MARKET OBSERVATIONS FOR JUNE 26, 2012: The stock market rally of the last few weeks is taking a breather. With Monday’s sharp drop, I would expect a retest of the early June lows sometime early next week. That would allow several of the internal indicators to set up for another buy signal.
The McClellan Summation Index is looking toppy and will probably zig-zag down to another point slightly above the early June lows. This would be a normal pattern for setting up a buy range to enter the market.
Other key market indicators show the following:
For now, the best advice is to remain on the sidelines getting ready for a buy signal in the near term either late this week or next. This may not be a major buy signal but one for a short run up. Don’t expect all stocks to participate in this run so avoid the temptation to buy low with energy stocks. Choose the broad-based ETFs like DIA and QQQ for accumulation. If things set up perfectly, then you could also make a side-bet on leveraged ETFs such as DDM and SSO.
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In regards to Apple (AAPL), the stock seems to have topped out for the near term at 590 and could head lower towards a good buy range just above 500. The Money Flow Indicator has a reading of 60 after hitting a short-term upside target of 80 and is quite a long distance to a buy signal around 20. The “Full Stochastics Indicator” is in a downwards zig-zag formation with a good chance of heading south toward a new buy area under 20 after Monday’s action. That would be the best time to buy APPL for a trade up. The price at that time would probably between its previous low at 522 and the 200-day moving average which now stands around 501. I’d start making small bets on any move under 530 if that should occur. The last move down could turn out to be an intraday spike.
MARKET OBSERVATIONS FOR JUNE 17, 2012: The stock market rally has taken many investors by surprise. This could lead to a “melt-up” type rally that is fueled by panic-stricken short-sellers covering their losing positions. But this is not an optimal time to buy the general market. The correct way to play this current market is to wait for the next oversold condition which is likely to be a retest of the June 1st lows. Otherwise, step aside and watch the show. The fact is you can’t catch all of the minor rallies if you’re weighing the risks.
The McClellan Summation Index has ended its decline and started a new uptrend. This usually precedes the external bottom in prices by a few weeks. Look to buy on any weaknesses if the market comes back to retest its June lows.
Other key market indicators show the following:
For now, the best advice is to remain on the sidelines awaiting weakness to buy on the long side. Most of the market indicators are mid-range and makes us aware that the market can move in either direction.
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In regards to Apple (AAPL), the stock is trading in an unusually tight range and not leading the market to the upside. On the shorter term, the Money Flow Indicator has a reading of 69 after hitting a short-term upside target of 80. The “Full Stochastics Indicator” is in a downwards zig-zag formation with a good chance of heading south toward a new buy area under 20. That would be the best time to buy APPL for a trade up. The price at that time would probably between its previous low at 522 and the 200-day moving average which now stands around 495. I’d start making small bets on any move under 530 if that should occur.
Incidentally, the stock that appears to be closer to a buy range in both price and time than Apple is Google (GOOG).
MARKET OBSERVATIONS FOR JUNE 11, 2012: The stock market broke to new lows on Monday and Tuesday of last week. The reversal last Tuesday may have been the end of the correction with the cover story being the bad economic news from Europe. The new uptrend is currently in a “reverse head and shoulders” chart pattern with a little bit of backing and filling needed over the next day or two. With the deeply oversold bottom in terms of breadth and sentiment (but not necessarily in the extent of prices in major indices), there is now a strong chance of the stock market going into a sustained rally phase over the intermediate term.
The McClellan Summation Index appears to have ended its multi-month decline last week. Time symmetry tendencies indicate that a matching rally phase should take us well into the summer in terms of volume and breadth. Keep in mind that the McClellan Summation Index reflects the internal market and will precede price movements which is the external market.
Key market indicators shows the following:
For now, the best advice is to buy on weakness over the near term in less risky positions. Last Tuesday was the time to buy riskier vehicles like leveraged ETFs. You can buy value-oriented ETFs and stocks on weakness. This decline may only last a few days so you may have to act quickly on this.
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In regards to Apple (AAPL), this current rally in the stock is fueled by expectations on upcoming positive announcements and strong fundamentals. On the shorter term, the Money Flow Indicator has a reading of 79 which is closer to a top than a bottom. But with this particular stock, the Money Flow Indicator can sustain a high reading while the stock continues to climb. It may be too late to buy this stock individually so the QQQs are probably the best way to participate in Apple’s rally.
