Home > Stock Market Strategy > WALL STREET CRAPS STOCK MARKET OBSERVATIONS FOR JANUARY 26, 2014

WALL STREET CRAPS STOCK MARKET OBSERVATIONS FOR JANUARY 26, 2014

January 25th, 2014

craps front coverSTOCK MARKET OBSERVATIONS FOR January 26, 2014: The stock market corrected sharply during this past week. While I did expect a little more strength earlier in the week, the overriding message was to stay out of long positions. This proved to be wise advice as almost all sectors experienced large percentage losses during the week. From here, the majority of internal indicators are about a day away from becoming oversold enough to produce a technical bounce. But I’d still expect that the final lows for this move aren’t going to happen until at least February.

Key underlying market indicators show the following

Another way to look at the general market is to see if there are matching oversold “Full Stochastics” readings on the major ETF broad-based averages. You will notice that all major intermediate bottoms start after oversold reading. The current readings require more time before reaching oversold levels. Note: The QQQ does not always reach oversold readings at bottoms due to its high relative strength:

  • DIA – Full Stochastic – 37 (neutral) on lagging red line
  • SPY – Full Stochastic –  61 (neutral) on lagging red line
  • QQQ – Full Stochastic – 83 (neutral) on lagging red line
  • IWM – Full Stochastic – 79 (neutral) on lagging red line

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My advice for traders and investors is to remain of the sidelines and let the market set itself up for a possible bottom in the intermediate term. The majority of internal indicators have moved into buy readings but need more time in the misery zone. Expect a short-term bounce early next week and then a retest 5 to 10 days after those previous lows. The time to take a chance on the long side is when weakness occurs amid obvious bad news on the retest of previous lows. That should come in February most likely.

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Note: Stock that have moved into their buy range according to the Money Flow Indicator include the following: General Electric and Berkshire-Hathaway.

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