“Virtually all traders experience periods when they are out of sync with the markets. When you are in a losing streak, you can’t turn the situation around by trying harder. When trading is going badly, Clark’s advice is to get out of everything and take a holiday. Liquidating positions will allow you to regain objectivity.”
Source: Schwager, Jack D. (2012-04-25). Hedge Fund Market Wizards. John Wiley and Sons. Kindle Edition.
“T
raders focus almost entirely on where to enter a trade. In reality, the entry size is often more important than the entry price because if the size is too large, a trader will be more likely to exit a good trade on a meaningless adverse price move. The larger the position, the greater the danger that trading decisions will be driven by fear rather than by judgment and experience.”
Source: Schwager, Jack D. (2012-04-25). Hedge Fund Market Wizards. John Wiley and Sons. Kindle Edition.
MARKET OBSERVATIONS FOR July 10, 2013: The stock market reached a short-term bottom last Monday morning. Normally, one would expect a retest of that bottom in about 5 to 7 days. Therefore, we would expect some weakness on Monday and/or Tuesday as that retest. We had 3 days up from the bottom and can anticipate an equal 3 days down in this simple time symmetry. But the Summation Index clearly shows that we have already arrived at an intermediate term bottom and that smart traders/investors should get on-board for another bull run that will climb the proverbial “wall of worry.”
Key market indicators show the following:
For now, my advice is to buy into any weakness at the beginning of the week. Active broad-based exchange-traded funds to consider buying would include DIA, SPY, QQQ, SSO.
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The indicators for Apple (AAPL) read as follows:
- Relative Strength Indicator = 26 (buy signal under 30)
- Ultimate Indicator = 33 (buy signal under 30 which it was on Thursday’s close)
- Money Flow Indicator = 6 (buy signal under 20)
This means that the stock of Apple is now in a buy zone and time to start accumulating. While it would appear that a test of the previous lows around 383 can be expected, we’ve learned to expect the unexpected when it comes to this stock. With a 3% dividend, an investor will get paid to wait on this unpredictable stock.
MARKET OBSERVATIONS FOR APRIL 29, 2013: The stock market may be headed to its final closing high in the Dow Jones Industrial Average. It is approaching overbought levels while remaining 150 points below its previous high. From a technical standpoint, the final closing high in the Dow Jone Industrial Average while not be confirmed by the majority of other key indicators or averages. Be on the lookout for this final solo march up by the Dow. On the other hand, if the Dow does have support from the majority of other averages, then this rally can continue higher into June.
Key market indicators show the following:
For now, my advice is to remain on the sidelines and let the market set itself up for its next big move. A major top could be ahead of us shortly. But the neutral sentiment readings cause me to think that the market still needs more time on the upside. Stay flexible and read the market as it moves in either direction for clues.
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THE APPLE BEAR MARKET OPTIMIZED MOVING AVERAGE UPDATE MARCH 20, 2013
On March 5th, the Money Flow, Relative Strength, and Ultimate Indicators triggered buy signals for the stock of Apple. Thus, this triple buy signal made it possible to take initial positions in this undervalued, oversold, and unpopular high-quality stock near the absolute bottom around 420.
(Click here for the chart for Apple)
Since that time, the price of Apple has rallied to a current price of 452. The so-called “Apple Bear Market Optimized Moving Average” stands at 464, just 12 points away. This moving average has served as the cap on three previous rallies in Apple over the past several months. As long as the price of Apple stays under the Optimized Moving Average, it is still considered to be in a bear market phase.
If the stock does not rally through the Optimized Moving Average at this time, I would expect a retest of the early March lows around the 425-407 price range. A successful retest could be in store for the stock so I’d start accumulating the stock on any move close to that price area.
THE APPLE BEAR MARKET OPTIMIZED MOVING AVERAGE UPDATE FEBRUARY 19, 2013: I have devised a new indicator for Apple which I call the “Apple Bear Market Optimized Moving Average“. It is a 50-day exponential moving average of the price of Apple. It currently has 3 points that served as the top of small rallies since early October 2012. This will help those who want to buy the stock low but want to get out before it turns down again. As of today, the moving average is at 498 and dropping rapidly.
With today’s AAPL price of 460, the spread between the Optimal Moving Average and current price is 38 points. Until the price of AAPL breaks convincingly above the Optimal Moving Average with increased volume, expect the bear market in AAPL to continue….much to the chagrin of those who purchased the stock during the height of its popularity last year.
Until the weaker hands give up on the stock, the bear market in AAPL should continue. The first clue would be a clear oversold buy signal in the “Money Flow Indicator” which has called each of the last three rally in AAPL.
Key Apple indicators show the following:
- Relative Strength Indicator: “42” reading & is more than a week from a buy signal
- Ultimate Indicator: “42” reading and is also more than a week away from a buy signal
- Money Flow Indicator: “55” reading which is far from being a buy signal under 20
Until the “Apple Bear Market Optimized Moving Average” is broken to the upside, the trend is down for this popular stock. And until the Money Flow Indicator gets near 20, it still hasn’t gone enough to an extreme in this most accurate forecasting timer for buying Apple.