MARKET OBSERVATIONS FOR JUNE 3, 2012: The stock market has broken through its basing pattern and can be expected to start a new leg down in price. That should lead to another chance to bottom out during the second or third week of June.
The McClellan Summation Index continues to confirm the market correcting heading towards lower prices. We may even see some climatic panic in the near term which will lead to a big bounce and then a retest of the bottom. And while breadth and sentiment have been negative all through the month of May, the price of the Dow Jone Industrials has not dropped enough to create the kind of negative emotions that usually mark a tradable bottom.
The following market indicators show that Monday is probably not an ideal day for taking action:
For now, the best advice is to keep your powder dry on the sidelines and let the market set itself up for its next move up. The next move down could be nasty so patience is the name of game. The next bottom over the near term may only be a bounce to relieve downside pressure. If we buy this next bottom, be ready to ride it up quickly and get out. The target date for the next low is June 12 plus or minus 1 day.
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In regards to Apple (AAPL), this current bounce off of the 1/3 retracement of its prior rally appears to have finished. The next low in Apple should come during the middle of June (previous bounces have been in mid-April and mid-May) and below the previous lows around $522. I’d guess that this next mid-June low could come between $503 (a 50% retracement of the previous rally) and its 200 day moving average around $488. Keep in mind that this low could be a spike down intraday and that a sharp trader should be ready to pull the trigger beforehand – anytime the price of Apple goes below the previous low of $522.
MARKET OBSERVATIONS FOR MAY 27, 2012:The stock market has been experiencing a bounce off of a very oversold condition in terms of breadth and sentiment. However, the extent of the decline in terms of price has not been significant. With the last closing high for the Dow Jones Industrials being on May 1, I go by the understanding that a major top and major bottom do not occur during the same month. Therefore, a low worth buying still appears to be a few weeks away.
In addition, a major Bradley Turn Date is scheduled for June 12. (Note: Bradley turn dates can be either indicate tops or bottoms.)
Since the May 18th lows, the stock market has had a classic “Dead Cat Bounce” which hasn’t gone up much at all. What has happened is that breadth and sentiment indicators have had a chance to relieve their downside pressure and chew up time. In fact, the short-term sentiment readings are neutral according to SentimenTrader.com which signifies that no action is required for the next few days.
While a successful retest of those lows could occur this coming Tuesday, the more likely scenario is for the market to resume its decline into a mid-June deeply-oversold low.
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In regards to previous comments about Apple (AAPL), this current bounce off of the 1/3 retracement of its prior rally may give way to a 50% retracement to the price of $503. I would also be a strong buyer of this stock if it touches its 200-day moving average which currently stands at $464. This stock remains the most undervalued large-cap growth company in the entire stock market and certainly worth owning on the next major rally either on its own or through ownership in the QQQs.
FROM APPLE EXPERT, EDITOR OF THE BULLISH CROSS ADVISORY & HEDGE-FUND MANAGER ANDY ZAKY: The two key levels of support for Apple’s stock in the intermediate term are $537 (32.8% retracement) and $503 (50% retracement) a share. We believe Apple presents with a unique buying opportunity at $537 and an extraordinarily rare opportunity at $503 a share. While we don’t believe the stock will ever see $503 a share, if Apple does reach that level, it would be the equivalent of $310.50 in June 2011 or $80.00 a share in March 2009.
Investors tend to over-complicate things. Apple (AAPL) will undoubtedly see $750 a share by January 2013 and will likely see $1,000 no later than the fall of 2013.
Thus, we believe the best thing to do is just to go in and buy now, ride any potential drawdown to $537 a share, ignore all of the nonsense you are likely to hear on the way down and beat Wall Street by being smart enough to realize what they often do not. And that is the fact that Apple will inevitably sell 100 million iPhones a quarter within the next few years. When that happens, Apple will be trading far north of $1,000 a share. Who cares about a $30 – $50 drawdown when there is over $500 in upside for the stock over the next year or so. Don’t make things so complicated. Just go in and buy.
