Wall Street Craps – 2012 Global Ebook Finance Award-Winner

STOCK MARKET OBSERVATIONS FOR December 21, 2014: The stock market formed another “V-Bottom” in a similar way that it did in October. It only took 7 trading days for the market to go from top-to-bottom. In the process, the market became oversold and responded with a matching rally to the upside. This kind of breathtaking performance is something to take note of as it characterizes the current age of computerized hedge fund trading. From now on, you definitely want to avoid being on the wrong side of any large bets involving volatile trading vehicles.

Key underlying market indicators show the following:

• NYSE Breadth Oscillator – Ultimate Indicator – 63 (neutral)
• NYSE % Above 50 Day Moving Average – Ultimate Indicator – 53 (neutral)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 62 (neutral)
• Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 57 (neutral)
• S&P 100 % Above 200 Day Moving Average – Ultimate Indicator – 51 (neutral)
• Stock vs. Bond Indicator – Ultimate Indicator – 54 (neutral)
• Volatility Indicator – Ultimate Indicator – 53 (neutral)

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Special Notes: Last Monday December 15th, marked the 14th day out of 15 in which the TRIN Index showed a bearish reading. This has never happened since I’ve been tracking the markets from 1974. While price movements have largely disguised this breadth indicator’s reading, it does demonstrate that the internal market forces have most likely corrected upside excesses. With the end of the year in sight, I’d be looking to buy some shares of diversified, non-leveraged broad-based Exchange-Traded Funds for participation in what could be a final speculative phase of the Bull Market lasting a few more years. Those ETFs would include the DIA, SPY, and QQQ (Note: Charles Schwab clients should consider building positions in SCHD and SCHB for larger, longer-term accounts)

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STOCK MARKET OBSERVATIONS FOR December 6, 2014: The stock market continues to push upwards to new closing highs in the Dow and S&P 500. But under the surface, many breadth indicators show that the rest of the market is not following through. This suggests that the upside is limited at this time until we can create an oversold condition. With a mild correction in the coming week, we could have a buy opportunity to take us into the New Year. But for now, the market is over-extended and not a place to buy.

Key underlying market indicators show the following:

• NYSE Breadth Oscillator – Ultimate Indicator – 37 (neutral)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 47 (neutral)
• NYSE % Above 50 Day Moving Average – Ultimate Indicator – 40 (neutral)
• Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 52 (neutral)
• S&P 100 % Above 200 Day Moving Average – Ultimate Indicator – 56 (neutral)
• S&P Bullish Percent Indicator – Ultimate Indicator – 61 (neutral)
• Volatility Indicator – Ultimate Indicator – 57 (neutral)

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Personal Note: The 21-Day Weighed Equity-Only Put-Call Ratio flashed an intermediate “sell signal” on Monday December 1st. This indicator has proven to be a very reliable measure of the extremes in term of the duration of bullish and bearish sentiment. I would respect this signal as a clear warning to avoid new purchases here. This would also be a good time to take profits on overextended long positions. On the other hand, the TRIN Index readings have been negative for 8 out of the last 9 trading sessions. This indicates a disproportionate amount of selling (energy sector), but could mean that any correction in the general market will be short in duration.

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STOCK MARKET OBSERVATIONS FOR November 30, 2014: The stock market has now reached the point of exhaustion to the upside. The last two new closing Dow highs have been contained within the intraday highs that were achieved in the week before. This means that the general market should correct either sideways or to the downside in the coming week to ten days. That process has already begun in many individual stocks. But this could easily lead up to a short-term buying opportunity in mid-December for a quick ride back to the top by year’s end.

Key underlying market indicators show the following:

• NYSE Breadth Oscillator – Ultimate Indicator – 45 (neutral)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 46 (neutral)
• NYSE % Above 50 Day Moving Average – Ultimate Indicator – 58 (neutral)
• Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 58 (neutral)
• S&P 100 % Above 200 Day Moving Average – Ultimate Indicator – 50 (neutral)
• Risk On/Risk Off Indicator – Ultimate Indicator – 31 (neutral)
• Volatility Indicator – Ultimate Indicator – 56 (neutral)

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Personal Note: I’m watching Equity-Only Put-Call Ratios with great interest now. With this past Friday’s 13th successive new closing high in the Dow Jones Industrial Average, we have now arrived at the optimal point of “buying” exhaustion. The top of this move may become a mirror-image of the most recent bottom – turning on a dime and never looking back. So be careful out there. In the wise words of Art Cashin, UBS Director of Floor Operations at the NYSE, “Stick with the drill: stay wary, alert and very, very nimble

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STOCK MARKET OBSERVATIONS FOR November 23, 2014: The stock market is approaching a point of exhaustion to the upside. But Thursday’s “buy” signals in the NYSE and Nasdaq breadth indicators show that there is still more room to advance. I’m looking for the market to retest Friday’s intraday highs in the coming week. But more importantly, I would be ready for a mid-December buying opportunity should the market to begin its correction right here.

