STOCK MARKET STRATEGY FOR JULY 14, 2018: The market presented a tricky, short-term trading opportunity on July 3rd. It came from a semi-oversold condition which suggests that the rally will not be strong. So far, it appears as if the market can still go in either direction with the same degree of certainty. This is a time to be on the sidelines waiting for the next opportunity to set up. The Volatility Indicator will have to traverse across its oscillator from “overbought” to “oversold” which will probably take over a week to happen.
Key underlying short-term timing indicators show the following:
***********
THE BOTTOM LINE: The Fear/Greed Index is currently reading 47 or “neutral.” I’m still awaiting for a quick move into the “Extremely Fear” area in order to feel like the conditions are ripe for a more sustainable rally. So, we continue to wait for a better trading opportunity to the upside.
Categories: Stock Market Strategy Tags: AAPL, buy low sell high, ETF, invest, investing, investing tips, market timing, money, QQQ, stock market timing, stock market trading tips, stock trading tips, stocks, wall street
MARKET OBSERVATIONS FOR JULY 15, 2012: The stock market staged a big “relief rally” last Friday which quickly alleviated the oversold condition of the general market. In fact, the TRIN Indicator was negative 10 days in a row which is extremely one-sided in terms of breadth. The only thing that was missing from a good buy signal was a more downside action in terms of price. For more nibble traders, the ideal time to have bought was mid-day on Thursday. That bottom sets up a 5- day retest of the intraday lows that is expected around Thursday of this coming week. Be prepared to buy on weakness backed by “obvious bad news” into the Wednesday-Friday time period.
The McClellan Summation Index appears to be in a topping formation. This occurs whenever you see a cluster of dots after an extended period of advance like we’ve seen over the past month. So this indicator is preparing us for a large decline (the primary signal now) or a confusing pause before resuming the current uptrend.
Other key market indicators show the following:
- Investor Sentiment – is in the mid-range area with no clear signal
- NYSE Breadth Oscillator – gave a buy signal after Thursday’s close in the “Ultimate Indicator” – the “Full Stochastics” still need to move down to the lower parameter near -80
- Nasdaq Breadth Oscillator – also gave a buy signal after Thursday close in the “Ultimate Indicator” – the “Full Stochastics” still need to move down to the lower parameter near -80
- Risk On/Risk Off Indicator – a reading below 30 is needed for a buy signal – the current reading is only 44
For now, the best advice is to remain on the sidelines getting ready for a near term bottom in the stock market. The NYSE Breadth Oscillator and Nasdaq Breadth Oscillator have already given buy signals in the “ULT” indicator. The “5-Day Retest Pattern” tells us to be prepared to buy on weakness backed by obvious bad news into the Wednesday-Friday time period of this coming week.
**********
In regards to Apple (AAPL), the stock is coming off of a top at 619 and is expected to retest that high. It is anyone’s guess whether it will succeed or fail at this resistance. Sorry, but there isn’t much to say about trading this stock at this particular time. Savvy traders will stay away and let APPL set up for its next big move.
**********
In the event of a general stock market buy signal, prime candidates for participating on the upside include the QQQ, DIA, DDM, and SSO Exchange-Traded Funds.
MARKET OBSERVATIONS FOR JULY 11, 2012: The stock market has been in a steady decline for the past 9 sessions according to the daily TRIN indicator which reads the undercurrent in terms of breadth and volume. This sets the stage for a short-term tradable rally between July 17 and July 19 if this current trend continues in this “slow drain” (in price, breadth, and behavioral psychology) fashion.
The McClellan Summation Index appears to be topping out or setting up for one more run to the upside. For right now, I would not interpret this indicator as signaling anything in particular. (Note: Sometimes, even the best indicators do not have definitive readings.)
Other key market indicators show the following:
For now, the best advice is to remain on the sidelines getting ready for a near term bottom in the stock market. During this correction, watch the NYSE Breadth Oscillator and Nasdaq Breadth Oscillator for oversold readings in the “ULT” and “Full Stochastics” indicators for a possible short term buying opportunity. (Note: This may be only a minor movement which would call for making only small side bets on the upside.)
**********
In regards to Apple (AAPL), the stock has shown strength apart from the general market. In market declines, the strongest sectors tend to be the last ones to drop. The stock of Apple has become sort of an asset class all by itself! The Money Flow Indicator has a reading of 54 and has hardly moved since last week’s update. The “Full Stochastics Indicator” and the “Ultimate Indicator” have already reached overbought readings and a decline to at least the mid-range would be expected before another run to the upside begins.
In the event of a general stock market buy signal, Apple would be one of the prime candidates for participating on the upside along with the QQQ, DIA, DDM, and SSO Exchange-Traded Funds.
MARKET OBSERVATIONS FOR JULY 4, 2012: The stock market rally continued its move upwards climbing the proverbial “Wall of Worry.” It is now reaching an overbought area of resistance and is not likely to move much further on the upside without some consolidation first over the next couple of weeks.
The McClellan Summation Index continues to give a clear reading that shows a strong rally based on breadth. This indicator cuts through the market B.S. of news and opinions and lets investors see and know whether the Bulls or the Bears are in control. Right now, the Bulls are running the show!
