STOCK MARKET STRATEGY FOR NOVEMBER 22, 2015: The stock market rallied sharply from the oversold condition that was described in last week’s post. At the present time, the market is neither oversold or overbought. The neutral readings of breadth indicators imply that the market can go in either direction from here. The odds favor a “Santa Claus Rally” in December which means that we should anticipate one more return to an oversold condition sometime in early-to-mid December.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: The market presented a buying opportunity at the last oversold condition on Monday’s opening. After such a robust rally, it’s probably too late to go long equities especially with resistance levels nearby, a possible negative reaction to a Fed hike, and a typical short-term December bottom preceding the traditional “Santa Claus Rally.” For these reasons, I would prefer to sell into additional strength, hedge any long positions, and keep the powder dry for a possible trading opportunity in the first half of December.
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STOCK MARKET STRATEGY FOR NOVEMBER 14, 2015: The stock market has been setting up for a trading low this past week. With the events in Paris, the market could experience a large gap opening to the downside on Monday’s opening. But with nearly all breadth indicators at historical trading lows, this “cover story” may serve to be the catalyst for a climatic bottom. Don’t be surprised if Monday proves to be an important intermediate bottom from which the “year-end rally” takes us back up to the all-time highs.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: The market looks to be in the vicinity of an important trading low. While we may have one or two more down days, it may be wise to start taking pilot positions in stocks with high correlations to the upside. That would include all of the broad-based ETFs. But be careful about taking too large a position because the news could be scary while this bottom takes it form. It will be important to remain emotionally-detached during this trading period and control your risk.
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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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