Wall Street Craps – 2012 Global Ebook Finance Award-Winner

The stock market made 7 consecutive new closing highs in the Dow Jones Industrial Average creating a point of buying exhaustion. On Friday with the background of a tariff war with China, the market gave up all of the last month’s gains in a matter of hours. With oversold readings in several indicators, a gap down opening in the next trading session may cause a selling climax to create a bounce from the session’s lows. But overall, I’d expect the market to head lower but with increased volatility in both directions over the near term.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 27 (Oversold)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 35 (neutral)
• Volatility Indicator – Ultimate Indicator -27 (Oversold)
• Risk On/Off Trend Indicator – Full STO Indicator – 20 (Oversold)
• NYSE Advance/Decline Oscillator – Ultimate Indicator – 26 (Oversold)

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NYSE McClellan Summation Index: This index’s oscillator has a current reading of 9. This indicates that it is in deep “oversold” territory. But the clustering effect has not appeared yet to indicate a tradable bottom. It may be time to exit short positions, but too early to go long except for a short bounce. A better buying opportunity should appear in a few weeks, not days.

Fear/Greed Index: This popular indicator is in the “Fear” territory with a reading of 29. I would expect a reading under 25 in the “Extreme Fear” territory to indicate a bottom. That could come at any time now. I suspect that the market is setting itself up for a Santa Claus Rally in December. But it could be rough sledding until then. Be careful getting in too soon.

The stock market has been on a record shattering rally since the April “Trump Tariff” bottom. This rally has exceeded all expectations and brings to mind the concept of a “5th Wave Blow-Off.” But that kind of thinking can be a trading trap and it’s best to just play it carefully and wisely. With that being said, today represented the 7th consecutive closing DJIA all-time high and a pullback can be expected. But how long is anyone’s guess. Just remember that it is October, a month that is notorious for sharp corrections.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 58 (neutral)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 59 (neutral)
• Volatility Indicator – Ultimate Indicator -48 (neutral)
• Risk On/Off Trend Indicator – Full STO Indicator – 33 (neutral)
• NYSE Advance/Decline Oscillator – Ultimate Indicator – 58 (neutral)

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NYSE McClellan Summation Index: This index’s oscillator has a current reading of 19. This indicates that it is in “oversold” territory but far from “clustering” as in the case of forming a bottom. Until we see more points in a tight area, a bottom is not here yet.

Fear/Greed Index: This popular indicator is in the “Neutral” territory with a reading of 54. This does not indicator a buying area but could go in either direction.