Home > Stock Market Strategy > WALL STREET CRAPS MARKET OBSERVATION FOR JULY 15, 2012

WALL STREET CRAPS MARKET OBSERVATION FOR JULY 15, 2012

July 15th, 2012

MARKET OBSERVATIONS FOR JULY 15, 2012: The stock market staged a big “relief rally” last Friday which quickly alleviated the oversold condition of the general market. In fact, the TRIN Indicator was negative 10 days in a row which is extremely one-sided in terms of breadth. The only thing that was missing from a good buy signal was a more downside action in terms of price. For more nibble traders, the ideal time to have bought was mid-day on Thursday. That bottom sets up a 5- day retest of the intraday lows that is expected around Thursday of this coming week. Be prepared to buy on weakness backed by “obvious bad news” into the Wednesday-Friday time period.

The McClellan Summation Index appears to be in a topping formation. This occurs whenever you see a cluster of dots after an extended period of advance like we’ve seen over the past month. So this indicator is preparing us for a large decline (the primary signal now) or a confusing pause before resuming the current uptrend.

Other key market indicators show the following:

  • Investor Sentiment – is in the mid-range area with no clear signal
  • NYSE Breadth Oscillator – gave a buy signal after Thursday’s close in the “Ultimate Indicator” – the “Full Stochastics” still need to move down to the lower parameter near -80
  • Nasdaq Breadth Oscillator – also gave a buy signal after Thursday close in the “Ultimate Indicator” – the “Full Stochastics” still need to move down to the lower parameter near -80
  • Risk On/Risk Off Indicator – a reading below 30 is needed for a buy signal – the current reading is only 44

For now, the best advice is to remain on the sidelines getting ready for a near term bottom in the stock market. The NYSE Breadth Oscillator and Nasdaq Breadth Oscillator have already given buy signals in the “ULT” indicator. The “5-Day Retest Pattern” tells us to be prepared to buy on weakness backed by obvious bad news into the Wednesday-Friday time period of this coming week.

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In regards to Apple (AAPL), the stock is coming off of a top at 619 and is expected to retest that high. It is anyone’s guess whether it will succeed or fail at this resistance. Sorry, but there isn’t much to say about trading this stock at this particular time. Savvy traders will stay away and let APPL set up for its next big move.

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In the event of a general stock market buy signal, prime candidates for participating on the upside include the QQQ, DIA, DDM, and SSO Exchange-Traded Funds.

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