Wall Street Craps – 2012 Global Ebook Finance Award-Winner

“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.

“Traders 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 August 6, 2013: The stock market has continued its march upwards despite any rest for over a month. Expect this winning streak to continue until we see some obvious non-confirmations to the downside. For now, it looks like any near-term correction could create a quick oversold condition for another ride to new highs. The last phase of this advance should see strength in the DOW and QQQ Indexes while breadth weakens. This has not happened yet.

Key market indicators show the following:

• Investor Sentiment – Short-term = 60 neutral/Long-term = 60 neutral
• NYSE Breadth Oscillator – Ultimate Indicator reading of 31 – nearly oversold
• Nasdaq Breadth Oscillator – Ultimate Indicator reading of 40 – neutral
• Risk On/Risk Off Indicator – Ultimate Indicator reading of 51 – neutral
• NYSE Summation Index – Clustering at present level showing neutral

For now, my advice for traders is to buy into any dip that corresponds to an oversold reading. This current rally has its doubters and will continue to “climb a wall of worry” until the bears capitulate. The most recent highs appear to have been strongly confirmed which gives the market more weeks to the upside.

**********

The indicators for Apple (AAPL) read as follows:

• Current price: 469.45
• Relative Strength Indicator = 74 overbought
• Ultimate Indicator = 69 almost overbought
• Money Flow Indicator = 65 neutral
• 200-Day Moving Average = 465

The stock of Apple is finally broke decisively above its 50-Day Bear Market Moving Average. That means that this moving average no longer applies to the nature of the stock. A new “Bull Market Moving Average” will eventually form as the stock of Apple shifts to its new phase. But at this time, it cannot be determined what time frame the new moving average will get in sync with. But for now, a smart trader will be looking for a correction in the stock in order to ride this new phase upwards. That signal will probably come from an oversold condition in the Money Flow Indicator or Relative Strength Indicator.

MARKET OBSERVATIONS FOR July 10, 2013: The stock market continues to climb the proverbial “wall of worry” on the hope of reassuring news from the Fed. This current rally is in the position to challenge the market’s previous highs and may even surpass those May readings. But overall, this appears to be a time to wait for a pullback before it embarks on its challenge of the old highs.

Key market indicators show the following:

• Investor Sentiment – Short-term = 60 slightly overbought/ Long-term= 60 slightly overbought
• NYSE Breadth Oscillator – Ultimate Indicator reading of 60 – neutral/overbought
• Nasdaq Breadth Oscillator – Ultimate Indicator reading of 74 – overbought
• Risk On/Risk Off Indicator – Ultimate Indicator reading of 59 – slightly overbought
• NYSE Summation Index – Clearly on a bullish path upwards after making a significant intermediate term low.

For now, my advice is to buy into any dip that is triggered by obvious bad news. Active broad-based exchange-traded funds to consider buying would include DIA, SPY, QQQ, SSO. The NYSE Summation Index shows that the market should be strong for several more weeks.

**********

The indicators for Apple (AAPL) read as follows:

• Relative Strength Indicator = 50 neutral
• Ultimate Indicator = 58 and heading higher
• Money Flow Indicator = 29 with lots of room to move to the upside
• 50-Day Bear Market Moving Average = 427

The stock of Apple is in a position to go in either direction but seems to have an upwards bias. I was hoping for a retest of the old lows but got surprised by a Wall Street analyst’s “strong buy” recommendation that moved the stock up sharply for several days. It has since retraced some of those gains, but may be ready to rally again shortly.

MARKET OBSERVATIONS FOR June 12, 2013: The stock market reached a short-term bottom last Thursday morning. That bottom is about to be tested one week later which coincides with tomorrow. With extreme readings in the NYSE Breadth Oscillator over the past week, it is entirely likely that tomorrow will present a buying opportunity before the next leg up to new highs.

Key market indicators show the following:

• Investor Sentiment – Short-term = 30 oversold/ long-term=60 neutral
• NYSE Breadth Oscillator – Ultimate Indicator reading of 40 – neutral
• Nasdaq Breadth Oscillator – Ultimate Indicator reading of 40 – neutral
• Risk On/Risk Off Indicator – Ultimate Indicator reading of 47 – neutral
• NYSE Summation Index – Reading of -97 – a retest of last week

For now, my advice is to buy into weakness in oversold stocks or indexes with high positive correlations. Exchange-traded funds to buy would include DIA, SPY, QQQ, SSO. Oversold stocks to consider would include QCOM, BRCM, IYR.

**********

The indicators for Apple (AAPL) read as follows:

• Relative Strength Indicator = 42
• Ultimate Indicator = 38
• Money Flow Indicator = 44

This means that the stock of Apple is mid-ranged and can go in either direction. There isn’t any pressure on the stock to go in one direction verses the other. I’d personally stay away from this issue until one or more of its indicators show that it is oversold again.

THE APPLE BEAR MARKET OPTIMIZED MOVING AVERAGE UPDATE APRIL 20, 2013

The so-called “Apple Bear Market Optimized 50-Day Moving Average” currently stands at 443. The current price as of Friday’s close is 390. The 417-392 price range for accumulating the stock that was mentioned on the March 30th Update is now at its lower end. So based on price alone, this would seem to be a place to start buying. But in terms of the internal indicators, it may still be a little too early to do so.

