STOCK MARKET STRATEGY FOR JANUARY 17, 2016: The stock market experienced another severe down move this past week putting it in position to challenge last August’s lows. Those who were looking for a short-term bounce to trade were hurt badly by quick reversals and large gaps down. Look for a test of Dow 15700 and a bounce from that level. Or it might take one more failed rally and plunge before the masses finally throw in the towel – marking the bottom of this cycle.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: Be careful here. The climate right now is ripe for a crash to happen. While sentiment is largely negative and all short-term breadth indicators are severely oversold, there is still room to the downside in terms of price. If you’re going to bet on a quick bounce, look to trade on weakness below Dow 15666. But overall, it feels like the bearish sentiment needs more time to ferment into genuine “blood on the street” for public investors. One more downwards zig-zag may do the trick.
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STOCK MARKET STRATEGY FOR JANUARY 10, 2016: The stock market’s strong down move last week puts it in position to rally this coming week. Keep in mind that the markets are severely oversold and that bottoms are supposed to be tricky to buy into. For many people, a short-term trade here just isn’t worth the risk and stress of trying to time this bounce perfectly. A quieter, safer bottom is probably a few weeks away, but for nimble traders a sharp short-term reversal may occur in the next 1 or 2 sessions.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: With all 5 internal indicators at historically low readings, you can expect a short, sharp bounce early in the coming week. But this kind of action may only serve as a pause in the decline before a safer bottom is formed towards the end of the month closer to last August’s lows. If you want to play for a quick rally, consider buying the QQQ, DIA , SSO and/or SPY Exchange-Traded Funds on weakness. Don’t expect to buy the exact bottom with the knowing that timewise, a rally is close at hand. Otherwise, stay in cash and wait for a better opportunity to buy later.
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STOCK MARKET STRATEGY FOR JANUARY 3, 2016: The stock market displayed a lot of volatility during the last week of 2015. That sets up the market for even more volatility during the first week of 2016. Expect the market to fool the public by making them fearful right when it’s time to buy. With the key internal indicators trending down, a good buying opportunity by the end of the coming week is a realistic possibility. But in order for that to happen, the market must continue to go down from here.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: With all 5 internal indicators that I follow with neutral reading that are trending down, I would expect a good trading bottom to occur towards the end of next week. Since the first week of the new year is often tricky, don’t be surprised if the general stock market closes down sharply on Friday with a gap up the following Monday. That way, the public will miss out on the bottom and end up chasing prices later. So this may turn out to be a case when it may pay to be early in taking your positions even if it requires you to go against conventional wisdom by trying to “catch a falling knife.”
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STOCK MARKET STRATEGY FOR DECEMBER 27, 2015: The stock market will spend the next week or two setting itself up for a big move in early January. My guess is that is will be a surprise to the upside after a fake-out to the downside. Right now, a decline to retest the lows at 17128.55 on December 18th seems likely. But overall, get your “powder dry” for a bottom of major significance during the first week of January. But for right now, the market is overbought and needs time to go down.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: With an overbought market, it will take a week or so for it to get to an oversold buying area. If that should take place in the first week of January, be ready to take solid diversified positions in both SPY & QQQ. The next ride up could be spectacular so don’t get too tricky with buying this next bottom. It will be meant to fake you out and miss. So be willing to be a little early and buy into weakness. When the bottom comes, it might be followed be consecutive gaps up leaving many investors back at the dock. And as has been the pattern of late, the bottom may occur on late Friday afternoon when it is not easy to buy heading into the weekend.
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STOCK MARKET STRATEGY FOR NOVEMBER 30, 2015: The internal breadth indicators are now turning down after reaching the overbought area this past weekend. A likely set-up would be for the market to continue to correct as the breadth indicators move their way down into an oversold condition. It may take another week or so for that to transpire. If it does correct in that fashion, then we will have an oversold buying opportunity as a set-up before a “Santa Claus Rally.” Expect that bottom somewhere between December 10th-18th.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: The market appears to be turning down after its last rally. Expect an oversold condition during the second week in December as a good spot to go long in anticipation of a strong “Santa Claus Rally” to end out the year.
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STOCK MARKET STRATEGY FOR NOVEMBER 22, 2015: The stock market rallied sharply from the oversold condition that was described in last week’s post. At the present time, the market is neither oversold or overbought. The neutral readings of breadth indicators imply that the market can go in either direction from here. The odds favor a “Santa Claus Rally” in December which means that we should anticipate one more return to an oversold condition sometime in early-to-mid December.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: The market presented a buying opportunity at the last oversold condition on Monday’s opening. After such a robust rally, it’s probably too late to go long equities especially with resistance levels nearby, a possible negative reaction to a Fed hike, and a typical short-term December bottom preceding the traditional “Santa Claus Rally.” For these reasons, I would prefer to sell into additional strength, hedge any long positions, and keep the powder dry for a possible trading opportunity in the first half of December.
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STOCK MARKET STRATEGY FOR NOVEMBER 14, 2015: The stock market has been setting up for a trading low this past week. With the events in Paris, the market could experience a large gap opening to the downside on Monday’s opening. But with nearly all breadth indicators at historical trading lows, this “cover story” may serve to be the catalyst for a climatic bottom. Don’t be surprised if Monday proves to be an important intermediate bottom from which the “year-end rally” takes us back up to the all-time highs.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: The market looks to be in the vicinity of an important trading low. While we may have one or two more down days, it may be wise to start taking pilot positions in stocks with high correlations to the upside. That would include all of the broad-based ETFs. But be careful about taking too large a position because the news could be scary while this bottom takes it form. It will be important to remain emotionally-detached during this trading period and control your risk.
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STOCK MARKET STRATEGY FOR NOVEMBER 1, 2015: The stock market remains near the top of its trading range while internal breadth indicators show neutral readings. While a retest of the old highs is a strong possibility, the upside appears limited and a correction of either price or time is the more probable course for the market. Until we see a clearer picture, it’s not a time to buy and more likely a time to keep your powder dry for a near-term oversold condition to develop.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: The neutral breadth readings allow for a short-term buy signal with a move downwards into the end of the month. That would set up a strong “Santa Claus Rally” in December. But until we get a more clearly-defined pattern, the market is not in a buying area and more of a “hold/sell” range on further strength. So stay largely in cash and wait for a better spot to go long.
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STOCK MARKET STRATEGY FOR NOVEMBER 1, 2015: The stock market is near the top of its trading range in terms of price, but not so when it comes to breadth. This mixed bag of signals would lead me to believe that a sideways correction is in store for the market. Until we get a short-term oversold condition, it remains a market where you’re either waiting for a deeper correction to go more long or holding on to positions for further gains. Right now, the market can go either direction.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: The stock market is setting up for either another rally into the early part of November or a decline into a short-term oversold condition in the next week. Be ready for either scenario for short-term opportunities to trade. Otherwise, hold long positions and look to hedge if the market turns more overbought.
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STOCK MARKET STRATEGY FOR OCTOBER 25, 2015: The stock market appeared to be headed towards a short-term oversold bottom by mid-week, but instead revered to the upside in a big way. But daily TRIN readings have continued to be negative despite this last run-up which only serves to add confusion to any breadth analysis. That being said, this means that any buying opportunity will be pushed back another few weeks as the market will need time to set itself up again for an oversold bottom.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: This is a time to step aside and let the market digest its recent gains. It appears that the general market will continue to “climb a wall of worry” on its way to new closing highs. The only thing that would likely set itself up for a new decline and a possible oversold bottom would be an actual rise in interest rates by the FED. This still remains a possibility as we approach December.
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