Wall Street Craps – 2012 Global Ebook Finance Award-Winner

The stock market has made a dramatic recovery from its sharp decline last month. However, this could be the ideal setup for a classic Dow Theory Sell Signal. A new closing high the DJIA over 41,198.08 will not be confirmed by the NDX, DJTA, and the popular Magnificent 7, three prominent indicators. The ideal cover story is also present with the new Kennedy/Trump alliance and the Fed’s announcement of a cut in interest rates. This could all occur as early as Monday so watch the last hour of trading with the idea of taking pilot positions on the sell side if a rally comes without significant volume. Note: Be careful since Wednesday’s NVDA announcements may trigger another leg up as well.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 63 (neutral)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 66 (neutral)
• Volatility Indicator – Ultimate Indicator – 61 (neutral)
• NYSE Advance/Decline Oscillator – Ultimate Indicator – 77 (overbought)

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NYSE McClellan Summation Index: This index’s oscillator has a current reading of 76. This suggests that there may be some more time left to this rally (1-2 weeks) since this indicator is still in a rising trend.

Fear/Greed Index: This popular indicator is in the “Neutral” territory with a reading of 53. This does not mean that it is an ideal time to short the market. In fact, this indicator is best used for finding bottoms, not tops. It did another good job of spotting this current rally.

The stock market has been correcting for the last week with many of the short-term indicator within striking distance of oversold readings. Investors and traders should be very careful in this time period as deep oversold readings often occur during the September-October time period. This week should be interesting with Apple’s earnings, new iPhone and China news affecting this bellwether stock.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 39 (neutral)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 38 (neutral)
• Volatility Indicator – Ultimate Indicator – 56 (neutral)
• NYSE Advance/Decline Oscillator – Ultimate Indicator – 39 (neutral)

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NYSE McClellan Summation Index: This index’s oscillator has a current reading of 26. It has been in the oversold range for some time now and just recently started to decline once again.

Fear/Greed Index: This popular indicator is in the “Neutral” territory with a reading of 51. The next solid upside trading opportunity doesn’t appear unless this trusty indicator hits a reading of 25 or less (Extreme Fear).