Special Note: It looks like a retest of the lows is about to happen. I would look to accumulate AAPL on this retest as it has a good chance of being successful. I would expect a negative “cover story” to cause the weak hands to capitulate on this retest. It may pay to be a day early on your buying of these pilot positions. AAPL has a habit of making huge jumps to the upside when bottoms are reached. Being a day or two late may cost you 30-50 points!
MARKET OBSERVATIONS FOR FEBRUARY 11, 2013: The stock market looks like it is about the test its February 1st highs. It is only 17 points away the old highs in the Dow. You can expect one to three consecutive closing new highs in this index before it’s ready to turn down for a more extensive correction. If these new highs are not confirmed by equal or greater strength in the Dow Transports, S&P 500, and Nasdaq indices, it would signal that the general market has lost momentum to the upside. But since the internal breadth indicators are largely neutral, the market may simply consolidate at this higher level instead of crashing down. That would confuse and frustrate a lot of traders by doing so.
Key market indicators show the following:
The market is about to test the February 1st highs. The risk-reward ratio is not good for a more extended move to the upside. And because of neutral readings in the breadth indicators, I would not expect the market to drop much either. This is a time to step aside from the market and keep your powder dry for special situations that may appear in either the Long-Term Treasury Bond Fund (TLT), Gold Miners (GDX), Silver Trust (SLV), or the China ETF (FXI).
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MARKET OBSERVATIONS FOR FEBRUARY 5, 2013: The stock market’s advance may be nearing its end sometime this coming week. If we can get another token new high in the Dow that is not confirmed by corresponding strength in the Dow Transportation and Nasdaq Index, it could signify the end of rally and the beginning of a sustainable correction. Smart traders and investors would be wise to sell into any strength during this coming week especially if it comes with “obvious good economic news.” That news will be the signal for all the latecomers who missed the rally to come into the market at precisely the wrong time.
Key market indicators show the following:
This coming week may mark the end of the current rally that started last November. Traders and investors should use any strength to lighten up on any remaining positions. The risk-reward ratio just doesn’t support adding or even holding too many long positions in the stock market at this time. While some issues may continue to rally, the time for the general market has probably come to get out.
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THE APPLE BEAR MARKET OPTIMIZED MOVING AVERAGE UPDATE FEBRUARY 4, 2013:I have devised a new indicator for Apple which I call the “Apple Bear Market Optimized Moving Average“. It is a 50-day exponential moving average of the price of Apple. It currently has 3 points that served as the top of small rallies since early October 2012. This will help those who want to buy the stock low but want to get out before it turns down again. As of today, the moving average is at 517 and dropping rapidly.
With so many traders, investors, and institutions having paper losses in this popular stock, it appears that the one thing that people don’t expect is a bear market in this issue. Almost all of the fundamental projections for the stock are in the 700-800 price range. Until these weak hands get scared out of the stock, my technical and behavioral indicators point to lower prices.
Some key Apple indicators show the following:
- Relative Strength Indicator: “34” reading and not far from a buy signal under 30
- Ultimate Indicator: “31” reading and close to a buy signal under 30
- Money Flow Indicator: “43” reading which is far from being a buy signal under 20 (Note: This indicator has been the most timely and reliable of the three mentioned above!)
Until the “Apple Bear Market Optimized Moving Average” is broken to the upside, the trend is down for this popular stock. And until the Money Flow Indicator gets near 20, it still hasn’t gone enough to an extreme in this most accurate forecasting timer for buying Apple. For now, my crystal ball says that a turn to the upside in Apple will have to wait until mid-to-late February (approximately Feb. 18-23).
MARKET OBSERVATIONS FOR JULY 30, 2012: The stock market threw the proverbial “curveball” at traders the last six trading sessions by going down 300 points and then returning up even more. The ideal time to have bought was intraday on Tuesday but that would have required one to perform the difficult and risky task of “catching a falling knife.”
The McClellan Summation Index looked like it was about to come crashing down on Tuesday but instead is now in a hesitation pattern, giving no clear-cut signals as to the future direction of the market. Since its time in the rally phase has been relatively short, there is still plenty of room to go up in terms of time.
Other key market indicators show the following:
For now, the best advice is to remain on the sidelines getting ready for a possible retest of last Tuesday’s low. Otherwise, expect another day of strength before a correction takes place. We will monitor the correction in order to determine if the rally has legs to it. Based on the long stretch of negative breadth days, it would not surprise us to see the stock market go into the “climb the wall of worry” phase to new highs in terms of price and several more weeks of rallying in terms of time.
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In regards to Apple (AAPL), the stock had a big one-day correction which broke the back of its recent rally. This sets up the possibility of the stock traversing its trading range towards a possible buy point in the next month. The Money Flow Indicator has a reading of 41 after hitting a short-term upside target of 80. It now has a good chance of reaching a buy signal under 20 in August. The “Full Stochastics Indicator” has already approached a buying area and is the first indicator to signal that a buyable low is not too far away in time. The price to buy Apple will probably be on the day it tests its previous low at 522 as well as the 200-day moving average which now stands around 520. I’d start making small bets on any move under 535 if that should occur. The last move down could turn out to be a brief one-hour intraday spike.
Note: The news and price action of Apple proved to be a distraction during this past week. It confirms my “Wall Street Craps Rule: Don’t Play Your Favorites.” When an investor pays too much attention to one stock, it prevents that person from reading the overall market correctly. That’s how this last buying opportunity was missed last Tuesday.