Wall Street Craps – 2012 Global Ebook Finance Award-Winner

MARKET OBSERVATIONS FOR May 6, 2013: The stock market reached a new closing high on Friday. This blog anticipated this new high to be full of non-confirmations across the board. But this did not materialize. Instead, this new high was indeed confirmed by strength in the NASDAQ and neutral sentiment readings. Expect the rally to extend another 2-5 weeks at a minimum until a new high is reached in the Dow that is not confirmed by corresponding strength in other key areas.

Key market indicators show the following:

• Investor Sentiment – still neutral both short and long term
• NYSE Breadth Oscillator – Ultimate Indicator reading of 59 – neutral
• Nasdaq Breadth Oscillator – Ultimate Indicator reading of 62 – neutral
• Risk On/Risk Off Indicator – Ultimate Indicator reading of 63 – neutral

For now, my advice is to remain on the sidelines and let the market set itself up for its next big move. A short term top could materialize in the next or so. The resulting decline could present us with a buying opportunity in the tech sector. But in the meantime, the stock market continues to “climb a wall of worry.”

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As for Apple (AAPL), the stock has finally broken above its Bear Market Optimized 50-Day Moving Average. After hitting its price pivot points in the 417-392 range, the stock of Apple rallied enough to end its Bear Market. But it doesn’t automatically mean that the stock will go into an instant bull market. Instead, the stock of Apple could remain in a neutral position while it “backs and fills” a stronger base for a more sustained rally. I’d be looking to accumulate the stock on a 50% retracement into the 424-403 price range.

MARKET OBSERVATIONS FOR APRIL 29, 2013: The stock market may be headed to its final closing high in the Dow Jones Industrial Average. It is approaching overbought levels while remaining 150 points below its previous high. From a technical standpoint, the final closing high in the Dow Jone Industrial Average while not be confirmed by the majority of other key indicators or averages. Be on the lookout for this final solo march up by the Dow. On the other hand, if the Dow does have support from the majority of other averages, then this rally can continue higher into June.

Key market indicators show the following:

• Investor Sentiment – is still in a neutral position
• NYSE Breadth Oscillator – Ultimate Indicator reading of 68 – close to a sell signal
• Nasdaq Breadth Oscillator – Ultimate Indicator reading of 68 – close to a sell signal
• Risk On/Risk Off Indicator – Ultimate Indicator reading of 54 – neutral
• Dow Jones Transportation Average – shows a key divergence with a second lower hig

For now, my advice is to remain on the sidelines and let the market set itself up for its next big move. A major top could be ahead of us shortly. But the neutral sentiment readings cause me to think that the market still needs more time on the upside. Stay flexible and read the market as it moves in either direction for clues.

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THE APPLE BEAR MARKET OPTIMIZED MOVING AVERAGE UPDATE APRIL 20, 2013

The so-called “Apple Bear Market Optimized 50-Day Moving Average” currently stands at 443. The current price as of Friday’s close is 390. The 417-392 price range for accumulating the stock that was mentioned on the March 30th Update is now at its lower end. So based on price alone, this would seem to be a place to start buying. But in terms of the internal indicators, it may still be a little too early to do so.

(Click here for the chart for Apple)

Internal Indicators for Apple currently read as follows:

* Relative Strength Reading:  28.00 which is a buy signal under 30.00

* Ultimate Indicator Reading: 30.66 which is just barely missing the buy signal under 30.00

* Money Flow Indicator Reading: 33.77 which is a few points away from flashing a buy signal

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Based on these indicators, I would say that the stock of Apple is very close to a buy signal.  But it would take a triple buy signal for me to start accumulating the stock. I am especially cautious about buying Apple until we see a clear Money Flow Indicator buy signal well under a reading of 30. At that time, I would gradually wade into the position with the idea of trading it as it moves back up to test its dominate 50-day moving average around 440.

What I’m trying to gauge, is whether those who bought the stock last year on the much-publicized march up have finally given up on Apple. It may still take an obvious piece of bad news in order to get the fundamentally-trained holders of the stock to capitulate. It could be now, but it could also be at a later time. But for now, it would appear that a trading rally is close at hand.

