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: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 539.
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. It seems hard to fathom, but it may take a move to $425 before panic sets in with this stock. Only then will the stock of Apple trade from weak hands to strong ones. There are just too many investors relying on “hope” which is almost always a bad thing to bet on when playing in the stock market.
Despite what Tom DeMark said on CNBC, I would contend that the stock of Apple has not fully exhausted itself on the downside. So my word of advice is simply to trade carefully with this issue. And if you buy it, do it incrementally on the way down as an investment rather than a trade.
Until the “Apple Bear Market Optimized Moving Average” is broken to the upside, the trend is down for this popular stock.
MARKET OBSERVATIONS FOR JANUARY 21, 2013: The stock market’s advance is running into resistance as it returns to its previous high. It has now reached its 9th successive new high in this rally since mid-November. Therefore, its momentum should soon run out (rarely over 13 successive new highs in any rally). But internally, the general market is not overbought. In fact, the 10-day ARMS readings are showing that the market is even slightly oversold. This surprising fact leads me to believe that any correction will be shallow and short-lived. Instead, any decline should be viewed more as a possible buying opportunity for another ride up.
Key market indicators show the following:
For now, my advice is to stay or move to the sidelines and let the market set itself up for a possible buying opportunity. The stock market may surprise the public by continuing to rally instead of decline over the intermediate term.
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MARKET OBSERVATIONS FOR JANUARY 13, 2013: The stock market is continuing its rally from the “fiscal cliff” resolution. The internal indicators show that this last week has risen despite weakness in breadth. With a mixed bag of conflicting signals in price, sentiment, and breadth, a wise trader should be ready to “buy the dips” and “sell the rips.” Last Friday’s close was the second consecutive “new high” in this current rally. I would not be surprised if this current phase tops out either Tuesday or Wednesday in the coming week. That would be followed by an initial correction and a short, sharp retest of the highs. That kind of action will reveal much about the staying power of this rally. There is a decent chance that this market could surprise many by having much further to go on the upside.
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 short-term top could easily occur by the middle of next week. The following dip might be one in which to take positions if the breadth indicators become oversold (very possible). Right now, the overall market is a bit too extended. This almost always leads to a correction in order for the market to get healthy again. That correction may only be a short one so be ready to get in on the action.
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As for Apple (AAPL), the stock has drifted back down towards it base around 515-500. The RSI, Ultimate Indicator, and Money Flow Indicators do not show that it is a time to buy yet. For those who only follow the external price action of the stock, it is tempting to buy at the current levels. But to me, it seems like too many investors are “wishing” for the stock to move up because they are trapped at much higher purchase prices. This makes me think that the stock needs another down-leg or news scare in order to shake out the weak hands. Most current holders of the stock are now disappointed that it has not participated much in this year’s rally and the expiration of tax-selling. That disappointment translates into “nervous hands” and “scared money” which will cause those people to get emotional at precisely the wrong time. Keep this in mind and approach Apple cautiously from a contrary trading perspective.
MARKET OBSERVATIONS FOR JANUARY 6, 2013: The stock market’s late December oversold breadth condition set itself up for last week’s sharp news-related rally. But sentiment readings should put a lid on anymore sizable upside action. A few more up-days should also move the breadth oscillators into “sell” mode. Also the “Risk On/Risk Off Indicator” shows that the “Risk On trade” has extended to its normal range again limiting much upside action. With the upside being limited, this is not a time to be buying and one to be moving to the sidelines (and waiting for the next high-probability opportunity).
Key market indicators show the following:
For now, my advice is to stay of the sidelines and let the market set itself up for its next big move. Last week’s update presented a scenario for taking advantage of the resolution of the “fiscal cliff,” but you would have had to move quickly on New Year’s Eve morning in order to capitalize on it. In addition, last week’s rally points to another trading tip which is “don’t watch breaking news while you’re trading” because you’ll get easily talked out of making a move (which happened to me!!!)
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As for Apple (AAPL), the stock moved up sharply after a positive article in Baron’s over last weekend, thereby blowing our chances to buy it on a quiet New Year’s Eve trading morning. But by midweek, it had hit its 250-day moving average around 555. From here, it could still have another leg down but I’ll be watching its internal signals (Money Flow, Ultimate Indicator, RSI) for clues more so than its external price moves. So overall, Apple is in “no man’s land” between 555 and 500 and is setting itself up for its next big move. This could come in another 10 days or so at the earliest.
MARKET OBSERVATIONS FOR DECEMBER 28, 2012: The stock market has set itself up for a relief rally beginning in the next day or so. Oversold readings in both the Nasdaq and NYSE breadth indicators make this a low-risk buying opportunity. This rally should coincide with good news from the resolution of the “fiscal cliff.” Be ready for a sharp but short rally that may take the Indices to new highs. Lower your risk by being diversified in broad-based Exchange-Traded Funds. My favorite trading vehicle for this rally is the QQQ Exchange-Traded Fund. Since Monday December 31st is a short trading day, be sure to take your positions early in the day so you don’t miss out!
Key market indicators show the following:
For now, my advice is to take a small to moderate position in the stock market based on breadth indicator buy signals in the NYSE and Nasdaq. The quiet trading day of Monday December 31st is time to take your positions for a sharp and short rally at the beginning of the year. Be sure to keep your risk down by being fully diversified and non-leveraged in case the downtrend continues for a few more days.
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As for Apple (AAPL), the chart looks like a possible move to under 430 which doesn’t seem possible at this moment. But we have to take a step back and remember that the stock was in the 300s just last year. For now, it seems to be finding support at 500. I would expect a brief move into the 400s in order to generate some weak panic selling. But given its action the past week, I wouldn’t be surprised if it goes up to the 565 area on the next rally. The stock flashed a brief buy signal last Friday in its Money Flow Indicator and you can buy it today at an even lower price than last week.
