MARKET OBSERVATIONS FOR MARCH 24, 2012: The stock market appears to be in a correction phase moving in the direction of the next buying opportunity. Most internal indicators are mid-range and don’t point in any particular direction. While some analysts will look at last week’s Apple dividend announcement as a sign of an approaching top, I would ignore the urge to go short now and wait instead for one last bull run into late April and May.
The McClellan Summation Index continues to show the market correcting heading towards lower prices. The trick is whether the March 6th bottom was an early cycle bottom or not. My guess is that the March 6th bottom will be tested shortly (as early as late next week) and prove to be a place for a good bounce up or even continuation of the recent bull run.
For now, the best advice is to keep your powder dry on the sidelines and let the market set itself up for its next move up. Betting the short side of the market will probably be tricky and distract you from making more significant bets when the market eventually bottoms. Remember that there’s a lot of money still out of the market or leaving the bond market and waiting to get in stocks or equities.
MARKET OBSERVATIONS FOR MARCH 10, 2012: The stock market experienced an interesting week where it corrected into a short-term oversold bottom and then rebounded in a 3-day rally. I would expect the market to retest Tuesday bottom in the next week.
Cycle studies point to a possible bottom around the March 16th time period. Also a major Bradley Turn Date is scheduled for March 19. (Note: Bradley turn dates can be either indicate tops or bottoms. If we get a weak rally to a new closing high, then this Bradley turn date would indicate a top. On the other hand, if we get a successful retest of last Tuesday’s bottom, then this Bradley turn date would indicate a bottom.)
So for those who want to go long in this market, a bottom worth buying could arrive either this coming week or next but only after there has been a successful retest of last Tuesday bottom.
MARKET OBSERVATIONS FOR MARCH 3, 2012: The stock market continues to hover in a tight trading range near recent highs. I wouldn’t be surprised if the Dow Jones 30 Industrials makes one more attempt at a closing new high before starting its overdue correction.
My 5-day retest rule indicates that the Dow Industrials will make an attempt at a new closing high on either Tuesday or Wednesday in the coming week. If that new high comes on weak volume and is largely unconfirmed by strength in the Dow Transports, QQQ, and overall breadth, it will most likely mark the intermediate high of this move. (Note: If the new high comes with a measure of strength, then the market can delay its topping formation for still another week)
Small side bets (called $5 bets) can be made in Exchange-Traded Funds with the symbols SDS and TZA for those who dare to play the short side of the market on a weak close during the last hour of trading on a new closing high in the Dow mid-week. Otherwise, a stock market bottom worth buying looks to be waiting for sometime in mid-to-late March at the earliest.
The McClellan Summation Index is showing a well-defined topping pattern with a time cycle bottom occurring about 4 weeks away. It’s important to remember that major selling opportunities and buying opportunities do not occur during the same month. It takes time to generate a significant shift in sentiment – a necessary ingredient for valid market signals.