Comment: The 200-Day Moving Average for AAPL is currently around 451 and rising. That would also be another place where the price of the stock may touch on the correction down. There is also a price gap between 425 and 450 that may end up being filled. This remains a legitimate possibility and one that fundamentally-oriented investors in Apple will find hard to swallow.
On the shorter term, the Money Flow Indicator has a reading of 32 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 day of bottom in June 2011 just over $310 a share. So be ready to make a small side-bet based on this one indicator if this should occur in the near future.
MARKET OBSERVATIONS FOR APRIL 21, 2012: The stock market’s breadth (advancing issues verses declining issues) continues to correct while prices try their best to rally. This sets up a market that is neither overbought or oversold enough in terms of breadth, sentiment, or price to make new buying decisions in the near term.
The Wall Street Craps approach calls to resisting the urge to short the market and to keep one’s powder dry in cash while waiting for the next buying opportunity. That first opportunity to take pilot positions may occur in the next week or so.
Since the last closing high in the Dow Jones 30 Industrial Average occurred on April 2nd, the more likely buying opportunity would be in the month of May at the earliest. This is based on the concept that selling opportunities and buying opportunities do not occur during the same month. That’s because it takes time to generate a significant shift in investor sentiment – a necessary ingredient for valid market signals.
Side-Bet Notes: Google (GOOG) is now approaching a possible buying opportunity as the Money Flow Indicator hit the 23 level on Friday. A move to the 15-20 range would mark a likely place for a short-term trading bottom. Apple (AAPL) still has much further to go before reaching a Money Flow Indicator buy signal.
MARKET OBSERVATIONS FOR APRIL 8, 2012: The stock market continues its correction into a late April to May bottom. The short side of the market continues to be tricky (as always). So it’s best to stay out of the market and on the sidelines – keep your powder – wait for a good buying opportunity that’s likely to come soon.
The McClellan Summation Index continues to show the market in a clear downtrend heading towards lower prices. When the time is ripe, we will be looking to take some large bets in a diversified portfolio of dividend-paying, Blue Chips equities in the form of actively-traded Exchange-Traded Funds. In addition, we will also look to take a solid position in the QQQs which are likely to be the speculative leader in the next rally.
My simple idea is to place 80% of trading funds designated for equities in SPY and DIA and 20% in the QQQ.
As far as total funds are concerned, I would place 80% in equities and 20% in high-yielding corporate bonds.
But first, the market needs to feel more pain! Maximum pain needs intensity, frequency, and duration. We haven’t reached that point yet.
MARKET OBSERVATIONS FOR MARCH 24, 2012: The stock market appears to be in a correction phase moving in the direction of the next buying opportunity. Most internal indicators are mid-range and don’t point in any particular direction. While some analysts will look at last week’s Apple dividend announcement as a sign of an approaching top, I would ignore the urge to go short now and wait instead for one last bull run into late April and May.
The McClellan Summation Index continues to show the market correcting heading towards lower prices. The trick is whether the March 6th bottom was an early cycle bottom or not. My guess is that the March 6th bottom will be tested shortly (as early as late next week) and prove to be a place for a good bounce up or even continuation of the recent bull run.
For now, the best advice is to keep your powder dry on the sidelines and let the market set itself up for its next move up. Betting the short side of the market will probably be tricky and distract you from making more significant bets when the market eventually bottoms. Remember that there’s a lot of money still out of the market or leaving the bond market and waiting to get in stocks or equities.
MARKET OBSERVATIONS FOR MARCH 10, 2012: The stock market experienced an interesting week where it corrected into a short-term oversold bottom and then rebounded in a 3-day rally. I would expect the market to retest Tuesday bottom in the next week.
Cycle studies point to a possible bottom around the March 16th time period. Also a major Bradley Turn Date is scheduled for March 19. (Note: Bradley turn dates can be either indicate tops or bottoms. If we get a weak rally to a new closing high, then this Bradley turn date would indicate a top. On the other hand, if we get a successful retest of last Tuesday’s bottom, then this Bradley turn date would indicate a bottom.)
So for those who want to go long in this market, a bottom worth buying could arrive either this coming week or next but only after there has been a successful retest of last Tuesday bottom.