Key underlying market indicators show the following:

• NYSE Breadth Oscillator – Ultimate Indicator – 40 (neutral)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 34 (neutral)
• NYSE % Above 50 Day Moving Average – Ultimate Indicator – 71 (overbought)
• Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 52 (neutral)
• S&P 100 % Above 200 Day Moving Average – Ultimate Indicator – 75 (overbought)
• Risk On/Risk Off Indicator – Ultimate Indicator – 35 (neutral)
• Volatility Indicator – Ultimate Indicator – 60 (neutral)

Personal Note: I’m watching some other medium-term indicators (Equity-Only Put-Call Ratios, Investor Sentiment, and NYSE Summation Index) with great interest now. With this past Friday’s 10th successive new closing high in the Dow Jones Industrial Average, we are historically only 2 or 3 more new highs from the point of “buying” exhaustion. The top of this move may become a mirror-image of the most recent bottom – turning on a dime and never looking back. So be careful out there. In the wise words of Art Cashin, UBS Director of Floor Operations at the NYSE, “Stick with the drill: stay wary, alert and very, very nimble

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My advice for traders and investors is let the market set-up for a near term bottom in mid-December in order to establish new long positions. Don’t get antsy and remember that the “casino is always open!”

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STOCK MARKET OBSERVATIONS FOR November 17, 2014: The stock market is churning near these price levels as money is nervously flowing in and out of the market. Those who bought this last bottom may be eager to cash out after this spectacular run, while others who missed it are trying to get in. With a mixed bag of internal indicators, expect the market to remain in this holding pattern with another possible run to the upside in order to entice the public into buying at the top. Keep in mind that the next cyclical bottom is due in mid-December just in time for tax-loss selling in Big Oil stocks that influence the widely-watched DJIA.

Key underlying market indicators show the following:

• NYSE Breadth Oscillator – Ultimate Indicator – 21 (oversold)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 33 (neutral)
• NYSE % Above 50 Day Moving Average – Ultimate Indicator – 76 (overbought)
• Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 72 (overbought)
• S&P 100 % Above 200 Day Moving Average – Ultimate Indicator – 73 (overbought)
• S&P Bullish Percent Indicator – Ultimate Indicator – 91 (overbought)
• Risk On/Risk Off Indicator – Ultimate Indicator – 46 (neutral)
• Volatility Indicator – Ultimate Indicator – 45 (neutral)

Other key market gauges worth following right now include:

• Equity-Only Put-Call Ratios – topping out and headed lower towards the next bottom
• Investor Sentiment – mid-range (neutral)
• NYSE Summation Index – topping out & headed down towards it next cycle low

Personal Note: The timing of Tony Robbins’ new bestseller, Money – Master the Game may coincide with a classic top in the market. As a former trainer for Mr. Robbins, I have tremendous respect for his ability to learn and master anything that he puts his heart and mind into. I’m just saying that his publisher’s timing of this work is when the book market is ripe for this topic. Hence, the uninformed public is ready to invest in equities (low-cost Equity Index Funds) at a highly popular but less-than-optimal trading time.

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My advice for traders and investors is let the market set-up for a near term bottom in mid-December in order to establish new long positions. Don’t get antsy and remember that the “casino is always open!”

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STOCK MARKET OBSERVATIONS FOR November 2, 2014: The stock market has fulfilled its “V-Shaped Bottom” with last week’s historic run to the upside. However, the new closing high on Friday is still unconfirmed by a number of major indicators. This coupled with several “overbought” readings in key underlying indicators would suggest that the upside may be limited right now. It’s probably too late to buy into this rally without experiencing some sort of sideways correction soon, but be ready to buy any dips for a resumption of this long bull market.

Key underlying market indicators show the following:

• NYSE Breadth Oscillator – Ultimate Indicator – 71 (overbought)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 76 (overbought)
• NYSE % Above 50 Day Moving Average – Ultimate Indicator – 86 (overbought)
• Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 91 (overbought)
• S&P 100 % Above 200 Day Moving Average – Ultimate Indicator – 82 (overbought)
• S&P Bullish Percent Indicator – Ultimate Indicator – 83 (overbought)
• Risk On/Risk Off Indicator – Ultimate Indicator – 59 (neutral)

Personal Note: A good student of the market needs to update their strategy over time in order to play the game more effectively. The reason is that the stock market game is now more volatile than ever before. The new players in the game are quicker, smarter, better equipped, more competitive, and forever looking for an “edge” in order to make money in this market.

As an individual do-it-yourself investor, the new strategy for today’s market is to make smaller bets while buying the dips and selling the rips – and thus, holding your trading positions for a shorter time. This applies to “playing” the stock market for fast money with less risk.

As far as “asset allocation” and the vehicles for “security assets” and “growth funds,” the best funds for long-term money are in the higher-yielding broad-based low-fee Exchange-Traded Funds offered by Charles Schwab and Vanguard. The annual fees charged by Exchange-Traded Funds when compounded over time can amount to significant cuts in your overall returns. This is especially true when it comes to large positions that are held for a long time – as in “Security Assets” that they are described in my book, Wall Street Craps: How to Play Today’s Hot & Cold Stock Market For Fast Money With Less Risk.

