Wall Street Craps – 2012 Global Ebook Finance Award-Winner

STOCK MARKET OBSERVATIONS FOR October 26, 2014: The stock market has gone almost straight up since its bottom a week ago Wednesday. There was no retest of bottoms like a lot of other dips this past couple of years. The market should be running into resistance areas that could slow down the current advance. With the balance of indicators at or near “overbought” levels, a smart investor has to careful about buying at this time. I’ll be looking for  “oversold” readings in the NYSE Breadth and Nasdaq Breadth Indicators as a place to take positions for another move to the upside.

Key underlying market indicators show the following:

• NYSE Breadth Oscillator – Ultimate Indicator – 74 (overbought)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 71 (overbought)
• NYSE % Above 50 Day Moving Average – Ultimate Indicator – 74 (overbought)
• Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 68 (neutral)
• S&P 100 % Above 200 Day Moving Average – Ultimate Indicator – 66 (neutral)
• Risk On/Risk Off Indicator – Ultimate Indicator – 64 (neutral)

Personal Note: I missed this last bottom thinking that momentum would continue to the downside. But like so many V-Shaped bottoms of late, it appears that once the stock market reverses direction it doesn’t return. Perhaps, it has something to do with hedge funds afraid of missing out. But in any case, I’ll be looking for extremes to the downside as a time to make intelligent (small, liquid, and diversified) bets. While this may be akin to “catching a falling knife,” this may be the strategy we are forced to pursue for part of our funds. While the financial media said a couple of weeks ago that it was no time for “heroes,” the fact remains that the “heroes” were in fact rewarded handsomely for having the guts to take action when the sentiment was at an extreme. For my part, I thought the intensity was extreme – but in terms of duration and extent, I thought that the market had a lot more room to the downside.

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My advice for traders and investors is let the market set-up for a dip in the near term in order to establish new long positions. Otherwise, it might be less risky to simply wait for the seasonal correction during mid-December in order to establish or add to long positions.

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STOCK MARKET OBSERVATIONS FOR October 19, 2014: The stock market experienced a sharp decline and a possible capitulation on Wednesday of last week. Will this turn out to be another “V-Shaped Bottom” or just a bounce? That’s a big question that no one really knows the answer to and can only speculate. With the majority of indicators below showing “neutral” readings by the close of Friday, the stock market is in a position of going in either direction.

Key underlying market indicators show the following:

• NYSE Breadth Oscillator – Ultimate Indicator – 57 (neutral)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 59 (neutral)
• NYSE % Above 50 Day Moving Average – Ultimate Indicator – 37 (neutral)
• Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 39 (neutral)
• S&P 100 % Above 200 Day Moving Average – Ultimate Indicator – 19 (oversold)
• Risk On/Risk Off Indicator – Ultimate Indicator – 59 (neutral)

Personal Note: I expected the NYSE Breadth Oscillator and Nasdaq Breadth Oscillators to have reached “oversold” readings during this last decline, but they never got close in terms of their respective Ultimate Oscillators. So my bet is on the market to retest last Wednesday’s bottom in the coming week after a sharp decline on Monday and Tuesday. If that decline looks like it’s going to be a successful retest, I’d be willing to put a few small “place bets” on some broad-based ETFs while trying to catch that proverbial “falling knife.”

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My advice for traders and investors is let the market set-up for a retest of last Wednesday’s intraday low. If that retest comes with glaring technical divergences and “obvious bad news”, we could experience a sharp rally worth trading in broad-based Exchange-Traded Funds like DIA, QQQ, IWM, SPY, and maybe even SSO.

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