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.
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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MARKET OBSERVATIONS FOR AUGUST 22, 2012: The stock market went to new rally highs today before settling back. This intraday high will probably be tested within 5 trading days. If this new high is not confirmed by a majority of indicators, I will go on the assumption that the rally has seen its peak. Investors and traders can expect either a short-shallow correction that sets up a top or a deeper correction that sets up another leg up. Either scenario is possible. The key is not to fall in love with any particular scenario & read the correction accurately for clues.
Key market indicators show the following:
- McClellan Summation Index – appears to be reforming in order to support another leg of this rally. This could mean that the current correction serves to eliminate the excess bullishness and refuel the market for more higher highs.
- Investor Sentiment – is in the mid-range area with no clear signal (more room on the upside)
- NYSE Breadth Oscillator – Ultimate Indicator reading of 47 and may flash a possible buy signal on a short-term correction.
- Nasdaq Breadth Oscillator – Ultimate Indicator reading of 56 and may flash a buy signal on a short-term correction
- Risk On/Risk Off Indicator – has a reading of 68 and has recently flashed a short-term sell warning
- Volatility Indicator – had a recent reading over 100 which is a clear sell warning
For now, the best advice is to remain on the sidelines getting ready for a near term correction in the stock market. If we get a buy signal from the NYMO and NAMO, then it might be prudent to put a small wager on some quick upside action (Example: QQQ). But large long positions should look to lighten up as the market retests the highs within the next 7-10 trading days.
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In regards to Apple (AAPL), the stock has had a big run-up on anticipation of the new iPhone release and other fundamental reasons. It is reaching overextended levels and smart investors should consider taking some chips off the table at this very opportune time. Note: The “Money Flow Indicator” and “Ultimate Indicator” are both flashing very clear “sell signals” right now.
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MARKET OBSERVATIONS FOR AUGUST 14, 2012: The stock market appears to be near the end of its summer rally. The internal indicators are showing more weakness than strength. On the other hand, the stock market is certainly not over-bought in terms of breadth nor over-liked by investor sentiment. Hence, the market can still respond to the upside on more good fundamental news. While anything can happen, the present “Triple Top” price formation looks like there is a lid to more upside progress.
The McClellan Summation Index has not participated much in the recent rally. This indicates a low-powered rally that is not yet fueled by strong buying. This indicator is not confirming the rally and serves as a warning to tread lightly and not be surprised by quick downside price action.
Other key market indicators show the following:
For now, the best advice is to remain on the sidelines or lighten up on present positions as the market challenges the “Triple Top” formation. With so much resistance to further upside progress, a wise investor would expect more sideways or downside action instead of upside in the near term.
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In regards to Apple (AAPL), the stock has shown remarkable strength on this last market rally despite its recent report of lower than expected earnings. The Money Flow Indicator has a reading of 78 which is only two points away from a sell signal. Because of the current legal case with Samsung, this stock appears to be ready to jump in either direction based on the outcome of the trial. But because of its high Money Flow Reading and price resistance near its old high, this is a stock that I’d rather watch than bet on now.
MARKET OBSERVATIONS FOR JULY 30, 2012: The stock market threw the proverbial “curveball” at traders the last six trading sessions by going down 300 points and then returning up even more. The ideal time to have bought was intraday on Tuesday but that would have required one to perform the difficult and risky task of “catching a falling knife.”
The McClellan Summation Index looked like it was about to come crashing down on Tuesday but instead is now in a hesitation pattern, giving no clear-cut signals as to the future direction of the market. Since its time in the rally phase has been relatively short, there is still plenty of room to go up in terms of time.
Other key market indicators show the following:
For now, the best advice is to remain on the sidelines getting ready for a possible retest of last Tuesday’s low. Otherwise, expect another day of strength before a correction takes place. We will monitor the correction in order to determine if the rally has legs to it. Based on the long stretch of negative breadth days, it would not surprise us to see the stock market go into the “climb the wall of worry” phase to new highs in terms of price and several more weeks of rallying in terms of time.
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In regards to Apple (AAPL), the stock had a big one-day correction which broke the back of its recent rally. This sets up the possibility of the stock traversing its trading range towards a possible buy point in the next month. The Money Flow Indicator has a reading of 41 after hitting a short-term upside target of 80. It now has a good chance of reaching a buy signal under 20 in August. The “Full Stochastics Indicator” has already approached a buying area and is the first indicator to signal that a buyable low is not too far away in time. The price to buy Apple will probably be on the day it tests its previous low at 522 as well as the 200-day moving average which now stands around 520. I’d start making small bets on any move under 535 if that should occur. The last move down could turn out to be a brief one-hour intraday spike.
Note: The news and price action of Apple proved to be a distraction during this past week. It confirms my “Wall Street Craps Rule: Don’t Play Your Favorites.” When an investor pays too much attention to one stock, it prevents that person from reading the overall market correctly. That’s how this last buying opportunity was missed last Tuesday.
