The “Fear/Greed Sentiment Index: What Emotion is Driving the Market Now?” has a current reading of “2” which is the lowest number since this indicator’s inception. This suggests that market sentiment is at levels last seen in the 2008-2009 bear market. However, this doesn’t necessarily mean that the market is ready to go up just now. But what this does do is potentially indicate the location of the “internal bottom” of the market. The “external bottom” or lowest Dow Jones Industrial Average closing price will likely follow 2-5 weeks later. On this second “external bottom” there will be many non-confirmations to show it’s a final bottom. This type of set-up won’t happen until January.
STOCK MARKET STRATEGY FOR DECEMBER 16, 2018: The stock market continued its downward move by closing at its lows for this correction. With the majority of internal indicators showing readings in the 30s, a short-term bottom can be expected on Monday or Tuesday. That should set up the market for its anticipated “Santa Claus Rally.”
Key underlying short-term timing indicators show the following:
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THE BOTTOM LINE: The Fear/Greed Index is currently reading 8 or “Extreme Fear.” This single digit reading after two months of “Extreme Fear” readings overall is sufficient to indicate that the general market is unloved and the sentiment has been severe enough it both duration and direction. This sets up the market for a year-end rally starting sometime between Tuesday and Thursday of this week.
Note: Thursday would match the recent 18-day cycle of lows from October 29 to November 23 in terms of number of trading days. Tuesday would mark the matching number of calendar days. Thus, a cyclical low can be anticipated between Tuesday and Thursday of this week. But remember that it will be tricky catching the exact bottom for it may mean trying to catch a “falling knife.”
This indicator is labeled as being in the “Neutral” zone right now. Ideal buying opportunities have only occurred when the general market has been in the “Extreme Fear” zone. This suggests that the market needs more time and greater fear in order to set itself up for a better intermediate-term buying opportunity. (Source: http://money.cnn.com/data/fear-and-greed)
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STOCK MARKET STRATEGY FOR OCTOBER 3, 2016: The stock market has been climbing and dropping in the same price range for several weeks now. There isn’t a clear trend and the current market is neutral in terms of overbought vs. oversold. With the national election only a month away, I suspect that the markets will make a clearer trend before and then afterwards. So if we rally into the election, expect the opposite to occur after the election and vice versa. For now, keep your powder dry and wait for a better entry point.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: The internal indicators are neutral and trending down slightly. This would suggest that the market is likely to decline over the near term with the chance of reaching an oversold condition shortly. That would set up a rally to challenge and maybe exceed the all-time highs as we approach the elections. But right now isn’t an attractive time to buy unless we can get some more bearishness and lower prices.
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While this indicator is labeled as being in the “Fear” zone, the ideal buying opportunities have occurred when the general market has been in the “Extreme Fear” zone. This suggests that the market needs more time and greater fear in order to set itself up for a better intermediate-term buying opportunity. (Source: http://money.cnn.com/data/fear-and-greed)
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STOCK MARKET STRATEGY FOR SEPTEMBER 18, 2016: The stock market has retreated and bounced around for the last few weeks. The internal indicators are near the lower range and could reach oversold readings if the market should fall in the coming days. Look for weakness early this week with the opportunity to buy near the end of the week for another run to new highs. If that scenario doesn’t set up that way, then step aside and let the market create a different kind of opportunity further down the road.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: The internal indicators are neutral but within range of a bottom. While the readings have not been very severe to the downside, the length of time in this lower range suggests that a move up should be coming soon. It is based on that factor, that I’d be ready to move into action should we see weakness at the beginning of next week.
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There has been an important shift in sentiment as the bears now outnumber the bulls 41.67% to 37.50%. This is one of the first prerequisites to forming an intermediate-term bottom. Now we need some more downside action to produce a higher degree of fear and for the internal breadth indicators to move into a deeply oversold area. That could happen as early as Friday, but more likely next week sometime. My guess is that the “Brexit Bottom” will hold and even serve as the most extreme lower boundary for any spike down in price.
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STOCK MARKET STRATEGY FOR SEPTEMBER 5, 2016: The stock market reached a short-term low intraday on Wednesday. Since that time, the internal oscillators have been trending up. This has been a sideways correction with the Dow remaining in a 300-point trading range for 38 straight trading days. Another new closing high in the coming week is certainly possible. But overall, the market did not become oversold enough or create enough of a sentiment shift to fuel the market towards a big move upwards.
Key underlying short-term market indicators show the following:
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THE BOTTOM LINE: The internal indicators are all trending up after last Wednesday’s bottom. That gives the general market time to rally more and reach new high ground. But since the market did not become deeply oversold, I would be careful about being either long or short with any significant positions. A better risk/reward opportunity should present itself in the coming months which historically has been volatile. Keep your powder dry instead.
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