WALL STREET CRAPS STOCK MARKET STRATEGY – AUGUST 7, 2016
STOCK MARKET STRATEGY FOR AUGUST 7, 2016: The stock market followed last week’s scenario and is now in a position to make new all-time highs. The internal market is not overbought so that any strength can continue for another week to 10 days without triggering much of an overbought signal. However, if new highs reveal widespread weakness in the general market, it would provide a good opportunity to move to the sidelines and wait for the next high-percentage set-up.
Key underlying short-term market indicators show the following:
- NYSE McClellan Oscillator – Ultimate Indicator – 49 (neutral/trending up)
- NYSE Overbought/Oversold Indicator – Ultimate Indicator – 51 (neutral/trending up)
- Nasdaq McClellan Oscillator – Ultimate Indicator – 46 (neutral/trending up)
- Nasdaq Overbought/Oversold Indicator – Ultimate Indicator -49 (neutral/trending up)
- Volatility Indicator – Ultimate Indicator – 64 (neutral)
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THE BOTTOM LINE: Last week I wrote the following: The stock market has been chewing up time and consolidating its gains from the Brexit lows. The internal indicators show that the general market is within reach of oversold readings. This presents an interesting situation where the price levels would appear to be too high, but the internal market shows that it’s getting set up for more upside. At the very least, I’d expect a retest of the previous highs and show us clues of either strength or weakness.
That has panned out pretty much as expected. But where do we go from here?
We are right near the area of the previous highs and new highs are certainly likely given the fact that a moderate oversold condition was achieved only 2 trading sessions ago. So timewise, the market can continue upwards for another week or two without become overbought. So resist the idea of going short and let the market show us whether the new highs are achieved with strength or weakness. Then you can determine if is a “bull trap” or not.