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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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 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 AUGUST 7, 2012: The stock market rally is continuing its move upwards climbing the proverbial “Wall of Worry.” Having spent so much time in a negative breadth environment over the last several months, it would not be surprising to see the market continue upwards for a much longer time.
The McClellan Summation Index has not shown much improvement despite the several hundred points of advance. This means that while prices have advanced significantly, the underlying market has not been quite as strong. This may be a warning of a possible retreat by way of its blatant non-confirmation.
Other key market indicators show the following:
For now, the best advice is to remain on the sidelines and let the rally play out. If there is a correction in the next week or so, you might find an opportunity to make a small short-term wager on the market’s retest of the highs. But overall, the market’s trend is up and long positions in conservative diversified Exchange-Traded Funds such as SPY, DIA, or QQQ should work out well for the time being.
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In regards to Apple (AAPL), the stock took off to the upside despite the one day crash it experienced after its earnings disappointment. The Money Flow Indicator has a reading of 54 and has hardly moved up in the last rally phase. The “Full Stochastics Indicator” and the “Ultimate Indicator” are close to being overextended but a retest of the old highs around 644 is in clear striking range. My guess is that the old highs will be broken, but it isn’t a time to buy it.
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.