Wall Street Craps – 2012 Global Ebook Finance Award-Winner

The stock market had a highly volatile week ending with a strong rally on Friday. Monday appeared to be a climatic low with several retests during the week. Unless you were an experienced day-trader, it would have been a difficult week to trade. It feels like the sentiment is strongly negative with bad news dominating the headlines. Friday’s rally may just be the fact that too many investors were on the negative side of the equation. I would expect there to be continued volatility and not a market for most investors to participate in unless in small amounts for the fun of it.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 42 (neutral)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 48 (neutral)
• Volatility Indicator – Ultimate Indicator – 37 (neutral)
• NYSE Advance/Decline Oscillator – Ultimate Indicator – 18 (oversold)

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NYSE McClellan Summation Index: This indicator has been declining for some time and usually needs a cluster to dots in the bottoming area before advancing. But when it turns after a cluster, it should be a sustained rally upwards.

Fear/Greed Index: This popular indicator is only in the “Fear” territory with a reading of 36. At the December 2018 bottom, this indicator reached a reading of 3. It is amazing to me that it is this high and did not come close to an “Extreme Fear” reading this week. That makes me very cautious about the current rally that started on Friday and maybe the market needs another leg down to make this indicator have lower readings.

The stock market had a rocky start to 2022. With several non-confirmations during the last week of December, it is not surprising that there would be problems this week. With that being said, the general market could stay in this range without a major move in either direction. But with the large percentage losses in many of last year’s dynamic growth stocks, the background is set for a final plunge for these shares. However, there aren’t any signs of capitulation that would mark that final bottom. So for now, I would recommend keeping your powder dry and resist the temptation of going long until we see more signs of extreme behavior/sentiment.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 36 (neutral)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 45 (neutral)
• Volatility Indicator – Ultimate Indicator – 41 (neutral)
• NYSE Advance/Decline Oscillator – Ultimate Indicator – 55 (neutral)

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NYSE McClellan Summation Index: This indicator has rallied from its December 20th low and is in the process of clustering at a peak before heading lower again. A tradable bottom usually isn’t signaled unless the clustering starts after a sustained move down. That point is still weeks away in time.

Fear/Greed Index: This popular indicator is in the “Neutral” territory with a reading of 52. At the December 2018 bottom, this indicator reached a reading of 3. So we are a long way away from a swing trade to the upside. A minimum reading of 25 is required to reach the “Extreme Fear” range.