MARKET OBSERVATIONS FOR October 20, 2013: As I mentioned last week, the stock market’s rallies and declines over the past few months have ranged between 14 and 17 trading days. The October 8th bottom comes exactly 14 days after the most recent closing high in the Dow Industrial Average. The current rhythm of the market suggests that the next top should come between 14 and 17 days after the October 8th bottom. That means that the end of this rally in terms of time is scheduled to arrive around Oct 28-31. So there is still another week of upside before this market is ready to move downwards.
Key market indicators show the following:
For now, my advice for traders is to move to the sidelines as the stock market reaches the end of this month. The overbought readings along with overly-bullish sentiment makes it an ideal time to start selling positions and moving to cash. The news can’t get any better and the opportunity is to sell, not buy right now.
MARKET OBSERVATIONS FOR October 13, 2013: The stock market’s rallies and declines over the past few months have ranged between 14 and 17 trading days. The October 8th bottom comes exactly 14 days after the most recent closing high in the Dow Industrial Average. The current rhythm of the market suggests that the next top should come between 14 and 17 days after the October 8th bottom. Since we are only 3-4 days into the rally phase, there is still lots of time for the stock market to continue its current uptrend.
Key market indicators show the following:
For now, my advice for traders is to look for weakness early next week in which to take short-term “rental” positions in the QQQ, IWM, SPY, and DIA Exchange-Traded Funds. Expect to hold these positions into the end of the month. Otherwise, be ready to lighten up as the market’s rally runs out of time.
MARKET OBSERVATIONS FOR September 29, 2013: The stock market has declined steadily since its recent new closing Dow high. The most recent advance and decline have been between 14 and 17 days long. That timing pattern would suggest that the market still needs one more week of declining action in order to reach a bottom around October 8-10. In the meantime, the current list of relevant indicators suggests that an oversold condition will likely be met in the coming week. That being said, it looks like a buying opportunity is starting to shape up over the near term.
Key market indicators show the following:
For now, my advice for traders and investors to keep your powder dry in anticipation of a good buying opportunity in the next week or two. At this point, the sentiment has not changed significantly enough to warrant a bottom. But with a steady flow of negative news, the market can quickly change to one where savvy traders and investors can take intelligent risks to the upside.
MARKET OBSERVATIONS FOR September 13, 2013: The stock market has rallied to a point where it is overbought and about to form the right shoulder of a “head and shoulders top.” While it is still entirely possible for the market to continue its upward march towards new highs, it also could be near its end in terms of time. After a 17 session decline, the current rally will match that time by the end of next week. Since I never recommend going short or buying inverse ETFs, this is a time to be out of the market and waiting for a deeply oversold condition to establish new long positions in the weeks ahead.
Key market indicators show the following:
For now, my advice for traders and investors to get out of the market and wait for a better risk/reward environment. The September/October period is usually a time of increased volatility which could produce a deeply oversold condition in which to take new positions.
“B
uying low-beta stocks is a common mistake investors make. Why would you ever want to own boring stocks? If the market goes down 40 percent for macro reasons, they’ll go down 20 percent. Wouldn’t you just rather own cash? And if the market goes up 50 percent, the boring stocks will go up only 10 percent. You have negatively asymmetric returns.”
Source: Schwager, Jack D. (2012-04-25). Hedge Fund Market Wizards. John Wiley and Sons. Kindle Edition.
“I
f a stock is extremely oversold—say, the RSI is at a three-year low—it will get me to take a closer look at it. Normally, if a stock is that brutalized, it means that whatever is killing it is probably already in the price. RSI doesn’t work as an overbought indicator because stocks can remain overbought for a very long time. But a stock being extremely oversold is usually an acute phenomenon that lasts for only a few weeks..”
Source: Schwager, Jack D. (2012-04-25). Hedge Fund Market Wizards. John Wiley and Sons. Kindle Edition.
MARKET OBSERVATIONS FOR August 17, 2013: The stock market had a big drop last week as it heads into its August bottom. From this bottom, we should see a new rally which will either form the right shoulder of a “head and shoulders top” or challenge the early August highs. But so far, this decline has been a confusing one to analyze and trade effectively. Time and cycle studies indicate that Monday or Tuesday should see the low for August, but it remains to be seen what kind of strength, if any, awaits investors and traders. And despite last week’s weakness, it is still entirely possible that the decline could resume in earnest. So watch your step out there, play it tight to the vest, and keep your bets (position sizes) small.
Key market indicators show the following:
For now, my advice for traders is to wait for the next oversold condition and then take positions for an upside move into the Fall. But last week’s unusual TRIN readings on this current decline, shows an absence of selling. This makes it anyone’s guess as to how much further the market will drop in the coming week. Perhaps this is one of those times when it’s best to just stand aside and let the market set itself up for a better percentage move.
MARKET OBSERVATIONS FOR August 10, 2013: The stock market made a new closing high 5 trading sessions ago. Since that time, it has been in a slow, choppy decline where there has been an absence of buyers rather than an abundance of sellers. The previous high was largely confirmed by other major indicators and suggests that another “retest” rally will be made in the coming week. But the NYSE Summation Index is making the case for a significant low coming up in a couple of weeks.
Key market indicators show the following:
For now, my advice for traders is to wait for the next oversold condition and then take positions for an upside move into the Fall. But if the market were to rally here into an unconfirmed new high, I’d be wary that the highs for the year have been achieved and to stand aside in a defensive position of cash. Thus far, playing the short side of the market has been difficult to trade and is better off avoided by most people.
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The indicators for Apple (AAPL) read as follows:
- Current price: 454
- Relative Strength Indicator = 61 heading down
- Ultimate Indicator = 59 heading down
- Money Flow Indicator = 50 heading down
- 50-Day Moving Average = 435
The stock of Apple appears to have achieved its upside objective for this cycle in terms of price. I would wait to take new positions in the stock whenever any of the indicators (RSI, Ultimate, Money Flow) reach oversold readings. Of these, the Money Flow Indicator has been the most reliable one for swing trading. I’ve surmised that trying to chart this stock purely from a price standpoint has been an exercise in futility. The best trading results for the past year have been by simply relying on the Money Flow Indicator to identify low-risk buying areas to go long.
“Do you know what happens in a bull market? Prices open up lower and then go up for the rest of the day. In a bear market, they open up higher and go down for the rest of the day. When you get to the end of a bull market, prices start opening up higher. Prices behave that way because in the first half hour it is only the fools that are trading [pause] or people who are very smart.”
Source: Schwager, Jack D. (2012-04-25). Hedge Fund Market Wizards. John Wiley and Sons. Kindle Edition.
Categories: Trading & Investing Quotations Tags: AAPL, investing, QQQ, stock action, stock market, stock tips, stock trading, stock trading tips, trading, trading tips, wall street
“Staring at the screen all day is counterproductive. He believes that watching every tick will lead to both selling good positions prematurely and overtrading. He advises traders to find something else (preferably productive) to occupy part of their time to avoid the pitfalls of watching the market too closely.”
Source: Schwager, Jack D. (2012-04-25). Hedge Fund Market Wizards. John Wiley and Sons. Kindle Edition.
Categories: Trading & Investing Quotations Tags: AAPL, investing, QQQ, stock action, stock market, stock tips, stock trading, stock trading tips, trading, trading tips, wall street