherwise. Furthermore, just like I said last week, I don't see the market making any significant moves without first coming back down to test the 30MA due to the overbought condition. That should coincide with the more important economic data this week; Retail sales on Wednesday and the slew of data on Thursday that includes Jobless Claims, Empire State Index and Philley Fed.

Market Crash Timer: ORANGE

For now, the market remains in short term bull trend within an intermediate and primary neutral trend. 

Wednesday, October 07, 2015

Is This The Start of a Bull Leg?

Market ended higher in a highly technical session as the market come up against a strong technical resistance level.  The 2000 points level is not only a psychological resistance level (investors and traders tend to be very cautious around whole numbers, thus forming a psychological resistance) but also a technical resistance marking the top of the 2000 / 1875 sideways price channel. What this means is that there are plenty of reasons for traders watching these levels and formations to start taking profit.

This was why the morning session saw plenty of profit taking in expectation of the market turning around back down. However, with the SP-500 trading above the 30MA once again, there are also traders who are betting on this being a double bottom reversal, signified by the double bounce off the 1875 level. This was why the rest of the day turned around to become bullish inclined, closing the market higher.

Like I wrote in yesterday's report for paid subscribers:

"The real question is,is this going to be that market crash that I have predicted all these while as it really looks like a classic double bottom reversal marking the end of yet another intermediate correction. Indeed, I would agree that when taken in isolation without regards to the overall behavior of the market over the past few years, this does look like a textbook  ending of an intermediate correction, no questions about it. In fact, if this happened during the last two years, I would not hesitate to call it the end of an intermediate correction. However, technical analysis cannot be performed without regards to the overall framework of the market. It is exactly like how when making an assessment of a person's character that you cannot arrive at a conclusive picture just by looking at what that person is doing right now but also take into account what that person has done at least over the recent few years."

(Yes, I only publicly post my report every other day at best but paid subscribers get my reports DAILY for LIFE... sign up now! Only $99 for LIFE! And it takes only one winning trade to make that back and MORE, you know it!)

So, was the market REALLY bullish today?

Looking inside the action, we see alot of weakness. We see strong volume, non-committed bond yields movement and an actual move towards put options trading in the total equities put call ratio. Now, how is strong volume a bad thing? Well, contrary to popular belief, strong volume isn't a bullish thing at all. In fact, big volume surges that are not the result of a Quadruple Witching tend to signify reversals (read more about Quadruple Witching ) rather than a sign of continued strength. In fact, we should see a steadily declining volume if this is truly a reversal. Bond yields also barely moved today, definitely not how it behaves in a truly strong day. The most interesting thing is that total equities put call ratio not only not stay in the call options zone, it actually moved into the put options zone today as options traders seem to be preparing for something.

All in all, in a quiet day without heavy economic numbers, today's trading is highly technical in nature and continues to go against the current trend of worsening economic numbers. Within the framework of an intermediate neutral trend, I won't want to be the first to bet on a breakout to upside. In fact, I continue to stand by my forecast of a testing of the 30MA this week before anything conclusive can be made of the market behavior.

Market Crash Timer: ORANGE

For now, the market remains in short term bear trend within an intermediate and primary neutral trend.

Monday, October 05, 2015

Has the Market Found a Bottom?

US market extended its rally today even as economic data continued to turn in worse than expected. This is also the 5th consecutive trading day that the SP-500 has been positive, which is something we hadn't seen since December 2014.

So, has the market actually found a bottom?

I still don't think so. 

Well, I will refer to this 5 days rally as a "Rate Hike Rally" from now onwards. Indeed, the only reason for this rally is the fact that economic data is now bad enough for the Feds to postpone their rate hike plan. What does this do for a sinking economy? Nothing. Soon enough, when this exuberance over the delayed rate hike dissipates, reality will set in... what is reality? Reality is the fact that the US economy, as well as the Chinese economy, are both sinking and that could set off that overdue global economic crisis, an event which myself and many other analysts are expecting to happen in 2016.

On the technical front, this Rate Hike Rally has all the characteristics of a classic dead cat bounce. A rally on weak fundamental reasons and weak internals. Technically, 5 consecutive positive days is also usually when people starts selling. This means that we could and should see the market turn around back down to test the 30MA for support for the rest of the week. This was what happened almost every single time the SP-500 makes 5 consecutive up days. Options traders seemed to be more aware of such behavior as they kept total equities put call ratio in the uncertain zone throughout this rate hike rally rather than trade in favor of call options like they do in real rallies. (Learn more about Put Call Ratio for free)

No market crashes go straight down. There will always be months of struggling up and down in a generally sideways downwards inclined manner (like right now), before a few big drops that academics only recognise as a market crash after it has been done. In fact, this should be where I would strategically spot and enter into good bearish positions for my Master's Stock Options Picks service. (Don't miss out on these profits! Profit with me!)

Market Crash Timer: ORANGE

For now, the US market remains in short term bull trend within an intermediate and primary neutral trend.

Friday, October 02, 2015

Strange Rally...

I got the first half of what happened today correctly but what happened during the second half truly surprised me.

Jobs Report turned in much much worse than expected today, leading to an immediate reaction during the opening hour. It didn't take investors very long to realise that it also mean that the rate hike hammer isn't going to be dropping anytime soon, leading to a rally all through the day. It is the rally that actually surprised me. Apparently investors are far more concerned with the rate hike than the fact that the economy is in trouble today. Which makes next week a very dangerous week for traders and investors who jumped in on this bull trap. The second week of each month is what I call "Digestion Week". A week of no heavyweight economy data and a chance for investors to cool down and seriously think about what the ISM index and Jobs Report released on the first week mean. It won't take investors much to realise that even without the rate hike, the economy is in trouble with economic data going the way it has. The scariest thing is, the Fed can no longer do anything to help the economy. There simply isn't anymore rates to cut and all they can do is sit and watch the economy sink, now, that is scary and I think we would see investors react to that realisation next week.

The technical front looks extremely uncertain for next week as well. The SP-500 looks like it formed a standard double bottom reversal right now but I have my reservations, especially when it is up once again against the 30MA line. The 30MA is a critical resistance/support line and a place where alot of bull traps and dead cat bounces reveal their true nature. This, along with the fact that the market has already been up for 4 consecutive days makes next week an extremely dangerous week where we could see the market take back all these gains.

Market Crash Timer: ORANGE

For now, the market turns a short term bull trend within an intermediate neutral trend and primary neutral trend.