What is next?

These are set of charts I posted tonight in the LinkUs hub. Click to enlarge them. Check for more charts during the day. I hope they will add some value to your thinking. Be happy!

Today was one for the record. You see these figures above? 73.05 - there were only two times higher and 19.44 is the largest I could find. Click for article. Certainly volume and issues balance were crashing today. It is a capitulation day and short of 1929 crash coming out in the next two trading days, it is safer to reduce your risk and for sure never to start a new fresh risk from these levels. The sharpest rallies are bear market rallies! They don't live long but they can scare the hell out of anyone. As I said earlier, the educated trade passed long ago and what is left here is nothing but the guess trade.

Here is another record above. Not even during the 2008 crisis, NYMO reached these levels we had today. (click here for article)

Above the $NYSI (click for article). It made a new lower low and approaching the zero line. This one takes time to turn around so keep an eye on NYMO (above it) for a change in direction.

Above: $NYSI with STO is near but not yet ready to give a buy signal after it gave 100 points gain (almost 9%) so far since the short signal (click here and here for articles). This configuration above is little bit faster than the original one in the article. 4,3 instead of 5,3

Above: Stocks above 50 day MA are visiting the long-term bearish zone for the first time but also that same level is calling for a bounce as I outlined in the chart

Here is another chart above that shows extreme market dislocation (read article). Levels where usually the market used to bounce on (green line) even including the 2008 crash is not working so far. The good news is this show extreme levels of selling exhaustion. The bad news, it could be a black swan type of event if they go farther down.

Chart above is good news. Today new 52week low were less than the flash crash day. Still 10MA of record high percent (lower part) is pointing south and making a new lower low. The good news: It is still above 50. (click here for article).

Chart above - Unlike the previous VIX sell signal (buy market), which I doubted it will work [see charts in the hub @ May 11, 2010 20:57], this time I believe that the incoming signal will be a great one. We just have step one today - VIX close outside BB. Click here and here.

Chart above - Notice though we made a new VIX high today, the VIX:VXV ratio didn't. This is one of a hell bullish divergence and it shows sign of VIX near reversal soon.

Though the previous chart is a bullish early signal for the market, the VIX still not giving the go for buying the market as you see from above chart.

Two charts above: TED spread is rising as well as LIBOR. I posted some links, charts, and PDF previously in the hub @ May 10, 2010 21:15 and below. Also @ May 8, 2010 17:38 - Check them out for more.

Two charts above are update for our fellowship members of a FREE exclusive trade that was completely closed today which I started last week. Setup and updates are on the first chart and below it is today's chart. Notice today's low was exactly $46.76 that same number I communicated last night $46.72. Once it touched the BB, it bounced. I have another trade ready for different setup right here as well. :) Do you like to have access to such content? Click here!

GoodVibe

52-Week High/Low indicator

We get the 52-week High/Low indicator from the total highest and lowest price at which stocks has traded in the past 12 months, or 52-week on a stock exchange like NYSE and others. We can use the data in different ways to analyze the market of which some are below.

Click above to enlarge

The chart above combines the raw data in one chart plotted against the NYSE composite. It contains:

1. New 52 week high (green).
2. New 52 week low (red).
3. The difference between both (positive or negative) - Pink.
   
4. The ratio of the difference in (3).
5. "The Record High Percent Index" which is a market breadth indicator created by dividing the number of 52-week highs for a given market by the sum of the number of new highs and the number of new lows.
   

Record High Percent = New Highs / (New Highs + New Lows)

The values range between 0 and 100. A value of 0 means that there were no new highs on that day. A value of 100 means that there were no new lows on that day. A value of 50 means that the number of new highs and new lows were equal.

As of today, notice the following:

1. The market at levels that matched the end of all previous corrections since the bottom in March 2009.
   
2. The difference between new high and low during that time was always positive with exception to one single day of -6. It was a hallmark of this rally and a dip in the negative that sticks will be an ominous sign.
   
