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 continues to correct for the last 15 trading sessions. This is a time match from the previous correction with the possibility that Friday marked the end of the decline. The Fear/Greed Index seems to agree that one more lower close on Monday might mark the bottom of this decline and the start of the Elliot Wave #5 to ATHs. However, the NYSE McClellan Summation Index is clustering in the overbought region and suggests the opposite – that a decline of a few weeks is due to reverse the upward trend in breadth numbers.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 42 (neutral)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 36 (neutral)
• Volatility Indicator – Ultimate Indicator – 33 (neutral)
• NYSE Advance/Decline Oscillator – Ultimate Indicator – 54 (neutral)

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NYSE McClellan Summation Index: This index’s oscillator has a current reading of 81. This suggests that a decline is due to occur over the next few weeks to correct the upward trend in breadth statistics.

Fear/Greed Index: This popular indicator is in the “Fear” territory with a reading of 27. A close below 25 would take this widely-followed indicator into the “Extreme Fear” area that has marked the bottom of all corrections. Note: Major corrections end when this Index is below a reading of 5.

The stock market has been continuing its relentless march upwards in terms of the S&P 500 and the Nasdaq Indexes. At the same time, the Advance/Decline Line, the Dow Jones Industrial Average and the Dow Jones Transportation Average have not confirmed that same strength. This presents a time to be extra careful about trading the upside for too long of a time and trading the downside too early or in the wrong sectors.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 54 (neutral)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 49 (neutral)
• Volatility Indicator – Ultimate Indicator – 60 (neutral)
• NYSE Advance/Decline Oscillator – Ultimate Indicator – 47 (neutral)

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NYSE McClellan Summation Index: This index’s oscillator has a current reading of 22. This clearly means that a bottom is closer than a top. This is a rare occurrence when many major indexes are making new highs.

Fear/Greed Index: This popular indicator is in the “Fear” territory with a reading of 42. This means that the market could head lower and reach a bottom soon. Or the market can head higher for a much longer period of time.

The stock market has declined sharply from its rally highs only one week ago. The short term oscillators are all in oversold territory suggesting that a bounce is due at any time now. Perhaps, Wednesday will be a day that opens lower, scares bulls into dumping, and turning around for a positive close. But where the market goes on an intermediate term basis is anyone’s guess at this time.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 15 (Oversold)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 16 (Oversold)
• Volatility Indicator – Ultimate Indicator – 30 (Oversold)
• NYSE Advance/Decline Oscillator – Ultimate Indicator – 29 (Oversold)

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NYSE McClellan Summation Index: This indicator has a current reading of 74 which is just coming out of overbought territory. This suggests that an intermediate term bottom has not had enough time to set up and any trades on the long side are for short-term speculation only.

Fear/Greed Index: This popular indicator is in the “Neutral” territory with a reading of 45. A reading below 25 is needed for a tradable low based on this sentiment indicator.

STOCK MARKET STRATEGY FOR APRIL 6, 2019: The stock market is now at the top of its trading range with all 5 internal indicators in “overbought” territory. This usually suggests that the market will fail on its first attempt to break above this current price range. But with the persistent strength of this market, it would be risky to bet on an immediate downturn. Until there are more obvious non-confirmations and/or a strong downside reversal, the Bulls will still have the upper-hand on this market.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 72 (overbought)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 79 (overbought)
• Volatility Indicator – Ultimate Indicator – 73 (overbought)
• S&P 500 % Above 50-Day Moving Average – Ultimate Indicator – 72 (overbought)
• Nasdaq 100 % Above 50-Day Moving Average – Ultimate Indicator – 74 (overbought)

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THE BOTTOM LINE: The market appears to be setting itself up for an eventual upside breakout on the news of a trade deal with China. But could this event become the trigger for a downside reversal on high volume? That’s the question that I’d be anticipating as I view this market in the current news environment remembering the words and wisdom of the late Joseph E. Granville, “the obvious is obviously wrong.”

