STOCK MARKET OBSERVATIONS FOR February 9, 2014: The stock market reached oversold levels last week and is now poised to rally further. While a retest of the lows could occur at the beginning of next week, it is certainly possible for the market to simply hesitate at this level to digest the recent gains. While the majority of indicators are in neutral positions, a little bit of weakness early this coming week may be your only opportunity to hop on board for what could be a big rally worth the risk.
Key underlying market indicators show the following
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My advice for traders and investors for this week is this: look for a chance to buy on any weakness in the beginning of the coming week. The majority of internal indicators are in neutral positions now. The optimal time to buy was last Wednesday so getting in on the absolute low doesn’t look likely in this next week. Things do change quickly is this current market environment so stay alert!
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STOCK 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.
STOCK MARKET OBSERVATIONS FOR January 6, 2014: The stock market may have reached its internal high on New Years Eve. A new closing high 5 to 10 trading days after that date could very easily be the final external high for this major rally. But with most professional traders sitting out last week, the stock market can still do almost anything in either direction this coming week. Expect at least one more new high in January to occur before any kind of significant decline begins.
Key underlying market indicators show the following:
My advice for traders and investors is to remain of the sidelines and let the market set itself up for the next major move. The internal indicators have mostly moved back into neutral readings after the declines on Thursday and Friday. The current list of oversold Blue Chips stocks and Exchange-Trade Funds that are near the lower range of their Money Flow Indicator and should be monitored on further weakness include: Apple , IEF, and MSFT. With such a short list of buying candidates, it implies that the market needs to correct further before moving to the upside.
MARKET OBSERVATIONS FOR December 14, 2013: The stock market declined this past week after its failed attempt at a new high following the previous Friday’s strong rally. This sets the market up for a short-term bottom this coming week. My best guess is that this bottom will come between Tuesday and Thursday. I would suggest buying into weakness on any of these days with small pilot positions in anticipation of a year-end rally. In order to do this, you’ll have to ignore any bad news.
Key underlying market indicators show the following:
For now, my advice for traders and investors is to remain of the sidelines and watch for a short term buying opportunity in the coming week. This bottom would set up the traditional “Santa Claus Rally” into the New Year. Oversold stocks would include IBM, Verizon, AT&T, and Newmont Mining.
Categories: Stock Market Strategy Tags: investing, investments, QQQ, SPY, stock market, stock tips, stock trading, stock trading tips, stocks, Tesla, wall street
MARKET OBSERVATIONS FOR December 7, 2013: The stock market had a mild 5-day correction after hitting its 13th consecutive new high in the DJIA. Yesterday (Friday Dec. 6th), the market snapped back with a rally that puts it into position to retest the previous week’s highs. That retest will occur early next week and could produce a new closing high. My hunch is that this retest will fail and clear the way to a more substantial correction shortly afterwards.
Key underlying market indicators show the following:
For now, my advice for traders and investors is to remain of the sidelines and watch for short term buying opportunities in alternative oversold asset classes. Those would include real estate (IYR), long-term Treasury bonds (TLT), emerging markets (EEM), silver (SLV), and gold mining (GDX). Other stocks that could experience tax-loss selling in December and may be worth picking up for longer-term holdings include: IBM, CSCO, and AT&T.
MARKET OBSERVATIONS FOR November 24, 2013: The stock market continues to push upwards without a hint of an extended correction. This past Friday marked the 10th consecutive new high of this current rally from its October 8th low. This pattern of new consecutive highs should continue until it reaches 13 which could occur in another week. About the only thing that could cause the change in momentum to the downside would be investor expectations of new Fed tapering. Otherwise, the lone prudent investment choice will continue to be the asset class of equities.
Key underlying market indicators show the following:
For now, my advice for traders and investors is to remain of the sidelines and watch for short term buying opportunities in alternative oversold asset classes. Those would include real estate (IYR), long-term Treasury bonds (TLT), emerging markets (EEM), silver (SLV), and gold mining (GDX). I strongly discourage trading leveraged, inverse ETFs for downside action because of their tricky nature, limited history, and deceiving internal indicators. But for those who insist on dabbling in this dangerous area with small bets for short holding periods, my two choices would be (TZA) and (SDS) based on liquidity and volatility.
MARKET OBSERVATIONS FOR November 17, 2013: The stock market continues to push upwards without a hint of an extended correction. Last Friday marked the 7th consecutive new closing high in the Dow with still more room to go on the upside. When a series of new highs occurs around the 13th time, it often marks the point of upside exhaustion….but we are not there yet. Other underlying indicators (shown below with links) also imply that the stock market still can move upwards for a little longer (4-7 market days) without a correction.
Key underlying market indicators show the following:
For now, my advice for traders is to be on the sidelines and wait for the market to set itself up for its next big move. The balance of indicators have neutral readings despite the upwards movement in prices. While many chartists are jumping at the bit to call the next top, the internal readings of the market still allow for more room or time to the upside. But that being said, a market player should be ready for one good correction in December in order to set up the customary Santa Claus Rally. Be on the lookout for a tricky, but opportunity-filled stock market during Thanksgiving Week.
MARKET OBSERVATIONS FOR September 13, 2013: The stock market has rallied to a point where it is overbought and about to form the right shoulder of a “head and shoulders top.” While it is still entirely possible for the market to continue its upward march towards new highs, it also could be near its end in terms of time. After a 17 session decline, the current rally will match that time by the end of next week. Since I never recommend going short or buying inverse ETFs, this is a time to be out of the market and waiting for a deeply oversold condition to establish new long positions in the weeks ahead.
Key market indicators show the following:
For now, my advice for traders and investors to get out of the market and wait for a better risk/reward environment. The September/October period is usually a time of increased volatility which could produce a deeply oversold condition in which to take new positions.
“B
uying low-beta stocks is a common mistake investors make. Why would you ever want to own boring stocks? If the market goes down 40 percent for macro reasons, they’ll go down 20 percent. Wouldn’t you just rather own cash? And if the market goes up 50 percent, the boring stocks will go up only 10 percent. You have negatively asymmetric returns.”
Source: Schwager, Jack D. (2012-04-25). Hedge Fund Market Wizards. John Wiley and Sons. Kindle Edition.
MARKET OBSERVATIONS FOR August 10, 2013: The stock market made a new closing high 5 trading sessions ago. Since that time, it has been in a slow, choppy decline where there has been an absence of buyers rather than an abundance of sellers. The previous high was largely confirmed by other major indicators and suggests that another “retest” rally will be made in the coming week. But the NYSE Summation Index is making the case for a significant low coming up in a couple of weeks.
Key market indicators show the following:
For now, my advice for traders is to wait for the next oversold condition and then take positions for an upside move into the Fall. But if the market were to rally here into an unconfirmed new high, I’d be wary that the highs for the year have been achieved and to stand aside in a defensive position of cash. Thus far, playing the short side of the market has been difficult to trade and is better off avoided by most people.
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The indicators for Apple (AAPL) read as follows:
- Current price: 454
- Relative Strength Indicator = 61 heading down
- Ultimate Indicator = 59 heading down
- Money Flow Indicator = 50 heading down
- 50-Day Moving Average = 435
The stock of Apple appears to have achieved its upside objective for this cycle in terms of price. I would wait to take new positions in the stock whenever any of the indicators (RSI, Ultimate, Money Flow) reach oversold readings. Of these, the Money Flow Indicator has been the most reliable one for swing trading. I’ve surmised that trying to chart this stock purely from a price standpoint has been an exercise in futility. The best trading results for the past year have been by simply relying on the Money Flow Indicator to identify low-risk buying areas to go long.
