Wall Street Craps – 2012 Global Ebook Finance Award-Winner

STOCK MARKET STRATEGY FOR OCTOBER 21, 2017: The stock market continues to march upwards fueled by good news on the tax reform front. This rally has continued while many internal indicators have been reaching “oversold” levels. This would not appear to make any sense at all. Because of these confusing signals in the general market, it might be better to be on the sidelines until oversold indicators match up with market bottoms, not market tops.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator Reading – 32 (neutral – nearly oversold)
• Nasdaq McClellan Oscillator – Ultimate Indicator Reading – 28 (Oversold)
• Volatility Indicator – Ultimate Indicator Reading – 50 (neutral)
• S&P 500 % Above 50-Day Moving Average – 31 (neutral – nearly oversold)
• Nasdaq 100 % Above 50-Day Moving Average – 24 (Oversold)
• S&P 100 % Above 200-Day Moving Average – 50 (neutral)

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THE BOTTOM LINE: The Fear/Greed Index is currently reading “Extreme Greed” after a short stay in the “Greed” territory. This is a simple indicator that guides an investor into the foundational discipline of buying low and selling high. Based on this indicator, this is not a “buy low” scenario, but instead a “sell high” environment. But more importantly, this is a unique time of a market with few, if any, remaining bears and almost total agreement on the bullish side. It’s just a matter of how long it can remain that way and what will be the trigger that finally creates a significant decline. But the truth is that no one really knows!

The “Fear/Greed Sentiment Index: What Emotion is Driving the Market Now?” reading has been in the “Extreme Greed” zone for several days now. It has even gone to the far extreme by posting a reading of 90 which probably marks an “internal top” or point of maximum upside momentum.

While this isn’t the only indicator of the market’s condition, it has represented a reliable gauge of market sentiment in the past. When the market is “over-loved” like it is now, it matches both the present overbought (in terms of price action) and overvalued (fundamental) condition.

Together, these 3 gauges confirm that this is highly likely the area of an important top and certainly not a time to become more bullish and hold large bets for more upside appreciation. That doesn’t mean that they market can’t go any higher in terms of price, but it does suggest that it won’t be going up for very much longer. If there is a time to move to the sidelines, this would be one of those.