Posts Tagged ‘stock market’
Market in UPTREND, July 5th
Friday July 1st was a 90% panic buying up day, indicating that more investors are entering the market. The S&P500 was testing resistance off the 200DMA between June 15th and June 26th and has been moving upward since then. The upward move has not been as strong as I would prefer to see it (going up in below average volume), but it has crossed through the 50DMA and stayed above this line. The major indexes are now 6-8% off the recent lows. All in all the market action has turned my model into UPTREND which historically has significantly proven to redue risk when buying stocks.
The stock market has been really choppy this year, which research shows is very typical for third year bull markets. There’s no guarantee the choppiness won’t continue. What usually happens in the market is that we have seasonal strength in January, then weakness in February, strength in March-April, and weakness in May-June and then again a summer rally in July until early August. We can hope that the choppiness lessens and that we will get a healthy market over the summer. But no one has ever made money over time by relying on hope. Time will tell if this will be a typical summer, but the market will clear signals as to wether it holds up or not. Until the next market update is out (indicating a new downtrend), things to look for includes the next levels of major resistance which sits at 1,350.
Looking to other asset classes for indication for how the stock market will do in this uptrend and over the next summer months can also give a good indication for what we have in store. It is unfortunately not pleasant reading. See chart below of the RJA (Elements Rogers Intl Commodity Index).
Source: Google Finance
Agricultural commodities have been leading the stock market by several months during QE1 and QE2. They peaked in February 2011, well ahead of the stock market’s May 2nd peak. Since that February peak they have crossed below the 50DMA and met resistance to this line from the downside several times before eventually also breaking down through the 200DMA on June 22nd. They are now well below the 200DMA and in addition the 50DMA is very close to crossing the 200DMA. That would be another negative if it were to happen.
The picture for several other commodities including oil looks equally bad. As I have written many times before, which still holds true: gold is the only market with no major breakdown since the start of the financial crisis. Gold is still the go-to-market for financial safety.
I remain cautious and keep looking for signs of further strength and weakness both in the stock market itself and in other markets attracting capital, despite the fact that we are in an uptrending market.
Market in UPTREND, June 1st
I indicated in my last post on May 24th that the market action that triggered my models into a downtrend was also action that we sometimes see near bottoms in the market. This turned out to be one of those times. The market has proved to be strong since then, breaking through its 50 day moving average and yesterday spiking up in significantly higher volume. This turned enough of my indicators to buy signals to indicate that we are now in a new UPTREND.
But as there were some cautionary signs to the downside last week, so there are in this uptrend. We typically like to see higher percentage gains in the indexes than we did yesterday. Another cautionary factor is that we are now in a third year bull market, and market action typically tend to be choppy with modest gains in such years.
Monitor leading stock for further indication to the strength of this new uptrend.
The strong market action yesterday was set off by indications that a new plan to save Greece was near. The market has chosen to party, at least now in the short-term. And I hope investors enjoy it while it lasts because I am certain (to the degree that anyone can be certain about anything regarding the financial markets and government action for that matter) that helping out Greece will do nothing else than cover over the cracks of the underlying structural problems which in due course will implode and cause even greater harm further down the road. I am confident that neither Greece, Portugal nor Spain will not be able to recover its debt ridden economies without going through debt defaults on a grand scale first, which will have severe global implications.
But for now, lets enjoy this last uptrend which is likely to take the markets above recent highs.
Market in UPTREND, March 30
We entered a downtrend on March 10th, but we have had enough positive market action over the last week to finally shift the market into a new uptrend yesterday Tuesday March 29th. The market shook off downbeat headlines yesterday as consumer confidence (data from the Conference Board) fell more than expected, hurt by higher food and fuel prices and concerns about the job market. The Conference Board’s chief economist said that this “will likely impact spending decisions.” What is important is not what economists like her are saying but rather what the market is saying, and the market is now saying (through my models) that it is in an uptrend. Act by it until we enter a new downtrend again. But use caution despite the new uptrend. Buy only the top stocks in the best industry groups as close as possible to proper buy points. Control your exposure by scaling into positions as a stock moves in your favor.
The Case-Shiller home price index was another data point that turned in its worst one-month performance in a year. The 20-city gauge fell 3.1% between January and February. “The housing market recession is not yet over,” the head of the committee at S&P said. Just wanted to remind you that the fundamentals still do not look good for the housing market.
Newsletter #1, 2011: Market in DOWNTREND – What we can learn from Japan
You have not heard from me in a while now and that is because we have been in a continuous uptrend since December 7th last year when I sent out my last newsletter. After more than three months of uptrend the market entered a new DOWNTREND as of the close of Thursday March 11th. I sent out my short notice the next day and this is finally the follow up newsletter.
We will cover the following topics in today’s newsletter:
- The newsletter is finally taking its first small baby steps into the www
- A new downtrend and what it means
- Emerging Markets gives indication of were we are heading
- We have just witnessed the fastest doubling in the S&P 500 since 1936! But then see what happened next…
- If the US was to see a repetition of 1937/38, maybe Japan could be a good place to put your money right now?
- Japan might or might not be nice investment, but more importantly we have so much to learn from the Japanese
- Everybody seems to be bullish on everything right now
- The US housing market does not provide any supportive arguments for taking a positive stance regarding the future