Other key market indicators show the following:
- Investor Sentiment – is close to being in the area of “Extreme Optimism”
- NYSE Breadth Oscillator – clearly overextended and due for a breather
- Nasdaq Breadth Oscillator – not as overextended as the NYSE breadth indicator
- Risk On/Risk Off Indicator – confirms the Summation Index and indicates a major move from safety to risk. This could be a major shift from the safety of Treasury Bonds to riskier asset classes such as corporate high-yield bonds or equities.
For now, the best advice is to remain on the sidelines getting ready for a near term correction in the stock market. After a week of consolidation or lower prices, you can reasonably expect a retest of the recent highs. We will have to reassess that top when it comes. But in the correction, watch the NYSE Breadth Oscillator and Nasdaq Breadth Oscillator for oversold readings and a possible short term buying trade.
**********
In regards to Apple (AAPL), the stock took off to the upside despite what many would consider “bad news” concerning competition from Microsoft and Google with tablet computers. The Money Flow Indicator has a reading of 52 and has hardly moved up in the last rally phase. The “Full Stochastics Indicator” and the “Ultimate Indicator” have much more room to the upside and both indicate that a retest of the old highs around 644 is a distinct possibility now.
MARKET OBSERVATIONS FOR JUNE 26, 2012: The stock market rally of the last few weeks is taking a breather. With Monday’s sharp drop, I would expect a retest of the early June lows sometime early next week. That would allow several of the internal indicators to set up for another buy signal.
The McClellan Summation Index is looking toppy and will probably zig-zag down to another point slightly above the early June lows. This would be a normal pattern for setting up a buy range to enter the market.
Other key market indicators show the following:
For now, the best advice is to remain on the sidelines getting ready for a buy signal in the near term either late this week or next. This may not be a major buy signal but one for a short run up. Don’t expect all stocks to participate in this run so avoid the temptation to buy low with energy stocks. Choose the broad-based ETFs like DIA and QQQ for accumulation. If things set up perfectly, then you could also make a side-bet on leveraged ETFs such as DDM and SSO.
**********
In regards to Apple (AAPL), the stock seems to have topped out for the near term at 590 and could head lower towards a good buy range just above 500. The Money Flow Indicator has a reading of 60 after hitting a short-term upside target of 80 and is quite a long distance to a buy signal around 20. The “Full Stochastics Indicator” is in a downwards zig-zag formation with a good chance of heading south toward a new buy area under 20 after Monday’s action. That would be the best time to buy APPL for a trade up. The price at that time would probably between its previous low at 522 and the 200-day moving average which now stands around 501. I’d start making small bets on any move under 530 if that should occur. The last move down could turn out to be an intraday spike.
MARKET OBSERVATIONS FOR JUNE 17, 2012: The stock market rally has taken many investors by surprise. This could lead to a “melt-up” type rally that is fueled by panic-stricken short-sellers covering their losing positions. But this is not an optimal time to buy the general market. The correct way to play this current market is to wait for the next oversold condition which is likely to be a retest of the June 1st lows. Otherwise, step aside and watch the show. The fact is you can’t catch all of the minor rallies if you’re weighing the risks.
The McClellan Summation Index has ended its decline and started a new uptrend. This usually precedes the external bottom in prices by a few weeks. Look to buy on any weaknesses if the market comes back to retest its June lows.
Other key market indicators show the following:
For now, the best advice is to remain on the sidelines awaiting weakness to buy on the long side. Most of the market indicators are mid-range and makes us aware that the market can move in either direction.
**********
In regards to Apple (AAPL), the stock is trading in an unusually tight range and not leading the market to the upside. On the shorter term, the Money Flow Indicator has a reading of 69 after hitting a short-term upside target of 80. The “Full Stochastics Indicator” is in a downwards zig-zag formation with a good chance of heading south toward a new buy area under 20. That would be the best time to buy APPL for a trade up. The price at that time would probably between its previous low at 522 and the 200-day moving average which now stands around 495. I’d start making small bets on any move under 530 if that should occur.
Incidentally, the stock that appears to be closer to a buy range in both price and time than Apple is Google (GOOG).
MARKET OBSERVATIONS FOR JUNE 11, 2012: The stock market broke to new lows on Monday and Tuesday of last week. The reversal last Tuesday may have been the end of the correction with the cover story being the bad economic news from Europe. The new uptrend is currently in a “reverse head and shoulders” chart pattern with a little bit of backing and filling needed over the next day or two. With the deeply oversold bottom in terms of breadth and sentiment (but not necessarily in the extent of prices in major indices), there is now a strong chance of the stock market going into a sustained rally phase over the intermediate term.
The McClellan Summation Index appears to have ended its multi-month decline last week. Time symmetry tendencies indicate that a matching rally phase should take us well into the summer in terms of volume and breadth. Keep in mind that the McClellan Summation Index reflects the internal market and will precede price movements which is the external market.
