MARKET OBSERVATIONS FOR MARCH 30, 2013: The stock market hit two new rally highs this past week, despite the negative-news coming from Europe. This relentless rally still does not show any real signs of correcting downwards in price. What it has done is chew up time by moving sideways and allowing the technical features of the general market to reach equilibrium. This means that the stock market can still go in either direction over the near term.
Key market indicators show the following:
The choppy action in the market last week allowed the market to neutralize its overbought condition. The general market is up against resistance at the present level. This is one of those times in which it’s too late to buy, too risky to sell short, and probably one in which a savvy market player would be willing to “take some chips off of the table.”
My advice is to keep your powder dry in case the market has a sharp near term correction during the months of April and May. Such a scenario would set up a good buying opportunity in mid-May.
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MARKET OBSERVATIONS FOR FEBRUARY 17, 2013: The stock market tested its February 1st during this part week. I would expect one or two more tests of these highs (Dow 14018) in the coming 10 trading days. If we should get a short and sharp decline, it could be an opportune time to go long for a quick trip back up to the old highs. The internal breadth indicators are largely neutral and show that the market has been under a mild correction from within.
Just because the market isn’t going up, don’t assume that it has to go down. It is entirely possible that the market is simply chewing up time before continuing its march higher. And speaking of March, that is the most likely month to expect a more sustained drop in the market. Right now, there are just too many bears predicting the end to this rally. When the bears get quiet, it will probably mean that the final top of this rally is in. We may be close to that time, but I don’t think we are there quite yet.
Key market indicators show the following:
Last week, I mentioned the Long-Term Treasury Bond Fund (TLT), Gold Miners (GDX), Silver Trust (SLV), and the China ETF (FXI) as possible speculations. But based on last Friday’s action, I will resist the temptation to “catch the falling knife” and avoid these stocks until things settle down. As I stated in my book, Wall Street Craps: How to Play Today’s Hot & Cold Stock Market For Fast Money With Less Risk, “buying in a panic is just plain risky.” Most high-percentage bottom are not at points of maximum fear, but instead at points of maximum apathy.
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MARKET OBSERVATIONS FOR JANUARY 28, 2013: The stock market’s advance continues its relentless push to new rally highs. According to my count, Friday’s advance was the 13th successive new high on this march up. This usually equates to a point of exhaustion and a period of non-advance. My guess is that we will see a high level consolidation in this area before a continuation of the advance. I don’t think that the market internals are overbought enough to warrant a decline. In fact, the internal breadth indicators are surprisingly neutral. It’s the price and behavioral indicators that are showing extremes.
Key market indicators show the following:
Like last week, 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. Don’t be surprised if the next phase of the market is a short squeeze inspired narrow advance. But right now, the rally is still broad-based and solid.
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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 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.