We Bounced

Yesterday I said that the Seven Sentinels were suggesting yet another bounce after Monday's sell-off and low and behold we got a bit of a rally. Of course it was an intra-day rally, but it was a rally none-the-less.

So is that it? Probably not. I suspect another pop higher is still in the cards, but the unemployment report is looming later this week, so it's a difficult call to predict what may happen.

Here's today's charts:



We're sitting just above the 6 day EMA on both signals here and they are technically on buys. But they don't look particularly bullish.



NAHL and NYHL both fell back below their 6 day EMAs are now flashing sells.



Mixed bag with TRIN and TRINQ. One buy and one sell.



BPCOMPQ continues to drop lower. This particular signals continues to point lower and remains a bearish sign.

So we have 4 of 7 signals flashing sells, which keeps the system on a sell. Although I am expecting another run higher this week, it may not last the day, or we may not get much of a move higher at all with those unemployment numbers looming. We are also moving towards a long weekend, which may spook buyers more than they already are. The Sentinels look neutral overall, but that's only for the very short term. Longer term we are still pointed down.

Things could get very interesting by the end of the week.

 

[ContrarianJeff]

Thanks CH. Technically, the market looks terrible. And the economy seems to be going from bad to worse. But if you're a contrarian, you have to be interested in getting long. Sentiment indicators (like the AAII and others) show that virtually everyone is very bearish--total despair. Like March '09 despair. For that reason, I think we may be within a week of an intermediate term bottom. It wouldn't surprise me at all if we began a big-time rally. Then again, if we close below 1030-1040, it could get scary and ugly really fast. But the uncertainty and the risk/reward is why I find markets so fascinating. Thanks for your posts.

 

[Boghie]

CH,

da'Boyz will be back next week.

Just a guess, but...

Don't you think they may want to chew on the fear. Yummy:toung:

I don't think they will want to lock in losses. Most likely they will want to excite the goobers for a while then slowly bail. They have room to do so...

 

[coolhand]

So many main street investors have long since left this market that I wonder just how reliable sentiment can be. Or at least how long we can trade on it. But we have to be very mindful that trading TSP in a bull market is not as difficult as trading it in bear market. These next two months or so leading up to the mid-term elections may be very volatile making trading that much more hazardous too.

Sentiment by itself cannot be traded reliably, which is why my primary indicator is technicals as reflected in the Seven Sentinels.

Futures are up early this morning, which makes me think da boyz will run up prices leading up to the end of week unemployment report.

Thanks CH. Technically, the market looks terrible. And the economy seems to be going from bad to worse. But if you're a contrarian, you have to be interested in getting long. Sentiment indicators (like the AAII and others) show that virtually everyone is very bearish--total despair. Like March '09 despair. For that reason, I think we may be within a week of an intermediate term bottom. It wouldn't surprise me at all if we began a big-time rally. Then again, if we close below 1030-1040, it could get scary and ugly really fast. But the uncertainty and the risk/reward is why I find markets so fascinating. Thanks for your posts.

 

[coolhand]

I don't know Boghie. Again, we're now in a bear market, which means the primary trend (longer term) is down. I can only project where the market is headed using the indicators that I post each trading day and right now they don't look healthy. But we can never be sure when that may change. For now, I'm playing the downside, which means I sit in G in the TSP.

CH,

da'Boyz will be back next week.

Just a guess, but...

Don't you think they may want to chew on the fear. Yummy:toung:

I don't think they will want to lock in losses. Most likely they will want to excite the goobers for a while then slowly bail. They have room to do so...

 

[Warrenlm]

Ref Boghie comment on the boys wanting to draw in the goobers....I had the impression that by and large they are already in bond funds or looking for an exit. Also, I heard on CNBC this morning more talk about institutions moving more heavily into bond funds (the comment was that this was the opposite of where long term pension funds need to be.) Despite the Fed, isn't the money available to drive prices up even short term dwindling?

 

[ContrarianJeff]

Sentiment by itself cannot be traded reliably, which is why my primary indicator is technicals as reflected in the Seven Sentinels.

I've found that my returns have improved markedly using a combination of sentiment and technical analysis. And when in doubt, it's sentiment over TA--especially at extremes. TA can be made to say whatever I want it to say. E.g., if I'm bearish, the current market looks like a long-term head and shoulders pattern; if I'm bullish, it looks like an intermediate inverse H&S. TA is adequate during large moves, but it has a tough time finding turning points--which usually makes it late to the party.

 

[paradocs]

These are good TA's Coolhand!! I enjoy charts. I agree that we will see a pop or two this week. Watch out for the end of the week! The TA's and indicators all show a definite downward trend. All the "small" traders are sitting on the side-lines watching the "big boys" and govt manipulate the market, thereby creating an illusion that things are fine. Quite the contrary. I fear a significant downturn by mid-Sept and not because of the customary "black september" reasons.

Political issues with China, growing japanese yen, mideast issues, iran, the two wars (yes we are still in Iraq...just not many), etc. all add to the market TAs. While I cant "see" clearly, my prediction is that by mid-Sept 2010, we will see up to a 2-4% drop in the market followed by an attempt to rebound. a bear market will reign through the first quarter in 2011. the market will move laterally for most of 2011, albeit, some pops here and there. I see the S&P down to around 640 (+/- 12%)within the next 6-8 months.

 

[coolhand]

Thanks for the post paradocs. I'm glad you like the charts. I try to keep it simple and I agree with your fundamental outlook. Your targets could certainly be hit too. I suspect I'll be doing a lot of shorting in the months ahead.

These are good TA's Coolhand!! I enjoy charts. I agree that we will see a pop or two this week. Watch out for the end of the week! The TA's and indicators all show a definite downward trend. All the "small" traders are sitting on the side-lines watching the "big boys" and govt manipulate the market, thereby creating an illusion that things are fine. Quite the contrary. I fear a significant downturn by mid-Sept and not because of the customary "black september" reasons.

Political issues with China, growing japanese yen, mideast issues, iran, the two wars (yes we are still in Iraq...just not many), etc. all add to the market TAs. While I cant "see" clearly, my prediction is that by mid-Sept 2010, we will see up to a 2-4% drop in the market followed by an attempt to rebound. a bear market will reign through the first quarter in 2011. the market will move laterally for most of 2011, albeit, some pops here and there. I see the S&P down to around 640 (+/- 12%)within the next 6-8 months.