Multi-Pivots Robot Setup - August 1, 2011

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Now that futures are pointing to a much higher open, those among you who – like Pascal- entered or refused to get stopped out of IWM on Friday’s open are in a very comfortable trade development. Exceptionally, Pascal will be updating the trailing stop for that unique very strong buy signal daily on the robot page. Those in the same trade can confidently follow his updates. But this trade cannot and will not be included in the robot’s official track record.

The robot and the majority of subscribers including me are now in cash after 3 consecutive (small) losses. I wish the inauguration month for the paying service was more encouraging, but reading your posts and personal mails, there is a widespread understanding and indulgence due to the unexpected tightrope walking by politicians on the debt ceiling debate. Market players have historical references for almost all events, terrorist attacks, wars, financial crises, etc. but none for a US government debt default. This may explain some of the market’s deviation from usual positive expectancy probabilities. Let’s turn the page and prepare for the next trade setup.

Today’s buy limit of 80.07 is just above the 200-day moving average support (79.56) and well above Friday’s daily VWAP (79.35). It was the first time in a week that IWM closed above the day’s VWAP which is suggesting that buyers were tentatively in control from Friday’s opening gap down. But SPY and QQQ failed to close above their own VWAP’s. This is often a precursor of imminent outperformance by IWM after a long period of underperformance. This is the most risk-aggressive ETF out of the trio and Friday’s strength, which actually already started on Thursday’s afternoon is pointing to short-covering if not outright accumulation. The high for the day came just under the 3-day moving VWAP (blue line) from Wednesday big gap down that closed exactly at today’s limit entry of 80.07! Holding above that level at today’s close and hopefully above the 4-day moving VWAP will be a major victory for the bulls.

The first resistance cluster is marginally stronger than the first support cluster with a 11:9 ratio, something easily surmountable with a knee-jerk positive reaction to the weekend news. Strongest resistance in the first cluster really starts at the 50-day moving average (81.62) with another big barrage waiting immediately thereafter from SPP (82.19) and QPP (82.28).

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Pre-market, IWM, SPY and QQQ are all trading around their respective weekly pivots, showing acceptance from futures traders of last week’s equilibrium price in a negative wide weekly range bar. This is very often a clue that a major reversal will be underway with daily closes above the weekly pivots. However, intraday reversals and a close below the weekly pivots would mean that institutional sellers are still pressuring the intermediate term trend by lacking to trust significantly any relief strength.

For SPY, the weekly pivot (130.60) is the lower border of the first resistance cluster which is rather strong (22) and this makes this the potentially weakest of the trio.

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On the other hand, QQQ’s weekly pivot (58.42) is at the higher end of the resistance cluster and a re-test of YR1 (59.02) is profiling once again on the horizon.

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The GDX robot is advising staying in cash today. GDX will be supported by an exceptionally strong cluster with a weight of 28 ranging from QPP and SPP (56.61) down to yearly pivot (55.19). The next robot buy signal coming before any decisive breach of that cluster will be extremely powerful from a multi-pivot perspective. A robot short signal would be much improved under the cluster.
Billy

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This market is proving itself very difficult, to say the least. From a review of the EV charts, it looks like we could have a short signal on the 20DMF at EOD and at the same time have the OB/OS chart reaches oversold status. Pascal, is this an unusual circumstance in your experience?

[QUOTE=adam ali;15219]This market is proving itself very difficult, to say the least. From a review of the EV charts, it looks like we could have a short signal on the 20DMF at EOD and at the same time have the OB/OS chart reaches oversold status. Pascal, is this an unusual circumstance in your experience?[/QUOTE]

The issue about market direction is the inversed ETFs. As you can see, three of them are now above their average, but that does not give certainty regarding to a confirmed short signal at the close. There is still much time left.
I would say that if we have a sell-off at the close, then we'll probably get a 20DMF confirmed short signal. Otherwise, as far as I can tell, the IWM robot will again turn to a strong buy.

