WALL STREET CRAPS MARKET OBSERVATIONS FOR SEPTEMBER 20, 2012
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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