WALL STREET CRAPS MARKET OBSERVATIONS FOR OCTOBER 21, 2012
MARKET OBSERVATIONS FOR OCTOBER 21, 2012: The stock market just experienced a sharp 1-2 day correction that was mainly centered around technology issues. The Dow Jones Industrial Average’s most recent closing high occurred on October 5th. The “One Month Rule” puts the next bottom no sooner than November 5th. In May of this year, the market experienced a 28 trading day decline. By the Law of Recency and the Law of Rhythm, the stock market could easily follow the same pattern and present an ideal buying opportunity within two weeks.
Key market indicators show the following:
- McClellan Summation Index – is still holding at an established support.
- Investor Sentiment – slightly oversold short-term and neutral in the long-term
- NYSE Breadth Oscillator – has a reading to 55 and appears to be heading back down to a possible oversold buying area.
- Nasdaq Breadth Oscillator has a reading of 44 and heading down
- Risk On/Risk Off Indicator – has a reading of 59 with lots more room to the downside.
For now, the best advice is to remain on the sidelines getting ready for a chance to re-enter the market on more short-term weakness. The ultimate intermediate term bottom, though, could be another 10 trading days away.
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In regards to Apple (AAPL), the stock has had its first bounce from a slightly oversold condition. It has an RSI reading of 33, ULT reading of 38, and MFI reading of 35. The 200 day moving average is at 579. With a current price of 609, I would first begin accumulating the stock on any move under 600. It is likely to spike down to 579-580 on an intraday basis, but only the most nimble traders will be able to get this price. I’d look to any move under 590 as a “Golden Opportunity” to buy Apple for a 2013 run towards $950-$1000.
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