STOCK MARKET STRATEGY FOR MARCH 12, 2019: The stock market made a nice short-term bottom last Friday after a sustained move down. Although the prices didn’t go down much, the internal indicators were clearly oversold. My only hesitation was that the “Volatility Indicator” was only mid-range and I was concerned that the selling would continue for one to two more day. But I was wrong.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 14 (oversold)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 17 (oversold)
• Volatility Indicator – Ultimate Indicator – 42 (neutral)

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THE BOTTOM LINE: The market may have reached a bottom that could propel the general market to new highs. It is now primed to “climb the wall of worry” to new highs without much resistance. For those like me who missed it, there may not be a good place to reenter the market here.

STOCK MARKET STRATEGY FOR FEBRUARY 18, 2019: The stock market rallied from its short-term oversold readings last week to the surprise of many. To simplify things, I’ve decided to reduce the number of important indicators that I follow for swing trading in order to make clearer decisions. My experience is that too many indicators lead to more confusion and less action on a daily basis. And I’ve chosen the three indicators that are both less followed, more accurate, and more frequent in producing high-probability trading signals.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 49 (neutral)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 49 (neutral)
• Volatility Indicator – Ultimate Indicator – 64 (neutral)

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THE BOTTOM LINE: The market continues to rally in an almost “straight up” fashion. Aside from last week’s mild “oversold” reading, there hasn’t been much, if any, resistance to the advance. And in doing so, it has frustrated many chartists and technical market players. The smart thing here is to wait for the next “oversold” reading from the three key indicators above and trade lightly with the objective to “taking the money and run.” The time for taking longer term investment positions was back in December.

STOCK MARKET STRATEGY FOR FEBRUARY 10, 2019: The stock market showed some downside action with a turnaround near the close of Friday. Two of the internal oscillators are in “oversold” territory and may suggest that the downside pressure should subside near-term. But the other internal indicators (new choices to reflect other perspectives of the market) suggest that this is all short-term action that needs more time to set up properly for a stronger move in either direction.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 21 (oversold)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 30 (oversold)
• Risk On/Risk Off – Ultimate Indicator – 49 (neutral)
• Volatility Indicator – Ultimate Indicator – 66 (neutral)
• S&P 100 % Above 200-Day Moving Average – Ultimate Indicator – 62 (neutral)

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THE BOTTOM LINE: The market may have hit a very short-term bottom on Friday but any major moves will require more time to set up properly. This may be a good time to step aside and let time create a better opportunity to trade.

STOCK MARKET STRATEGY FOR FEBRUARY 4, 2019: The stock market has continued its strong, broad-based rally from the Christmas lows by going practically straight up. But now is the time for a correction of this rally (most likely starting after the State of the Union address Tuesday) and based on the momentum, I’d expect it to be more of a sideways, stalling decline than a steep drop which serves the purpose of chewing up time. But a good buying opportunity will likely arise from the next oversold reading.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 58 (neutral)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 56 (neutral)
• Risk On/Risk Off – Ultimate Indicator – 56 (neutral)
• Volatility Indicator – Ultimate Indicator – 70 (overbought)
• S&P 100 % Above 200-Day Moving Average – Ultimate Indicator – 80 (overbought)

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THE BOTTOM LINE: The market may be setting itself up for a decline starting after Trump gives his State of the Union speech. This correction may not amount to a lot of points to the downside, but I’d be a buyer on the next oversold bottom. I think that the December lows were an important pivot point for this market and a continuation of the Bull Market.

STOCK MARKET STRATEGY FOR JANUARY 27, 2019: The stock market experienced a choppy week ending up about where it started. In the process, it has worked out some of its overbought condition. The internal indicators are largely neutral which suggests that the market can go in either direction with the same probability – either up towards heavy resistance or down for a 50% retracement.

Key underlying short-term timing indicators show the following:

• NYSE McClellan Oscillator – Ultimate Indicator – 49 (neutral)
• Nasdaq McClellan Oscillator – Ultimate Indicator – 49 (neutral)
• Volatility Indicator – Ultimate Indicator – 59 (neutral)
• S&P 500 % Above 50-Day Moving Average – Ultimate Indicator – 78 (overbought)
• Nasdaq 100 % Above 50-Day Moving Average – Ultimate Indicator – 77 (overbought)

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THE BOTTOM LINE: It’s anyone’s guess whether the market corrects from here or rallies and then corrects. Perhaps there will be a tradable low in mid-February to take new positions on the long side. But momentum still appears strong to the upside and it’s a tough bet trying to play the downside. The December low’s extreme technical readings may have put in a solid bottom for many months.