Wall Street Craps – 2012 Global Ebook Finance Award-Winner

The stock market has made a dramatic recovery from its sharp decline last month. However, this could be the ideal setup for a classic Dow Theory Sell Signal. A new closing high the DJIA over 41,198.08 will not be confirmed by the NDX, DJTA, and the popular Magnificent 7, three prominent indicators. The ideal cover story is also present with the new Kennedy/Trump alliance and the Fed’s announcement of a cut in interest rates. This could all occur as early as Monday so watch the last hour of trading with the idea of taking pilot positions on the sell side if a rally comes without significant volume. Note: Be careful since Wednesday’s NVDA announcements may trigger another leg up as well.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 63 (neutral)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 66 (neutral)
• Volatility Indicator – Ultimate Indicator – 61 (neutral)
• NYSE Advance/Decline Oscillator – Ultimate Indicator – 77 (overbought)

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NYSE McClellan Summation Index: This index’s oscillator has a current reading of 76. This suggests that there may be some more time left to this rally (1-2 weeks) since this indicator is still in a rising trend.

Fear/Greed Index: This popular indicator is in the “Neutral” territory with a reading of 53. This does not mean that it is an ideal time to short the market. In fact, this indicator is best used for finding bottoms, not tops. It did another good job of spotting this current rally.

The stock market continues to correct for the last 15 trading sessions. This is a time match from the previous correction with the possibility that Friday marked the end of the decline. The Fear/Greed Index seems to agree that one more lower close on Monday might mark the bottom of this decline and the start of the Elliot Wave #5 to ATHs. However, the NYSE McClellan Summation Index is clustering in the overbought region and suggests the opposite – that a decline of a few weeks is due to reverse the upward trend in breadth numbers.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 42 (neutral)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 36 (neutral)
• Volatility Indicator – Ultimate Indicator – 33 (neutral)
• NYSE Advance/Decline Oscillator – Ultimate Indicator – 54 (neutral)

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NYSE McClellan Summation Index: This index’s oscillator has a current reading of 81. This suggests that a decline is due to occur over the next few weeks to correct the upward trend in breadth statistics.

Fear/Greed Index: This popular indicator is in the “Fear” territory with a reading of 27. A close below 25 would take this widely-followed indicator into the “Extreme Fear” area that has marked the bottom of all corrections. Note: Major corrections end when this Index is below a reading of 5.