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WALL STREET CRAPS MARKET OBSERVATIONS FOR AUGUST 26, 2012

August 25th, 2012 Comments off

MARKET OBSERVATIONS FOR AUGUST 26, 2012: The stock market has gone through a short and shallow correction since its intraday highs early last week. If the correction is complete, then I expect those highs to be retested sometime this week. If a nominal new closing high (or series of exhaustion highs) occurs without underlying strength in key breadth and volume areas, this could mark the end of the summer rally. But a successful retest of the highs will add more fuel to the upside and prolong the current rally well into September and maybe beyond. Either scenario has a decent chance of playing out so stay flexible in your stock market decision-making.

Key market indicators show the following:

  • McClellan Summation Index – is on the verge of turning down. This is warning us to beware of the market failing at the upcoming retest and then falling sharply afterwards.
  • Investor Sentiment – is still close to the mid-range area with no definitive signals.
  • NYSE Breadth Oscillator – Ultimate Indicator reading of 40 and needs to close below 30 to signal a buy.
  • Nasdaq Breadth Oscillator – Ultimate Indicator reading of 44 and needs to close below 30 to signal a buy.
  • Risk On/Risk Off Indicator -Ultimate Indicator reading of 48 and needs to close below 30 to signal a buy. It is now in a “risk-off” position which means to be on the side of safety (Treasury Bonds or cash).
  • Volatility Indicator – had a recent sell warning and gives a hint of future weakness up ahead.

For now, the best advice is to remain on the sidelines getting ready for a retest of last week’s highs. A successful test will give the rally more time on the upside. But an unsuccessful test may lead to a sharp shakeout and increased volatility to the downside.

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In regards to Apple (AAPL), the stock may see its highs on Monday with the favorable news on its court ruling with Samsung. This is just the kind of “cover story” and obvious good news that tends to trap the amateurs into buying at the top! Any buying done here is at high risk! However, lightening up and getting out of long positions in AAPL would be considered prudent from a trader’s perspective.

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WALL STREET CRAPS MARKET OBSERVATIONS FOR AUGUST 22, 2012

August 21st, 2012 Comments off

MARKET OBSERVATIONS FOR AUGUST 22, 2012: The stock market went to new rally highs today before settling back. This intraday high will probably be tested within 5 trading days. If this new high is not confirmed by a majority of indicators, I will go on the assumption that the rally has seen its peak. Investors and traders can expect either a short-shallow correction that sets up a top or a deeper correction that sets up another leg up. Either scenario is possible. The key is not to fall in love with any particular scenario & read the correction accurately for clues.

Key market indicators show the following:

  • McClellan Summation Index – appears to be reforming in order to support another leg of this rally. This could mean that the current correction serves to eliminate the excess bullishness and refuel the market for more higher highs.
  • Investor Sentiment – is in the mid-range area with no clear signal (more room on the upside)
  • NYSE Breadth Oscillator – Ultimate Indicator reading of 47 and may flash a possible buy signal on a short-term correction.
  • Nasdaq Breadth Oscillator – Ultimate Indicator reading of 56 and may flash a buy signal on a short-term correction
  • Risk On/Risk Off Indicator – has a reading of 68 and has recently flashed a short-term sell warning
  • Volatility Indicator – had a recent reading over 100 which is a clear sell warning

For now, the best advice is to remain on the sidelines getting ready for a near term correction in the stock market. If we get a buy signal from the NYMO and NAMO, then it might be prudent to put a small wager on some quick upside action (Example: QQQ). But large long positions should look to lighten up as the market retests the highs within the next 7-10 trading days.

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In regards to Apple (AAPL), the stock has had a big run-up on anticipation of the new iPhone release and other fundamental reasons. It is reaching overextended levels and smart investors should consider taking some chips off the table at this very opportune time. Note: The “Money Flow Indicator” and “Ultimate Indicator” are both flashing very clear “sell signals” right now.

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WALL STREET CRAPS MARKET OBSERVATIONS FOR AUGUST 14, 2012

August 15th, 2012 Comments off

MARKET OBSERVATIONS FOR AUGUST 14, 2012: The stock market appears to be near the end of its summer rally. The internal indicators are showing more weakness than strength. On the other hand, the stock market is certainly not over-bought in terms of breadth nor over-liked by investor sentiment. Hence, the market can still respond to the upside on more good fundamental news. While anything can happen, the present “Triple Top” price formation looks like there is a lid to more upside progress.

The McClellan Summation Index has not participated much in the recent rally. This indicates a low-powered rally that is not yet fueled by strong buying. This indicator is not confirming the rally and serves as a warning to tread lightly and not be surprised by quick downside price action.

Other key market indicators show the following:

For now, the best advice is to remain on the sidelines or lighten up on present positions as the market challenges the “Triple Top” formation. With so much resistance to further upside progress, a wise investor would expect more sideways or downside action instead of upside in the near term.

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In regards to Apple (AAPL), the stock has shown remarkable strength on this last market rally despite its recent report of lower than expected earnings. The Money Flow Indicator has a reading of 78 which is only two points away from a sell signal. Because of the current legal case with Samsung, this stock appears to be ready to jump in either direction based on the outcome of the trial. But because of its high Money Flow Reading and price resistance near its old high, this is a stock that I’d rather watch than bet on now.

WALL STREET CRAPS MARKET OBSERVATIONS FOR AUGUST 7, 2012

August 7th, 2012 Comments off

MARKET OBSERVATIONS FOR AUGUST 7, 2012: The stock market rally is continuing its move upwards climbing the proverbial “Wall of Worry.” Having spent so much time in a negative breadth environment over the last several months, it would not be surprising to see the market continue upwards for a much longer time.

The McClellan Summation Index has not shown much improvement despite the several hundred points of advance. This means that while prices have advanced significantly, the underlying market has not been quite as strong. This may be a warning of a possible retreat by way of its blatant non-confirmation.

Other key market indicators show the following:

For now, the best advice is to remain on the sidelines and let the rally play out. If there is a correction in the next week or so, you might find an opportunity to make a small short-term wager on the market’s retest of the highs. But overall, the market’s trend is up and long positions in conservative diversified Exchange-Traded Funds such as SPY, DIA, or QQQ should work out well for the time being.

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In regards to Apple (AAPL), the stock took off to the upside despite the one day crash it experienced after its earnings disappointment. The Money Flow Indicator has a reading of 54 and has hardly moved up in the last rally phase. The “Full Stochastics Indicator” and the “Ultimate Indicator” are close to being overextended but a retest of the old highs around 644 is in clear striking range. My guess is that the old highs will be broken, but it isn’t a time to buy it.