(Click here for the chart for Apple)

Internal Indicators for Apple currently read as follows:

* Relative Strength Reading:  28.00 which is a buy signal under 30.00

* Ultimate Indicator Reading: 30.66 which is just barely missing the buy signal under 30.00

* Money Flow Indicator Reading: 33.77 which is a few points away from flashing a buy signal

**********

Based on these indicators, I would say that the stock of Apple is very close to a buy signal.  But it would take a triple buy signal for me to start accumulating the stock. I am especially cautious about buying Apple until we see a clear Money Flow Indicator buy signal well under a reading of 30. At that time, I would gradually wade into the position with the idea of trading it as it moves back up to test its dominate 50-day moving average around 440.

What I’m trying to gauge, is whether those who bought the stock last year on the much-publicized march up have finally given up on Apple. It may still take an obvious piece of bad news in order to get the fundamentally-trained holders of the stock to capitulate. It could be now, but it could also be at a later time. But for now, it would appear that a trading rally is close at hand.

Trading Note: That rally could start with a quick bounce, a scary but successful retest on obvious bad news, and then a move up to challenge the moving average. This could start happening next week so be ready.

MARKET OBSERVATIONS FOR MARCH 17, 2013: The stock market hit consecutive new highs for 10 trading sessions. That remarkable string was broken on Friday with the market’s modest decline. While the general market is certainly overbought by many measures, it is not as over-loved as you might expect. Since investor sentiment is still largely neutral, the market may correct in the short-term and then present investors with another chance to buy for the next leg up. That appears to be a less risky approach to making money than trying to short this relentlessly bullish market.

Key market indicators show the following:

• Investor Sentiment – short-term neutral & long-term moderately over-loved
• NYSE Breadth Oscillator – Ultimate Indicator reading of 51 – neutral
• Nasdaq Breadth Oscillator – Ultimate Indicator reading of 55 – neutral
• Risk On/Risk Off Indicator -Ultimate Indicator reading of 64 – near a sell signal

Many key breadth indicators  are showing neutral readings even after this persistent advance. If the market continues to march upwards in the coming week, it may present an opportunity to buy the Long-Term Treasury Bond ETF (TLT). This is one of the best ways to participate with less risk in a downward market as opposed to going short or buying inverse Exchange-Traded Funds.

If the market heads down next week, it may set up a short term buying opportunity for a continuation of this advancing market. So be ready to move in either direction as the market reveals its next opportunity for traders and investors.

**********

THE APPLE BEAR MARKET OPTIMIZED MOVING AVERAGE UPDATE MARCH 9, 2013

The Money Flow Indicator hit 5.13 during this past week. Both the RSI and ULT Indicators made brief buy signals shortly afterwards. Thus, this triple buy signal made it possible to take initial positions in this undervalued, oversold, and unpopular high-quality stock. (Click here for the chart for Apple)

But the price action since this triple buy signal has been more of a “dead cat bounce.” Perhaps, the stock is not yet ready to advance. My guess is that the stock of Apple will experience a lot of selling as the end of the quarter approaches. Many money managers with large positions in the stock will not want this on their books at the end of quarter. The stock of Apple will most likely be ready to advance after this selling period is over.

On the trading side, it seems to me that the stock needs one more thrust downward in order to shake out all of the weak hands. It may take a move to the 410-400 price area in order for that to happen. It could do so intraday so a limit buy order may be required in order to capitalize on such a move.

MARKET OBSERVATIONS FOR MARCH 9, 2013: The stock market hit consecutive new highs during the last 6 trading sessions. This is a classic example of letting a powerful move run its course and resisting the urge to short. The upside momentum has probably peaked at this time, but after a short correction, I’d expect at least one more overshoot rally to a new closing Dow high. In order for that scenario to pan out, we first need a sharp and broad correction lasting a week to 10 days. Then one final narrow advance up to a new high which is not confirmed by breadth and other broad-based averages.

Key market indicators show the following:

• Investor Sentiment – is surprisingly both short-term & long-term neutral
• NYSE Breadth Oscillator – Ultimate Indicator reading of 75 – a clear sell signal
• Nasdaq Breadth Oscillator – Ultimate Indicator reading of 78 – also a sell signal
• Risk On/Risk Off Indicator -Ultimate Indicator reading of 68 – 2 points away from a sell

With many key breadth indicators at or near sell signal levels, I would be looking for a correction to begin on Monday. This will be the first leg down with most likely a retest of Friday’s highs in one to two weeks. Since the “Wall Street Craps Method” discourages both leverage and shorting the market, the best thing to do is remain on the sidelines and let the market correct. Then look for either a short-term upside opportunity in the general market or a trade in the Long Treasury Bond ETF (TLT).

Remember that the sentiment indicators show that market participants are still neutral. This is not a sign of a major top. So a correction here would give nimble traders and investors a chance to ride this market up when the rally resumes.

**********

THE APPLE BEAR MARKET OPTIMIZED MOVING AVERAGE UPDATE MARCH 2, 2013

The Money Flow Indicator hit 13.66 with Friday’s close. This is a clear buy signal and the first chance to take a position in Apple. Both the RSI and ULT Indicators are in the low 30s which are also very close to flashing buy signals on any further weakness. Now is the time to gradually wade into this undervalued, oversold, and under-loved high-quality stock!

Note: Monday March 4th or Tuesday March 5th could experience a sharp spike down (possibly towards 420-407) to buy into. Don’t be afraid to pull the trigger. It will be difficult to get the perfect price, but now is an optimal time. Remember, there is also the risk of missing out on a good opportunity!  (Click here for the chart for Apple)