Trading Note: That rally could start with a quick bounce, a scary but successful retest on obvious bad news, and then a move up to challenge the moving average. This could start happening next week so be ready.

MARKET OBSERVATIONS FOR APRIL 15, 2013: The stock market continues to climb the proverbial “wall of worry” and in the process causing short-sellers to throw in the towel. But with a few key oscillators near sell levels, I would expect a short correction in the near term. That would be followed by an upside test of the recent highs. That next rally should probably tells us whether it is the last move in this rally or if there is more to go. I wouldn’t rule out the idea that the current rally could last into June.

Key market indicators show the following:

• Investor Sentiment – is still in a neutral position
• NYSE Breadth Oscillator – Ultimate Indicator reading of 68 – close to a sell signal
• Nasdaq Breadth Oscillator – Ultimate Indicator reading of 64 – approaching a sell signal
• Risk On/Risk Off Indicator – Ultimate Indicator reading of 43 – neutral
• Dow Jones Transportation Average – shows a key divergence with other major averages

For now, my advice is to remain on the sidelines and let the market set itself up for its next big move. A short-term top is only a few trading sessions away. That could lead to a short & sharp dip that may be worth buying into. But it appears that the upside is generally limited from this point on.

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As for Apple (AAPL), the stock has drifted back down towards it base around 420. Meanwhile, the Bear Market Optimized Moving Average for Apple stands at 451. The price pivot points looks for a possible move to the 417-392 range. It may take such a move in order to get the last weak hands to give up their stocks to stronger long-term hands. After such a time, the good news will follow about the next dividend boost resulting in a new Apple advance. Be patient and wait for a possible move into this lower price range.

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:

• Investor Sentiment – short-term neutral & long-term moderately over-loved
• NYSE Breadth Oscillator – Ultimate Indicator reading of 55 – neutral
• Nasdaq Breadth Oscillator – Ultimate Indicator reading of 50 – neutral
• Risk On/Risk Off Indicator -Ultimate Indicator reading of 48 – neutral

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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THE APPLE BEAR MARKET OPTIMIZED MOVING AVERAGE UPDATE MARCH 30, 2013

As I stated on March 5th, the Money Flow, Relative Strength, and Ultimate Indicators triggered buy signals for the stock of Apple. Thus, this triple buy signal made it possible to take initial positions in this undervalued, oversold, and unpopular high-quality stock near the absolute bottom around 420. Then the stock rose to an intraday high of 469 which was just above the 50-day Optimized Moving Average at that time. But without a decisive move above this moving average, the stock fell back to its current price of 442.

(Click here for the chart for Apple)

The so-called “Apple Bear Market Optimized Moving Average” currently stands at 462, which is 20 points away. This moving average has served as the cap on three previous rallies in Apple over the past several months and appears to have put a lid on this most recent rally as well.

With the first quarter window-dressing out of the way, it is possible for Apple to challenge the Optimized Moving Average once again. If it fail to push through resistance at such an attempt or simply heads down from here, I would expect a retest of the early March lows around the 417-392 price range. A successful retest could be in store for the stock so I’d start accumulating the stock on any move close to that price area.

Note: The final phase of a market decline is often marked by investor apathy rather than by fear. Those who follow Apple may have noticed how much less talk there is on Wall Street about this stock in the last few weeks. This is a sure sign of apathy in regards to the stock of Apple.

THE APPLE BEAR MARKET OPTIMIZED MOVING AVERAGE UPDATE MARCH 20, 2013

On March 5th, the Money Flow, Relative Strength, and Ultimate Indicators triggered buy signals for the stock of Apple. Thus, this triple buy signal made it possible to take initial positions in this undervalued, oversold, and unpopular high-quality stock near the absolute bottom around 420.

(Click here for the chart for Apple)

Since that time, the price of Apple has rallied to a current price of 452. The so-called “Apple Bear Market Optimized Moving Average” stands at 464, just 12 points away. This moving average has served as the cap on three previous rallies in Apple over the past several months. As long as the price of Apple stays under the Optimized Moving Average, it is still considered to be in a bear market phase.

