Wall Street Craps – 2012 Global Ebook Finance Award-Winner

MARKET OBSERVATIONS FOR October 27, 2013: The stock market has been marching upwards for the past 13 trading sessions. During this coming week, the time of this rally will have matched the previous downleg and thus, be ripe for a pullback. I would not be surprised to see a new closing high in the Dow Jones Industrial Average sometime next week which would mark the high of this phase of the rally. But current readings of key breadth indicators show that the general market has already begun its correction. That could mean that the correction will be sharp in terms of price, but short in duration.

Key market indicators show the following:

• Investor Sentiment – Short-term = 50 neutral/Long-term = 60 neutral
• NYSE Breadth Oscillator – Ultimate Indicator – 63 (neutral)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 51 (neutral)
• S&P 100 % Above 200 Day Moving Average – Ultimate Indicator – 54 (neutral)
• NYSE Summation Index – Could be reaching the peak of this rally

For now, my advice for traders is to be on the sidelines as the stock market peaks this coming week. Since I don’t see a good way to participate on the downside, I’d prefer to wait until the market becomes oversold and then play the next rally. Retests of highs and lows has not been characteristic of this market. Instead, the stock market goes up until it runs out of time and then retreats into a similar reversal. Playing the extremes in breadth oscillators seems like the best way to go….. especially to the upside. And in this market, playing the downside has been a study in frustration and capital loss.

MARKET OBSERVATIONS FOR October 20, 2013: As I mentioned last week, the stock market’s rallies and declines over the past few months have ranged between 14 and 17 trading days. The October 8th bottom comes exactly 14 days after the most recent closing high in the Dow Industrial Average. The current rhythm of the market suggests that the next top should come between 14 and 17 days after the October 8th bottom. That means that the end of this rally in terms of time is scheduled to arrive around Oct 28-31. So there is still another week of upside before this market is ready to move downwards.

Key market indicators show the following:

• Investor Sentiment – Short-term = 60 neutral/Long-term = 60 neutral
• NYSE Breadth Oscillator – Ultimate Indicator – 72 (sell)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 71 (sell)
• S&P 100 % Above 200 Day Moving Average – Ultimate Indicator – 70 (sell)
• NYSE Summation Index – Turning up to match the previous 14 day downtrend

For now, my advice for traders is to move to the sidelines as the stock market reaches the end of this month. The overbought readings along with overly-bullish sentiment makes it an ideal time to start selling positions and moving to cash. The news can’t get any better and the opportunity is to sell, not buy right now.

MARKET OBSERVATIONS FOR October 13, 2013: The stock market’s rallies and declines over the past few months have ranged between 14 and 17 trading days. The October 8th bottom comes exactly 14 days after the most recent closing high in the Dow Industrial Average. The current rhythm of the market suggests that the next top should come between 14 and 17 days after the October 8th bottom. Since we are only 3-4 days into the rally phase, there is still lots of time for the stock market to continue its current uptrend.

Key market indicators show the following:

• Investor Sentiment – Short-term = 60 neutral/Long-term = 50 neutral
• NYSE Breadth Oscillator – Ultimate Indicator – 50 (neutral)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 52 (neutral)
• Risk On/Risk Off Indicator – Ultimate Indicator – 55 (neutral)
• S&P 100 % Above 200 Day Moving Average – Ultimate Indicator – 49 (neutral)
• NYSE Summation Index – Turning up after a 14 days downtrend

For now, my advice for traders is to look for weakness early next week in which to take short-term “rental” positions in the QQQ, IWM, SPY, and DIA Exchange-Traded Funds. Expect to hold these positions into the end of the month. Otherwise, be ready to lighten up as the market’s rally runs out of time.