Key market indicators shows the following:
For now, the best advice is to buy on weakness over the near term in less risky positions. Last Tuesday was the time to buy riskier vehicles like leveraged ETFs. You can buy value-oriented ETFs and stocks on weakness. This decline may only last a few days so you may have to act quickly on this.
**********
In regards to Apple (AAPL), this current rally in the stock is fueled by expectations on upcoming positive announcements and strong fundamentals. On the shorter term, the Money Flow Indicator has a reading of 79 which is closer to a top than a bottom. But with this particular stock, the Money Flow Indicator can sustain a high reading while the stock continues to climb. It may be too late to buy this stock individually so the QQQs are probably the best way to participate in Apple’s rally.
MARKET OBSERVATIONS FOR JUNE 3, 2012: The stock market has broken through its basing pattern and can be expected to start a new leg down in price. That should lead to another chance to bottom out during the second or third week of June.
The McClellan Summation Index continues to confirm the market correcting heading towards lower prices. We may even see some climatic panic in the near term which will lead to a big bounce and then a retest of the bottom. And while breadth and sentiment have been negative all through the month of May, the price of the Dow Jone Industrials has not dropped enough to create the kind of negative emotions that usually mark a tradable bottom.
The following market indicators show that Monday is probably not an ideal day for taking action:
For now, the best advice is to keep your powder dry on the sidelines and let the market set itself up for its next move up. The next move down could be nasty so patience is the name of game. The next bottom over the near term may only be a bounce to relieve downside pressure. If we buy this next bottom, be ready to ride it up quickly and get out. The target date for the next low is June 12 plus or minus 1 day.
**********
In regards to Apple (AAPL), this current bounce off of the 1/3 retracement of its prior rally appears to have finished. The next low in Apple should come during the middle of June (previous bounces have been in mid-April and mid-May) and below the previous lows around $522. I’d guess that this next mid-June low could come between $503 (a 50% retracement of the previous rally) and its 200 day moving average around $488. Keep in mind that this low could be a spike down intraday and that a sharp trader should be ready to pull the trigger beforehand – anytime the price of Apple goes below the previous low of $522.
MARKET OBSERVATIONS FOR MAY 27, 2012:The stock market has been experiencing a bounce off of a very oversold condition in terms of breadth and sentiment. However, the extent of the decline in terms of price has not been significant. With the last closing high for the Dow Jones Industrials being on May 1, I go by the understanding that a major top and major bottom do not occur during the same month. Therefore, a low worth buying still appears to be a few weeks away.
In addition, a major Bradley Turn Date is scheduled for June 12. (Note: Bradley turn dates can be either indicate tops or bottoms.)
Since the May 18th lows, the stock market has had a classic “Dead Cat Bounce” which hasn’t gone up much at all. What has happened is that breadth and sentiment indicators have had a chance to relieve their downside pressure and chew up time. In fact, the short-term sentiment readings are neutral according to SentimenTrader.com which signifies that no action is required for the next few days.
While a successful retest of those lows could occur this coming Tuesday, the more likely scenario is for the market to resume its decline into a mid-June deeply-oversold low.
**********
In regards to previous comments about Apple (AAPL), this current bounce off of the 1/3 retracement of its prior rally may give way to a 50% retracement to the price of $503. I would also be a strong buyer of this stock if it touches its 200-day moving average which currently stands at $464. This stock remains the most undervalued large-cap growth company in the entire stock market and certainly worth owning on the next major rally either on its own or through ownership in the QQQs.
FROM APPLE EXPERT, EDITOR OF THE BULLISH CROSS ADVISORY & HEDGE-FUND MANAGER ANDY ZAKY: The two key levels of support for Apple’s stock in the intermediate term are $537 (32.8% retracement) and $503 (50% retracement) a share. We believe Apple presents with a unique buying opportunity at $537 and an extraordinarily rare opportunity at $503 a share. While we don’t believe the stock will ever see $503 a share, if Apple does reach that level, it would be the equivalent of $310.50 in June 2011 or $80.00 a share in March 2009.
Investors tend to over-complicate things. Apple (AAPL) will undoubtedly see $750 a share by January 2013 and will likely see $1,000 no later than the fall of 2013.
Thus, we believe the best thing to do is just to go in and buy now, ride any potential drawdown to $537 a share, ignore all of the nonsense you are likely to hear on the way down and beat Wall Street by being smart enough to realize what they often do not. And that is the fact that Apple will inevitably sell 100 million iPhones a quarter within the next few years. When that happens, Apple will be trading far north of $1,000 a share. Who cares about a $30 – $50 drawdown when there is over $500 in upside for the stock over the next year or so. Don’t make things so complicated. Just go in and buy.
Comment: The 200-Day Moving Average for AAPL is currently around 451 and rising. That would also be another place where the price of the stock may touch on the correction down. There is also a price gap between 425 and 450 that may end up being filled. This remains a legitimate possibility and one that fundamentally-oriented investors in Apple will find hard to swallow.
On the shorter term, the Money Flow Indicator has a reading of 32 and needs to close below 20 in order to generate a buy signal. This one indicator allowed me to take a position in Apple on the day of bottom in June 2011 just over $310 a share. So be ready to make a small side-bet based on this one indicator if this should occur in the near future.