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My advice for traders and investors is let the market set-up for a dip in the near term in order to establish new long positions. Rather than a simple bounce in a topping pattern, this rally appears to me to be a new leg of a revived bull market. Otherwise, it might be less risky to simply wait for the seasonal correction during mid-December in order to establish or add to long positions. Don’t get antsy and remember that the “casino is always open!”

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STOCK MARKET OBSERVATIONS FOR October 19, 2014: The stock market experienced a sharp decline and a possible capitulation on Wednesday of last week. Will this turn out to be another “V-Shaped Bottom” or just a bounce? That’s a big question that no one really knows the answer to and can only speculate. With the majority of indicators below showing “neutral” readings by the close of Friday, the stock market is in a position of going in either direction.

Key underlying market indicators show the following:

• NYSE Breadth Oscillator – Ultimate Indicator – 57 (neutral)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 59 (neutral)
• NYSE % Above 50 Day Moving Average – Ultimate Indicator – 37 (neutral)
• Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 39 (neutral)
• S&P 100 % Above 200 Day Moving Average – Ultimate Indicator – 19 (oversold)
• Risk On/Risk Off Indicator – Ultimate Indicator – 59 (neutral)

Personal Note: I expected the NYSE Breadth Oscillator and Nasdaq Breadth Oscillators to have reached “oversold” readings during this last decline, but they never got close in terms of their respective Ultimate Oscillators. So my bet is on the market to retest last Wednesday’s bottom in the coming week after a sharp decline on Monday and Tuesday. If that decline looks like it’s going to be a successful retest, I’d be willing to put a few small “place bets” on some broad-based ETFs while trying to catch that proverbial “falling knife.”

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My advice for traders and investors is let the market set-up for a retest of last Wednesday’s intraday low. If that retest comes with glaring technical divergences and “obvious bad news”, we could experience a sharp rally worth trading in broad-based Exchange-Traded Funds like DIA, QQQ, IWM, SPY, and maybe even SSO.

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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

• NYSE Breadth Oscillator – Ultimate Indicator – 38 (neutral)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 45 (neutral)
• NYSE % Above 50 Day Moving Average – Ultimate Indicator – 64 (neutral)
• Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 65 (neutral)
• S&P 100% Above 200 Day Moving Average – Ultimate Indicator – 59 (neutral)
• Stock vs. Bond Indicator – Ultimate Indicator – 64 (neutral)
• Volatility Indicator – Ultimate Indicator – 60 (neutral)

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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 January 21, 2014: The stock market appears to be on the last leg up of its long bullish trend. The rally of the past week has been narrow in breadth which suggests that the next closing high for the Dow Jones Industrial Average will be its last. Look for strength during this coming week as an opportunity to sell or even go short as a speculation. The overly bullish sentiment of the past few months has set the market up for a possible fall of some significance. If anything, this is not a time to add to new long equity positions.

Key underlying market indicators show the following

• NYSE Breadth Oscillator – Ultimate Indicator – 47 (neutral)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 46 (neutral)
• NYSE % Above 50 Day Moving Average – Ultimate Indicator – 54 (neutral)
• Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 49 (neutral)
• S&P 100% Above 200 Day Moving Average – Ultimate Indicator – 57 (neutral)
• Stock vs. Bond Indicator – Ultimate Indicator – 50 (neutral)
• Risk On/Risk Off Indicator – Ultimate Indicator – 35 (neutral)

My advice for traders and investors is to remain of the sidelines and let the market set itself up for a possible top in the near term. The majority of internal indicators have  moved into neutral readings while the Dow looks like it wants to challenge the old highs. This is usually a sign of an important top and something that investors want to avoid being long equities. Instead, this is one of those times where being in cash is probably the wisest place to be for now.

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Note: The behavior of a big Dow stock like General Electric since the last day of 2013 suggests that it needs to correct back to its 200-day moving average.

STOCK MARKET OBSERVATIONS FOR January 6, 2014: The stock market may have reached its internal high on New Years Eve. A new closing high 5 to 10 trading days after that date could very easily be the final external high for this major rally. But with most professional traders sitting out last week, the stock market can still do almost anything in either direction this coming week. Expect at least one more new high in January to occur before any kind of significant decline begins.

Key underlying market indicators show the following:

• Investor Sentiment – Short-term = 50/neutral | Long-term = 70/SELL
• NYSE Breadth Oscillator – Ultimate Indicator – 50 (neutral)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 43 (neutral)
• NYSE % Above 50 Day Moving Average – Ultimate Indicator – 62 (neutral)
• Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 76 (SELL)
• S&P 100% Above 200 Day Moving Average – Ultimate Indicator – 49 (neutral)
• Stock vs. Bond Indicator – Ultimate Indicator – 57 (neutral)

My advice for traders and investors is to remain of the sidelines and let the market set itself up for the next major move. The internal indicators have mostly moved back into neutral readings after the declines on Thursday and Friday. The current list of oversold Blue Chips stocks and Exchange-Trade Funds that are near the lower range of their Money Flow Indicator and should be monitored on further weakness include: Apple , IEF, and MSFT. With such a short list of buying candidates, it implies that the market needs to correct further before moving to the upside.