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 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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STOCK MARKET STRATEGY FOR OCTOBER 18, 2015: The majority of stock market indices find themselves near their 200-day moving average. Internal breadth indicators are generally in “mid-range” making it possible to go in either direction. The last two months have shown weakness towards the end of the month so don’t be surprised to see a dip as we approach October’s final days. Otherwise, stay neutral and patient waiting for the next set-up.
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 set itself up for its next big move. Expect a decline into month’s end and a possible buying opportunity if the market can get oversold. Any decline from here is not likely to violate August’s lows and weakness will probably be a good time to get reinvested to the long side.
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STOCK MARKET STRATEGY FOR SEPTEMBER 27, 2015: The stock market is moving closer to another oversold condition as it aims to retest the August lows. Historically, early October is a time in the stock market cycle where bottoms commonly occur. But this time, that bottom may come a little earlier. Stay ready and willing to take new long positions on weakness in the coming two weeks.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: The internal indicators are close to flashing oversold buy signals marking the end of this current correction. The next oversold condition near the retest of the previous lows may be an important intermediate buying opportunity. Sentiment is again starting to shift too far to the negative side. Anticipate a short sharp decline on obvious bad news to create the backdrop to the next signal to buy. Top non-leverage buying candidates based on liquidity, diversification, and performance include: QQQ and DIA
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STOCK MARKET STRATEGY FOR SEPTEMBER 13, 2015: The stock market is moving closer to an overbought condition after the most recent panic to the downside. Strength on Monday or Tuesday could mark the top of this most recent move and start the decline to retest the August or last October lows. This is a time to lighten up into any strength and to keep your powder dry for an important buying opportunity soon.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: The internal indicators are close to flashing sell signals marking the end of this current rally. The next oversold condition near the retest of the previous lows may be an important buying opportunity.
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STOCK MARKET STRATEGY FOR AUGUST 30, 2015: The stock market has established a panic intraday low which will most likely not be violated in the intermediate term. However, a retest of the lows may produce a new closing low for the DJIA. Such a move would create the ideal environment to establish new positions for a run towards new all-time highs. But first, we need to work off the present rally, chew up time, and start the decline down below Tuesday’s closing low.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: The internal indicators show that there is still more room to the upside. But overall, the set-up is not ideal for taking on new long positions (or short positions for that manner). This is one of those times where the majority of investors and traders should step aside and let things settle down to more reasonable/tolerable daily swings.
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STOCK MARKET STRATEGY FOR AUGUST 23, 2015: The Fear & Greed Index has a current reading of 5 indicating “Extreme Fear.” This means that in terms of sentiment, we are in the buy zone now. If we don’t get government manipulation over the weekend, it is possible that we have a panic intraday low on either Monday or Tuesday. This might lead to a short-term bounce of several hundred Dow points. And while the past declines have resulted in V-shaped bottoms, this correction may be the one that requires a retest of the lows in order to begin a sustainable rally.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: While the market has gone down a lot in terms of price and sentiment, but it has not gone down long enough in duration. That means that bounces can be played nimbly over the short term, but a safer longer term bottom is probably weeks away. You may want to play the bounce which could come on Monday or Tuesday, but it might be wiser to wait at least for the retest of Friday’s low.
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