STOCK MARKET OBSERVATIONS FOR May 18, 2014: The stock market advanced to new highs during the early part of last week. The small rally on Friday sets up the market for another retest of the previous high. Whether it closes above or below the previous high, the stock market appears to be losing its upside momentum and provides another chance to sell into strength. Overall, this is not an oversold, undervalued, or unpopular market to buy. If anything, it is one to sell.
Key underlying market indicators show the following
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My advice for traders and investors is to be largely in cash while the market sets itself up for its next big move. With most indicators showing “neutral” reading, a possible scenario is for the market to decline from here into an oversold condition. That would present nimble traders with a short-term buying opportunity to ride still further to the upside. But for now, it’s a “wait and see” policy that is most prudent.
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STOCK MARKET OBSERVATIONS FOR May 4, 2014: The stock market as measured by the Dow Jones Industrial Average hit new all-time highs. But those highs were largely unconfirmed by the majority of other indices. At present, the internal indicators listed below are showing “neutral” readings across the board. This means that the market has an equal chance of going in either direction. Remain patient and wait for the market to set itself up for its next major move. The old Wall Street adage, “Sell in May and go away,” may indeed prove to be the correct course of action.
Key underlying market indicators show the following
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My advice for traders and investors is to be largely in cash while the market is in this indecision pattern. There are currently no stocks or Exchange-Traded Funds that are in the “oversold” area. Along with the “neutral” readings on all of the internal indicators, this is most likely a time to sit and wait for the next major move to take shape.
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STOCK MARKET OBSERVATIONS FOR March 23, 2014: The stock market rallied sharply in the beginning of last week which prevented a true “oversold” condition from developing. With weakness towards the end of the week, the stock market is currently showing “neutral” readings across the board. This means that the market has an equal chance of going in either direction. So be patient and wait for the market to set itself up for its next important move.
Key underlying market indicators show the following
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My advice for traders and investors is to be largely in cash while the market is in this indecision pattern. There are currently no stocks or Exchange-Traded Funds that are in the “oversold” area. Along with the “neutral” readings on all of the internal indicators, this is most likely a time to sit and wait for the next major move to take shape.
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STOCK MARKET OBSERVATIONS FOR March 16, 2014: The stock market declined last week to a point where it is moderately oversold. By early this coming week, it could be ready to bounce upwards. In the recent past, oversold readings in the NYSE and Nasdaq Breadth Oscillators have been the best indicators for timing tradeable short-term bottoms. That may be the case again if the market were to rally right back up to challenge its previous highs. However, I am inclined to wait another week and let the sentiment turn more negative in order to cause a “panic-selling” bottom.
Key underlying market indicators show the following
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My advice for traders and investors is to be ready to buy into the market for a quick ride back up to challenge the previous market highs. That exact moment may be hard to pin down so it would be wise to make even money bets on last hour declines or early morning weakness. This is done with the understanding that the bottom could be very tricky to trade with accuracy. My best guess is that a tradeable bottom is 2 to 8 trading days away. But I’d warn everyone to expect volatility in the next couple weeks as the market over-reacts to both positive and negative external news events.
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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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STOCK MARKET OBSERVATIONS FOR February 9, 2014: The stock market reached oversold levels last week and is now poised to rally further. While a retest of the lows could occur at the beginning of next week, it is certainly possible for the market to simply hesitate at this level to digest the recent gains. While the majority of indicators are in neutral positions, a little bit of weakness early this coming week may be your only opportunity to hop on board for what could be a big rally worth the risk.
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 buy on any weakness in the beginning of the coming week. The majority of internal indicators are in neutral positions now. The optimal time to buy was last Wednesday so getting in on the absolute low doesn’t look likely in this next week. Things do change quickly is this current market environment so stay alert!
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STOCK MARKET OBSERVATIONS FOR February 2, 2014: The stock market has now reached oversold levels that are consistent with recent trading lows. However, the danger is that the closing high on December 31, 2013 may have been a major bear market top with much more to go on the downside. While many investors and traders are looking for a relief rally to occur, it may be smarter to wait for a retest of previously established lows. That scenario puts us at least a week or two away from a tradeable bottom at the earliest. In my opinion, this decline still needs more time and “bad news” in order for the sentiment to shift significantly towards the bearish side.
Key underlying market indicators show the following
Another way to look at the general market is to see if there are matching oversold “Full Stochastics” readings on the major ETF broad-based averages. You will notice that all major intermediate bottoms start after oversold reading. Current readings show that the market is oversold enough in terms of price.
- DIA – Full Stochastic – 10 (Buy) on lagging red line
- SPY – Full Stochastic – 17 (Buy) on lagging red line
- QQQ – Full Stochastic – 19 (Buy) on lagging red line
- IWM – Full Stochastic – 18 (Buy) on lagging red line
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My advice for traders and investors is exactly the same as last week’s: remain on the sidelines and let the market set itself up for a possible bottom in the intermediate term. The majority of internal indicators have moved into buy readings but need more time in the misery zone. Expect a short-term bounce early next week and then a retest 5 to 10 days after those previous lows. The time to take a chance on the long side is when weakness occurs amid obvious bad news on the retest of previous lows. That could come in mid-February so be ready to act!
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Note: Stock that have moved into their buy range according to the Money Flow Indicator include the following: General Electric, Citigroup, Starbucks, and Wal-Mart.
Categories: Stock Market Strategy Tags: Citigroup, General Electric, investing, investments, Starbucks, stock action, stock market, stock tips, trading tips, Wal-Mart, wall street
STOCK MARKET OBSERVATIONS FOR January 26, 2014: The stock market corrected sharply during this past week. While I did expect a little more strength earlier in the week, the overriding message was to stay out of long positions. This proved to be wise advice as almost all sectors experienced large percentage losses during the week. From here, the majority of internal indicators are about a day away from becoming oversold enough to produce a technical bounce. But I’d still expect that the final lows for this move aren’t going to happen until at least February.
Key underlying market indicators show the following
Another way to look at the general market is to see if there are matching oversold “Full Stochastics” readings on the major ETF broad-based averages. You will notice that all major intermediate bottoms start after oversold reading. The current readings require more time before reaching oversold levels. Note: The QQQ does not always reach oversold readings at bottoms due to its high relative strength:
- DIA – Full Stochastic – 37 (neutral) on lagging red line
- SPY – Full Stochastic – 61 (neutral) on lagging red line
- QQQ – Full Stochastic – 83 (neutral) on lagging red line
- IWM – Full Stochastic – 79 (neutral) on lagging red line
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My advice for traders and investors is to remain of the sidelines and let the market set itself up for a possible bottom in the intermediate term. The majority of internal indicators have moved into buy readings but need more time in the misery zone. Expect a short-term bounce early next week and then a retest 5 to 10 days after those previous lows. The time to take a chance on the long side is when weakness occurs amid obvious bad news on the retest of previous lows. That should come in February most likely.
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Note: Stock that have moved into their buy range according to the Money Flow Indicator include the following: General Electric and Berkshire-Hathaway.