APPLE TRADING & INVESTING STRATEGIES: The most popular stock on the Exchange is the subject of controversy everyday in the financial media. But almost all of the positive news about the company itself is of little benefit to the performance of the stock. But on Friday December 21, the stock of Apple may have found a significant short-term bottom.
Most investors in the stock of Apple (AAPL) will look for fundamental reasons to justify their position in the stock. But with so many shares purchased at much higher prices, the stock of Apple sits in a place where both fear and greed could cause a big price move in either direction. A smart investor must look under the surface for clues as to when it is time to move. That time could be this Monday, December 24.
On the shorter term, the Money Flow Indicator has a reading of 19 and needs to close below 20 in order to generate a buy signal. This one indicator allowed me to take a position in Apple on the exact day of bottom on three different occasions in the past year. So be ready to make a small side-bet on Apple based on this one indicator as it is saying that it is time to move right now.
(Note: Don’t bet too much because there is also room for more downside in the stock, the general market is only neutral, and the threat of one more “fiscal cliff” disappointment still hangs over the market. If you choose to speculate on this, only make this a simple $5 bet in a $120 bankroll.)
MARKET OBSERVATIONS FOR DECEMBER 22, 2012: The stock market appears to be setting up for an obvious top to coincide with an agreement to the “fiscal cliff” matter. Friday’s retreat was merely a pause before this last rally attempt. I would expect that rally to begin just after Christmas. But otherwise, the market is closer to an intermediate top than a bottom and should have most investors out of the market. Note: Beware of one more downside scare from the “fiscal cliff” matter. It could come during the middle of next week and could be very sharp and costly to overextended traders!!! So be careful.
Key market indicators show the following:
For now, the best advice is to remain on the sidelines getting ready for a possible intermediate top in January. For nimble traders, there is a small bottom possibility on Monday morning if the market should go into a quiet retreat. If you should be tempted to play this short rally, be ready to sell whenever a resolution gets passed for the “fiscal cliff.” On the other hand, be on the lookout for one more sharp scare from a disappointment regarding the “fiscal cliff.” That could happen right before New Years Eve!
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MARKET OBSERVATIONS FOR SEPTEMBER 11, 2012: The stock market is at the top of its trading range right now. It has made three new rally highs in the last four trading sessions. The question is whether these new highs are confirmed or not confirmed by strength across the board. There’s a good chance that today’s closing high is the high for the year especially if tomorrow’s early strength does not follow through.
The McClellan Summation Index has broken out into a new uptrend after going sideways for several weeks. It gives the indication that the rally has more to go on the upside in both time and price. This prevents me from being more certain about an immediate correction.
Other key market indicators show the following:
- Investor Sentiment – is slightly negative over the long term but neutral near term
- NYSE Breadth Oscillator – the Ultimate Indicator reading is 68 which is only two points away from a sell signal. This would be triggered by one or two up-days.
- Nasdaq Breadth Oscillator – the Ultimate Indicator reading is 64 which is 6 points away from a sell signal.
- Risk On/Risk Off Indicator – the Ultimate Indicator reading is 67 and is 3 points away from a sell signal. This would be triggered by one to two up-days.
For now, it would be prudent to move out of stocks and into cash. For those seeking a chance to speculate, a small bet on the downside can be made if Wednesday’s initial up move is not confirmed by strength in the Nasdaq and S&P 500.
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In regards to Apple (AAPL), the stock was hit hard today and could be setting itself up for a classic cover story top tomorrow September 12 with the unveiling of its new iPhone. Weakness in AAPL and other technology issues are a signal of subsurface weakness in the market. This is one of the main reasons why I think today’s close may be the top of this rally.
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MARKET OBSERVATIONS FOR AUGUST 26, 2012: The stock market has gone through a short and shallow correction since its intraday highs early last week. If the correction is complete, then I expect those highs to be retested sometime this week. If a nominal new closing high (or series of exhaustion highs) occurs without underlying strength in key breadth and volume areas, this could mark the end of the summer rally. But a successful retest of the highs will add more fuel to the upside and prolong the current rally well into September and maybe beyond. Either scenario has a decent chance of playing out so stay flexible in your stock market decision-making.
Key market indicators show the following:
- McClellan Summation Index – is on the verge of turning down. This is warning us to beware of the market failing at the upcoming retest and then falling sharply afterwards.
- Investor Sentiment – is still close to the mid-range area with no definitive signals.
- NYSE Breadth Oscillator – Ultimate Indicator reading of 40 and needs to close below 30 to signal a buy.
- Nasdaq Breadth Oscillator – Ultimate Indicator reading of 44 and needs to close below 30 to signal a buy.
- Risk On/Risk Off Indicator -Ultimate Indicator reading of 48 and needs to close below 30 to signal a buy. It is now in a “risk-off” position which means to be on the side of safety (Treasury Bonds or cash).
- Volatility Indicator – had a recent sell warning and gives a hint of future weakness up ahead.
For now, the best advice is to remain on the sidelines getting ready for a retest of last week’s highs. A successful test will give the rally more time on the upside. But an unsuccessful test may lead to a sharp shakeout and increased volatility to the downside.
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In regards to Apple (AAPL), the stock may see its highs on Monday with the favorable news on its court ruling with Samsung. This is just the kind of “cover story” and obvious good news that tends to trap the amateurs into buying at the top! Any buying done here is at high risk! However, lightening up and getting out of long positions in AAPL would be considered prudent from a trader’s perspective.
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