Wall Street Craps – 2012 Global Ebook Finance Award-Winner

STOCK MARKET OBSERVATIONS FOR August 2, 2014: The stock market experienced a broad correction last week that took most oscillators to deep “oversold” readings. We could be just one day away from a good bounce right here. But at the same time, there is the danger of going into a “flash crash” sometime in the next couple of weeks. While a small amount can be risked for a sharp short-term bounce, I am more inclined to let the market run its course to the downside with a better bounce off the 200-day moving averages of the major indices. That would require 200 more points to the downside in the Dow Jones Industrial Average.

Key underlying market indicators show the following:

• NYSE Breadth Oscillator – Ultimate Indicator – 15 (oversold)
• Nasdaq Breadth Oscillator – Ultimate Indicator – 32 (neutral)
• NYSE % Above 50 Day Moving Average – Ultimate Indicator – 9 (oversold)
• NYSE % Above 150 Day Moving Average – Ultimate Indicator – 9 (oversold)
• S&P Bullish Percent Indicator – Ultimate Indicator – 62 (neutral)
• Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 20 (oversold)

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My advice for traders and investors is be on the lookout for a “flash crash” scenario in the next couple of weeks. We may get a golden opportunity to buy soon if you’re out of the market now and in cash. But the market could experience sharp swings in either direction. My guess is that August 2014 will be the month of an important trading bottom.

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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.