STOCK MARKET OBSERVATIONS FOR March 9, 2014: The stock market moved to only 120 points below its previous closing high recorded on December 31, 2013. Meanwhile, the Dow Jones Transportation Average moved to new highs this past week. This sets up a likely confirmation according to the classic interpretation of the Dow Theory. But this could become a trap for unsophisticated investors and throw off the majority by being a top instead. So be careful and avoid making new purchases here.
Key underlying market indicators show the following
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My advice for traders and investors is to remain of the sidelines and let the market set itself up for either a possible top on a new closing new in the DJIA or a short-term trading bottom on an oversold condition. With the majority of internal indicators in “neutral” positions, the stock market can go either way with equal odds.
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STOCK MARKET OBSERVATIONS FOR March 2, 2014: Last week, the stock market reached the upper end of its trading range. In fact, many people would argue that the market has broken out to new highs. But while several stocks and indices have advanced to new highs, many traditional sectors such as Industrial, Transportation, Retail, and Financial have lagged badly in this current rally. Unless strength rotates into these weaker core areas, I wouldn’t be surprised to see the DJIA make a new token closing high and then begin an immediate correction of major proportions.
Key underlying market indicators show the following
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My advice for traders and investors for this week is this: move to the sidelines and let the market correct into an oversold condition. Then add to long positions in strong sectors for a final ride to the top. The majority of internal indicators are mixed as of today. That means that the market has an equal chance to go in either direction. But the only prudent low-risk strategy to capitalize on this market is to buy on the next oversold condition. That may take another week or so to set up properly.
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STOCK MARKET OBSERVATIONS FOR February 17, 2014: The stock market quickly reached overbought levels by the end of last week. While this rally has been impressive by its straight-up action, it could still stall out in this current price range. The lagging performance of the Dow Jones Transportation Average is setting up a classic Dow Theory Sell Signal should the DJIA reach new highs while the Transports clearly don’t. It’s probably too early to short the market (I don’t recommend this as a wise strategy) but it certainly isn’t a time to go long the broad market.
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 sell on any strength during the coming week. The majority of internal indicators are in overbought positions now. The optimal time to sell is when the majority of indicators have started to come down after reaching their highest points. That means that some additional rallying could occur over the short-term. But selling into strength after an extended rally is usually a good strategy. If a small correction starts this week, then you may have another chance to hop on-board the long side in well-chosen individual stocks. Remember that “overbought” does not necessarily mean “sell.” It means “do not buy now.”
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MARKET OBSERVATIONS FOR December 22, 2013: The stock market rallied right from the start of last week and didn’t give traders a chance to buy into any weakness. As of Friday December 20th, the Dow Jones Industrial Average has hit 3 consecutive new closing highs. The first week of 2014 may turn out to be a top of some significance, so traders and investor beware! But until we get a key interday reversal to the downside and a weak retest of the highs, my bet is on the market to continue higher.
Key underlying market indicators show the following:
For now, my advice for traders and investors is to remain of the sidelines and let the market set itself up for the next major move. Oversold Blue Chips stocks and Exchange-Trade Funds that are near the lower range of their Money Flow Indicator and could be bought on weakness include: Starbucks, Microsoft, Verizon, Japan iShares, and China iShares.
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 July 10, 2013: The stock market reached a short-term bottom last Monday morning. Normally, one would expect a retest of that bottom in about 5 to 7 days. Therefore, we would expect some weakness on Monday and/or Tuesday as that retest. We had 3 days up from the bottom and can anticipate an equal 3 days down in this simple time symmetry. But the Summation Index clearly shows that we have already arrived at an intermediate term bottom and that smart traders/investors should get on-board for another bull run that will climb the proverbial “wall of worry.”
Key market indicators show the following:
For now, my advice is to buy into any weakness at the beginning of the week. Active broad-based exchange-traded funds to consider buying would include DIA, SPY, QQQ, SSO.
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The indicators for Apple (AAPL) read as follows:
- Relative Strength Indicator = 26 (buy signal under 30)
- Ultimate Indicator = 33 (buy signal under 30 which it was on Thursday’s close)
- Money Flow Indicator = 6 (buy signal under 20)
This means that the stock of Apple is now in a buy zone and time to start accumulating. While it would appear that a test of the previous lows around 383 can be expected, we’ve learned to expect the unexpected when it comes to this stock. With a 3% dividend, an investor will get paid to wait on this unpredictable stock.
THE APPLE BEAR MARKET OPTIMIZED MOVING AVERAGE UPDATE FEBRUARY 4, 2013: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 517 and dropping rapidly.
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.
Some key Apple indicators show the following:
- Relative Strength Indicator: “34” reading and not far from a buy signal under 30
- Ultimate Indicator: “31” reading and close to a buy signal under 30
- Money Flow Indicator: “43” reading which is far from being a buy signal under 20 (Note: This indicator has been the most timely and reliable of the three mentioned above!)
Until the “Apple Bear Market Optimized Moving Average” is broken to the upside, the trend is down for this popular stock. And until the Money Flow Indicator gets near 20, it still hasn’t gone enough to an extreme in this most accurate forecasting timer for buying Apple. For now, my crystal ball says that a turn to the upside in Apple will have to wait until mid-to-late February (approximately Feb. 18-23).
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.
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.)