Regarding more specifically to your question of OB/OS. I have to go back to the data and see what the OB/OS signal was in the past, but out of memory, this level is not critical unless we go through it and then come back up. Finally, the ATR is still around 1.8%, while it should be around 3% to be in-line with the level during confirmed short signals.

I am not as confident about staying long as I was last Friday, but I am pretty reluctant to turn short here after seeing large players buying last week.

The issue is: what has changed today? Something has changed, but what is it? If I had to venture in an explanation, I would say - without any hard fact to prove it - that this is maybe a liquidity issue and I would say a "manufactured one". Knowing that the US Gov will soon be able to sell bonds again and get cash that it will be able "emergency lend". It means that for now, this cannot be done. Hence, if you attack some weak link (for example Italian banks) you might be able to cash-in before the cavalry comes to the rescue. Yes, the FED and China would help Europe to save these banks because of the now overused "systemic risk" argument. But, as of now, rescue possibilities are limited.

Anyway, this is just conjecture. What is important is our trading position. I will just keep the stops where they are and wait... By the way, the GDX robot might very well issue a buy signal by the close. As far as I can see, the MF direction model has moved back above the critical -1.4% level. Of course, it still might reverse back down before the close. So we will wait and act tomorrow.


Pascal

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TWM:
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After reading Pascal's comment below, I'd like to stress that in case of a very strong buy signal at the close, the limit buy entry for tomorrow would be around 78.07 if IWM closes below the 200-day moving average (79.56).
This is one of theses rare occurences - under rare circumstances - where you may give some more wiggle room to today's stop of 78.19, because if the matket bounces tomorrow, the new entry might not be touched.
The risk is of course a 20DMF short signal at the EOD close or a gap down tomorrow morning.

Cumulative Tick is hinting at neither buy or sell programs being active today, so the selling is not coming from large professional players but they are neither buyers so far today.

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Billy

And now some serious buy programs have triggered. A short term bottom is beginning to take shape and the robot will probably not be stopped out today.
But keep also some ammunitions for the next GDX trade for optimal dual robots performance!
Billy

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[QUOTE=Billy;15226]And now some serious buy programs have triggered. A short term bottom is beginning to take shape and the robot will probably not be stopped out today.
But keep also some ammunitions for the next GDX trade for optimal dual robots performance!
Billy

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Billy,

$TIKRL is still underperforming $TICK so hope it improves into the close.

Trev

Hi --

I'm confused by GDX Robot signals. Will they be issued, if necessary, in the next 19 minutes-- i.e., end of day?

Watching, waiting...

Thanks,

[QUOTE=nickola.pazderic;15228]Hi --

I'm confused by GDX Robot signals. Will they be issued, if necessary, in the next 19 minutes-- i.e., end of day?

Watching, waiting...

Thanks,[/QUOTE]

Nickola, for GDX, any signal can only be confirmed EOD and so, if any, entry will be at tomorrow's open.
Sleep quiet!
Billy

Pascal and Billy,

Can you refresh my memory: is it possible for the 20DMF to give a sell signal, and the IWM Robot to remain long (or even initiate a new long position)?

And, Pascal, just because it's been such a crazy day, I'd like to ask whether you see the inverse ETFs giving a sell signal here? My guess is no with the late-day buying.

[QUOTE=adam ali;15230]Pascal and Billy,

Can you refresh my memory: is it possible for the 20DMF to give a sell signal, and the IWM Robot to remain long (or even initiate a new long position)?

And, Pascal, just because it's been such a crazy day, I'd like to ask whether you see the inverse ETFs giving a sell signal here? My guess is no with the late-day buying.[/QUOTE]

Out of the 905 trading trading days of the past years when the 20DMF issued either a buy or a short signal, the robot issued an opposite signal during 42 days, or about 4.6% of the time. So, in theory, the robot can indeed give an opposite signal.

As for todat's close signal, let's wait for tomorrow. The new robot signals will be posted about five hours before market opens.


Pascal