MARKET OBSERVATIONS FOR OCTOBER 9, 2012: The stock market is stalling at the top of its trading range right now. Any new closing highs in the Dow Jones Industrial Average will surely not be confirmed by the other key indices. I would look for a further and deeper correction in order to get the necessary sentiment shift that is needed before going strongly higher. But overall, this is a time in which the risk vs. reward is not that enticing for stock market bulls. I will continue to look for side-bets to play lightly in other areas like gold, bonds, and emerging markets until the US stock market sets itself up for a more major move.
Key market indicators show the following:
For now, it would be prudent to move out of stocks and into cash. This high-level consolidation could have a lot of non-confirmations of strength on any new Dow Jones Industrial closing highs. A cluster of new closing highs unconfirmed by the Transportation Index and Nasdaq Index would probably set up the market for a tumble shortly afterwards.
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In regards to Apple (AAPL), the stock continues to correct amid a lot of negative news. My guess is that this is setting up a great buying opportunity either late in October or early in November. The price level will probably be under the 600 mark and near its 200 day moving average around 580. But if we receive confirming buy signals from the Ultimate Indicator and Money Flow Indicator, it would be time to start accumulating the stock either through the stock itself, the QQQ ETF, or XLK ETF. As of Monday’s close, the Ultimate Indicator reading is 33 and the Money Flow Indicator is 31. These readings are only a few days from the first bounce in price for AAPL.
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MARKET OBSERVATIONS FOR SEPTEMBER 30, 2012: The stock market is still going through a very shallow correction in terms of price. I expect the old highs to be tested soon. The stock market may need to back and fill for another week before taking off again for the upside. While an argument can be made that the direction should be down, the current oversold condition of the market in terms of breadth makes me think that there is more to this rally. So don’t get complacent!
Key market indicators show the following:
- McClellan Summation Index – has started trending downwards. It is a warning that market breadth is going south.
- Investor Sentiment – is now mid-ranged in the short-term and long-term. The market can go either way.
- NYSE Breadth Oscillator – Ultimate Indicator reading of 33 is slightly above its mid-week reading of being oversold. I would expect another move down to retest the correction lows before heading back up.
- Nasdaq Breadth Oscillator – Ultimate Indicator reading of 34 after being in oversold range for most of last week. This confirms the NYSE Breadth Oscillator and it is expected to head back up shortly…perhaps after one more attempt to the downside.
- Risk On/Risk Off Indicator -Ultimate Indicator reading of 38 after barely touching oversold reading. This also confirms the breadth indicators of an oversold market.
For now, the best advice is to wait for a retest of either last week’s lows or the previous week’s highs within days. The market could surprise a lot of people by continuing it rally against the backdrop of a classic “wall of worry.”
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In regards to Apple (AAPL), the stock has had its typical 50 point correction this past couple of weeks. It may go up from here to challenge its recent high at 705 or go down to its 200-day moving average around 570. Near-term the stock is close to its first oversold reading in the Full Stochastics Indicator. That oversold reading would be the first place to start accumulating this stock for a trade.
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MARKET OBSERVATIONS FOR SEPTEMBER 25, 2012: The stock market is going through a very shallow correction in terms of price. I would expect the market to begin a short rally any day now as part of institutional window dressing. That rally should take the Dow to a new closing high. But the early part of October could bring the long-awaited swing to the downside in order to counter-balance the excessive euphoria and complacency in the market. That move down could end up being steep and swift as well. So be prepared!
Key market indicators show the following:
For now, the best advice is to remain on the sidelines getting ready for a retest of last week’s highs. For nimble traders, a short-term buy signal could come around Wednesday with further weakness in the market. That buy signal would be for a very short ride up to new highs. Be ready to sell out quickly if the new high does not have strength in other areas to confirm.
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In regards to Apple (AAPL), the stock may be finally making a case for weakness. A Wall Street Craps trading tool called “The Apple/Google Trading Indicator” has just flashed a sell signal on Apple. This indicator shows the relative strength of Apple vs. Google/Android in terms of leadership. I use it as an early sign of strength or weakness in the world’s most popular company, Apple. And today, it says “sell.”
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MARKET OBSERVATIONS FOR SEPTEMBER 20, 2012: The stock market has blown above its trading range with a successful test of the old highs. And while this move seems to have been triggered by obvious good fundamental news, a wise investor would be smart to go with the trend which is up. There’s nothing worse then being too clever in your analysis so that you end up fighting against a strong bullish trend with risky short-selling strategies. Remember that a market doesn’t change direction until it reaches a clear point of exhaustion which is not necessarily the most extreme price.
The McClellan Summation Index is consolidating its gains as shown by the cluster of dots on the chart. It may be regrouping for another charge to the upside.
Other key market indicators show the following:
- Investor Sentiment – is neutral in the short-term and overbought in the long-term
- NYSE Breadth Oscillator – has a reading to 51 and may come down enough for a re-entry point in this rally.
- Nasdaq Breadth Oscillator has a reading of 49 and may signal a new entry point with a short-term decline
- Risk On/Risk Off Indicator – actually flashed an overbought sell signal on Friday.
- Dow Theory/Dow Transportation Average – this index has not confirmed the strength in the other major averages. This is a concern for me as it signals that a top is being formed here. A new DJIA high in the short-term does not look like it will be confirmed by the Dow Jones Transportation Average. That would be a classic sell signal according to Dow Theory principles.
For now, the best advice is to remain on the sidelines getting ready for a chance to reenter the market on short-term weakness. That signal will be triggered by oversold breadth signals from the NYMO and confirmed by the NAMO. That could come in the next week so be ready. But if the weakness in the Transportation Average persists, I’d sell out and move to cash on the next DJIA high in all trading and speculative funds.
Quick Update: The Transportation Index fell sharply while the DJIA made a new high on Thursday’s close. This is a classic non-confirmation according to the Dow Theory. Expect market weakness at any time now.
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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 SEPTEMBER 4, 2012: The stock market still has the possibility of retesting its high around August 17. It is not far from there in terms of price. Friday’s rally helped ease a short-term oversold condition in the market. This is one of those times when the market can go in either direction without a clear case for either.
Key market indicators show the following:
For now, the best advice is to remain on the sidelines getting ready for a retest of the August 17th 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. Otherwise, the market could down from here and needs more selling in order to generate a decent oversold condition to push the odds in favor of buying.
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In regards to Apple (AAPL), the “Money Flow Indicator” and the “Ultimate Indicator” show that the stock has topped out for now. It will take some time for the stock to return back to its 200 day-moving average just above today’s readout of 544. By the time that price of Apple’s stock hits the 200-day moving average, the moving average should be closer to 560-570 which is about 100 points lower than it is today.
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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.