3. Today, we had an early warning sign by making the highest one day new 52 weeks lows (red bar) since March 12, 2009.
   

Click above to enlarge - Daily

Click above to enlarge - Weekly

The above two charts are the lowest part of the chart above them. It is the 10 days simple moving average of "The Record High Percent Index". Very valuable information can be determined from them.

Click above to enlarge

Above is one of my favorite ways to use the data by plotting the difference between new high and low as cumulative. Bullish and bearish crosses against the 5 and 10 days Moving averages tend to signal major changes in current market trend.

I hope this added some value to your thinking.

GoodVibe

Finale

Article Finale - Buying the opening

The site will not be available by Friday's close. It will be password-protected. Best wishes and thanks for your readership and friendship.

Below is an article published privately on Tuesday May 25, 2010.

*UPDATE Thursday June 10 6:20PM ~
Today's action was the confirmation I was waiting for. I bet many were surprised by today's action due to their excessive unsupported bearishness. The best fuel for a stealth rally. We are not done yet but as I promised, it is yours from tomorrow to take care of it. Current 1086.84

Be happy, do good, and the rest will be taken care of!

*UPDATE Wednesday June 09 7PM ~
Today's close @ 1055.69 is the lowest risk/highest reward you can get ever next to buying the hole @ 1040 - Enough said?! :) Are you enjoying the ride yet?
*UPDATE Tuesday June 08 12:25PM ~
We made a new high @ 1057.8 higher than today's first hour high @ 1056.43 and the pair currencies mentioned earlier are working okay but not great. The market is a buy here with stops @ today's low with VIX new high (for today's trade). Current 1051.80
*UPDATE Tuesday June 08 6AM ~
Yesterday's first hour low failed to hold and as on Friday, we closed at the low of the day. The key to any sustainable rally is rise in the Euro against the Yen and US dollar. Keep these two pairs on your radar beside the first hour rule.
*UPDATE Sunday June 06 6PM ~
Once Friday's first hour low broke, prices started declining. In that case I always wait until the close, which was almost the low of the day. That close was a buy as well as Monday's open (following the same rule of the first hour, inversely). As usual, I make my homework before I offer my two cents but unfortunately I can't share them anymore. To sum things up, you got many chances to buy @ 1045, 1065 (twice now), 1085 (twice) where the smart money are accumulating and the dumb money are selling and worse shorting. No offense to shorts. Short of a black Monday of which I don't see, next week prices will recover and the extent and nature of that recovery will determine my conviction in the long-term market trend which is currently neutral with short-term bullish bias.
*UPDATE Friday June 04 10:10AM ~
Still long and strong @ 1083 - today's open might also be another buying opportunity for the same reasons 1045 and 1065 were. If we don't make a new low than first hour later and better not lower than first half hour @ 1081.02, then a turn around will be around the corner.
*UPDATE Friday May 28 6:20PM ~
Mr. market gave you a chance to buy @ 1045, 1065, and then twice @ 1085 yesterday's open and today's low. Today, I picked few individual names that I missed in the large open yesterday. Now, I rest and watch after I am done buying everything I wanted. My major holdings in order are long Latin America and Small Caps, short volatility, long Euro, oil, Europe, semis and financial. Are you still skeptic unlike 1220 when you thought that the safest bet was the bullish one? Have a blessed long weekend.
*UPDATE Thursday May 27 9:10AM ~
Unlike the previous two openings, this is the real one. The market will end higher than the expected sharply higher open and ends with 90%+ up day. I'll add my last long position at the open (the smallest part of them all).
*UPDATE Wednesday May 26 3:35PM ~
I am adding to longs from yesterday's open here @ SPX 1067 and until the close. Reasons are the same I bought yesterday's open detailed below. Respect the price action but never defer to it.
................

Main article: Tuesday May 25, 10 6PM

This article is private. It is my thank you note for you taking the time to email me your thoughtful, kind words and best wishes after my departure from the Internet sphere. Thank you! I've been swayed before by your request to continue but unfortunately this time, this it!

Trust me, it is not easy to stop sharing but there is always time when for something new to start another must end. All I wish for is you keep learning, sharing, growing and when ready, you will take some of your time to help someone else of what we learned together or anything you know you are good at. You can make a difference!