MARKET OBSERVATIONS FOR JULY 15, 2012: The stock market staged a big “relief rally” last Friday which quickly alleviated the oversold condition of the general market. In fact, the TRIN Indicator was negative 10 days in a row which is extremely one-sided in terms of breadth. The only thing that was missing from a good buy signal was a more downside action in terms of price. For more nibble traders, the ideal time to have bought was mid-day on Thursday. That bottom sets up a 5- day retest of the intraday lows that is expected around Thursday of this coming week. Be prepared to buy on weakness backed by “obvious bad news” into the Wednesday-Friday time period.
The McClellan Summation Index appears to be in a topping formation. This occurs whenever you see a cluster of dots after an extended period of advance like we’ve seen over the past month. So this indicator is preparing us for a large decline (the primary signal now) or a confusing pause before resuming the current uptrend.
Other key market indicators show the following:
- Investor Sentiment – is in the mid-range area with no clear signal
- NYSE Breadth Oscillator – gave a buy signal after Thursday’s close in the “Ultimate Indicator” – the “Full Stochastics” still need to move down to the lower parameter near -80
- Nasdaq Breadth Oscillator – also gave a buy signal after Thursday close in the “Ultimate Indicator” – the “Full Stochastics” still need to move down to the lower parameter near -80
- Risk On/Risk Off Indicator – a reading below 30 is needed for a buy signal – the current reading is only 44
For now, the best advice is to remain on the sidelines getting ready for a near term bottom in the stock market. The NYSE Breadth Oscillator and Nasdaq Breadth Oscillator have already given buy signals in the “ULT” indicator. The “5-Day Retest Pattern” tells us to be prepared to buy on weakness backed by obvious bad news into the Wednesday-Friday time period of this coming week.
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In regards to Apple (AAPL), the stock is coming off of a top at 619 and is expected to retest that high. It is anyone’s guess whether it will succeed or fail at this resistance. Sorry, but there isn’t much to say about trading this stock at this particular time. Savvy traders will stay away and let APPL set up for its next big move.
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In the event of a general stock market buy signal, prime candidates for participating on the upside include the QQQ, DIA, DDM, and SSO Exchange-Traded Funds.
MARKET OBSERVATIONS FOR JULY 11, 2012: The stock market has been in a steady decline for the past 9 sessions according to the daily TRIN indicator which reads the undercurrent in terms of breadth and volume. This sets the stage for a short-term tradable rally between July 17 and July 19 if this current trend continues in this “slow drain” (in price, breadth, and behavioral psychology) fashion.
The McClellan Summation Index appears to be topping out or setting up for one more run to the upside. For right now, I would not interpret this indicator as signaling anything in particular. (Note: Sometimes, even the best indicators do not have definitive readings.)
Other key market indicators show the following:
For now, the best advice is to remain on the sidelines getting ready for a near term bottom in the stock market. During this correction, watch the NYSE Breadth Oscillator and Nasdaq Breadth Oscillator for oversold readings in the “ULT” and “Full Stochastics” indicators for a possible short term buying opportunity. (Note: This may be only a minor movement which would call for making only small side bets on the upside.)
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In regards to Apple (AAPL), the stock has shown strength apart from the general market. In market declines, the strongest sectors tend to be the last ones to drop. The stock of Apple has become sort of an asset class all by itself! The Money Flow Indicator has a reading of 54 and has hardly moved since last week’s update. The “Full Stochastics Indicator” and the “Ultimate Indicator” have already reached overbought readings and a decline to at least the mid-range would be expected before another run to the upside begins.
In the event of a general stock market buy signal, Apple would be one of the prime candidates for participating on the upside along with the QQQ, DIA, DDM, and SSO Exchange-Traded Funds.
MARKET OBSERVATIONS FOR JULY 4, 2012: The stock market rally continued its move upwards climbing the proverbial “Wall of Worry.” It is now reaching an overbought area of resistance and is not likely to move much further on the upside without some consolidation first over the next couple of weeks.
The McClellan Summation Index continues to give a clear reading that shows a strong rally based on breadth. This indicator cuts through the market B.S. of news and opinions and lets investors see and know whether the Bulls or the Bears are in control. Right now, the Bulls are running the show!
Other key market indicators show the following:
- Investor Sentiment – is close to being in the area of “Extreme Optimism”
- NYSE Breadth Oscillator – clearly overextended and due for a breather
- Nasdaq Breadth Oscillator – not as overextended as the NYSE breadth indicator
- Risk On/Risk Off Indicator – confirms the Summation Index and indicates a major move from safety to risk. This could be a major shift from the safety of Treasury Bonds to riskier asset classes such as corporate high-yield bonds or equities.
For now, the best advice is to remain on the sidelines getting ready for a near term correction in the stock market. After a week of consolidation or lower prices, you can reasonably expect a retest of the recent highs. We will have to reassess that top when it comes. But in the correction, watch the NYSE Breadth Oscillator and Nasdaq Breadth Oscillator for oversold readings and a possible short term buying trade.
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In regards to Apple (AAPL), the stock took off to the upside despite what many would consider “bad news” concerning competition from Microsoft and Google with tablet computers. The Money Flow Indicator has a reading of 52 and has hardly moved up in the last rally phase. The “Full Stochastics Indicator” and the “Ultimate Indicator” have much more room to the upside and both indicate that a retest of the old highs around 644 is a distinct possibility now.