WALL STREET CRAPS STOCK MARKET OBSERVATIONS FOR FEBRUARY 2, 2014
STOCK MARKET OBSERVATIONS FOR February 2, 2014: The stock market has now reached oversold levels that are consistent with recent trading lows. However, the danger is that the closing high on December 31, 2013 may have been a major bear market top with much more to go on the downside. While many investors and traders are looking for a relief rally to occur, it may be smarter to wait for a retest of previously established lows. That scenario puts us at least a week or two away from a tradeable bottom at the earliest. In my opinion, this decline still needs more time and “bad news” in order for the sentiment to shift significantly towards the bearish side.
Key underlying market indicators show the following
- NYSE Breadth Oscillator – Ultimate Indicator – 36 (near buy)
- Nasdaq Breadth Oscillator – Ultimate Indicator – 36 (near buy)
- NYSE % Above 50 Day Moving Average – Ultimate Indicator – 31 (near buy)
- Nasdaq % Above 50 Day Moving Average – Ultimate Indicator – 28 (Buy)
- S&P 100% Above 200 Day Moving Average – Ultimate Indicator – 27 (Buy)
- Stock vs. Bond Indicator – Ultimate Indicator – 36 (neutral)
- S&P 500 Bullish Percent Index – Ultimate Indicator – 8 (BUY)
Another way to look at the general market is to see if there are matching oversold “Full Stochastics” readings on the major ETF broad-based averages. You will notice that all major intermediate bottoms start after oversold reading. Current readings show that the market is oversold enough in terms of price.
- DIA – Full Stochastic – 10 (Buy) on lagging red line
- SPY – Full Stochastic – 17 (Buy) on lagging red line
- QQQ – Full Stochastic – 19 (Buy) on lagging red line
- IWM – Full Stochastic – 18 (Buy) on lagging red line
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My advice for traders and investors is exactly the same as last week’s: remain on the sidelines and let the market set itself up for a possible bottom in the intermediate term. The majority of internal indicators have moved into buy readings but need more time in the misery zone. Expect a short-term bounce early next week and then a retest 5 to 10 days after those previous lows. The time to take a chance on the long side is when weakness occurs amid obvious bad news on the retest of previous lows. That could come in mid-February so be ready to act!
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Note: Stock that have moved into their buy range according to the Money Flow Indicator include the following: General Electric, Citigroup, Starbucks, and Wal-Mart.