Now, to the market...

You know I've been raising cash as late as last Friday reducing my short exposure to 40% from 125% and I gave you the reasons in the Hub as well as in my last article where the real capitulation occurred (must read). Today, at the open 9:30AM, I made sure to have ZERO short positions including my favorite short, BZQ, Brazil. All are gone!

Nada, Zip, Zero!

Immediately after that and after reviewing what I will share here, I started to add gradually during the day until I raised my long exposure to 70% by the end of the day. Am I bullish as market trend? Not yet, trend is still neutral but that doesn't mean we can't trade as bulls.

Beside my work in the Hub and the previous article, here's why I thought that buying the open today was the most prudent risk/reward bullish entry we had in the last three months for a trade that might turn to be more than a trade:

~ Yesterday, even we closed down, we had a VIX sell signal (buy market). Watch tomorrow for support levels to break down and %B to go into the negative as another confirmation. This will put the nail in the VIX coffin. Sure as in LOST, the market always bring back the dead. It is just temporary especially if the black smoke monster come back again. :)

~ Yesterday down day was a fake down day on low volume.

~ Today's sharp low open was a fake reaction as well. Why? 1. The rapid, across the board breadth recovery immediately after the sharp low open as you see from the chart below. The down volume started above 110 and dropped to 30 within an hour and ended the day less than 1, which means that the up volume ended higher than the down volume for the day. This is a true turn around day and a great early signal for market trend change.

2. The first 30/60 minutes trading rule: If a sharp lower open occur and the first hour low holds, it is good to buy. Opposite is true for a sharp higher open. You sell when we fail to make a new high.

3. $TICK was trending higher since it opened at the far lower end of the range. See chart below.

4. Since the open, there was nothing but buying. Notice the bullish divergence in the indicators on the 60 minutes chart and the daily below.

5. Today, the VIX was not able to exceed the previous high and trended lower since the open to end almost 10% lower. That was the best signal today especially when you combine it with yesterday's VIX sell signal.

6. My favorite sectors [Consumer discretionary (XLY), Semis (SMH), and Financial (XLF)] which I watch for early reversal or confirmation of an intraday direction acted bullish versus the market not only on the daily chart but on the intraday level. These sectors ended with gain of 1% or more. Notice from the chart below that XLY even refused to make a new intraday low than Friday. As long as this sector is bullish, risk taking will continue. Watch this sector as your first signal for fake rally.

Notice also that the defensive sectors XLP (-1.17%), XLV (-0.42%), and XLU (-0.53%) were lagging and ended the most hit hard despite the recovery. This is another sign of market participants starting to throw caution to the wind.

7. The US dollar was not able to make a new high despite all the equity sell off and rising TED spread! Also the Euro refusing to make a new low against the US dollar and quickly recovering against the Yen after a brief low before the equity market open. Watch these two pairs as your most important two charts of the world especially the second one.

8. My Elliott wave count was an easy call for a fifth wave of some type. Count is on the chart and black one is the bullish one.

One thing!! Please, I will urge you to stop or reduce sharply visiting blogger's sites that promote an inevitable end of the world wave 3! It is possible but not inevitable. The longer you surround yourself with such mentality (even if it is well intentioned and researched), the less flexible you will become. You will miss bullish opportunities at the least and worse become aggressively bearish and stubbornly short. There is nothing in EW that said that wave 3 is the ONLY outcome. Use EW to your advantage instead of making it a dogma or fail-proof tool.

............

The analysis above is why one should respect the price action but never defer to it. A down open today should freak the most but when you are empowered with tools and capital to see what is really happening behind the price, you can make an educated and rewarding decisions.

That said, there always must be an understanding there is no 100% safe trade and no reward that is risk-free. Mr. Market never gives a free lunch. Define your risk and be willing to take that defined risk in exchange for an acceptable reward.

I hope this article finale added some value to your thinking and made my future silence easy on both of us. :) Be happy!

GoodVibe
Mr. Lucky