If the stock does not rally through the Optimized Moving Average at this time, I would expect a retest of the early March lows around the 425-407 price range. A successful retest could be in store for the stock so I’d start accumulating the stock on any move close to that price area.

MARKET OBSERVATIONS FOR MARCH 17, 2013: The stock market hit consecutive new highs for 10 trading sessions. That remarkable string was broken on Friday with the market’s modest decline. While the general market is certainly overbought by many measures, it is not as over-loved as you might expect. Since investor sentiment is still largely neutral, the market may correct in the short-term and then present investors with another chance to buy for the next leg up. That appears to be a less risky approach to making money than trying to short this relentlessly bullish market.

Key market indicators show the following:

• Investor Sentiment – short-term neutral & long-term moderately over-loved
• NYSE Breadth Oscillator – Ultimate Indicator reading of 51 – neutral
• Nasdaq Breadth Oscillator – Ultimate Indicator reading of 55 – neutral
• Risk On/Risk Off Indicator -Ultimate Indicator reading of 64 – near a sell signal

Many key breadth indicators  are showing neutral readings even after this persistent advance. If the market continues to march upwards in the coming week, it may present an opportunity to buy the Long-Term Treasury Bond ETF (TLT). This is one of the best ways to participate with less risk in a downward market as opposed to going short or buying inverse Exchange-Traded Funds.

If the market heads down next week, it may set up a short term buying opportunity for a continuation of this advancing market. So be ready to move in either direction as the market reveals its next opportunity for traders and investors.

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THE APPLE BEAR MARKET OPTIMIZED MOVING AVERAGE UPDATE MARCH 9, 2013

The Money Flow Indicator hit 5.13 during this past week. Both the RSI and ULT Indicators made brief buy signals shortly afterwards. Thus, this triple buy signal made it possible to take initial positions in this undervalued, oversold, and unpopular high-quality stock. (Click here for the chart for Apple)

But the price action since this triple buy signal has been more of a “dead cat bounce.” Perhaps, the stock is not yet ready to advance. My guess is that the stock of Apple will experience a lot of selling as the end of the quarter approaches. Many money managers with large positions in the stock will not want this on their books at the end of quarter. The stock of Apple will most likely be ready to advance after this selling period is over.

On the trading side, it seems to me that the stock needs one more thrust downward in order to shake out all of the weak hands. It may take a move to the 410-400 price area in order for that to happen. It could do so intraday so a limit buy order may be required in order to capitalize on such a move.

MARKET OBSERVATIONS FOR MARCH 9, 2013: The stock market hit consecutive new highs during the last 6 trading sessions. This is a classic example of letting a powerful move run its course and resisting the urge to short. The upside momentum has probably peaked at this time, but after a short correction, I’d expect at least one more overshoot rally to a new closing Dow high. In order for that scenario to pan out, we first need a sharp and broad correction lasting a week to 10 days. Then one final narrow advance up to a new high which is not confirmed by breadth and other broad-based averages.

Key market indicators show the following:

• Investor Sentiment – is surprisingly both short-term & long-term neutral
• NYSE Breadth Oscillator – Ultimate Indicator reading of 75 – a clear sell signal
• Nasdaq Breadth Oscillator – Ultimate Indicator reading of 78 – also a sell signal
• Risk On/Risk Off Indicator -Ultimate Indicator reading of 68 – 2 points away from a sell

With many key breadth indicators at or near sell signal levels, I would be looking for a correction to begin on Monday. This will be the first leg down with most likely a retest of Friday’s highs in one to two weeks. Since the “Wall Street Craps Method” discourages both leverage and shorting the market, the best thing to do is remain on the sidelines and let the market correct. Then look for either a short-term upside opportunity in the general market or a trade in the Long Treasury Bond ETF (TLT).

Remember that the sentiment indicators show that market participants are still neutral. This is not a sign of a major top. So a correction here would give nimble traders and investors a chance to ride this market up when the rally resumes.

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