#MarketTiming – with not much fanfare Santa slips into view

On a FED day as the Federal Reserve held firm on low interest rates, it appears the annual Santa Claus rally may have quietly slipped into view despite the tight trading of the past few days.

Possibly it’s even set up a for a fast move by the tight trading.

Appropriate timing, I guess, since it’s hard to fathom this market continuing to rally on anything other than the FED pump, pump, pump…

Regardless, the NYMO put in a low above a low today (see the chart below), to go along with the important NYSI’s rise for the past four days. That completes the breadth pattern that is a most reliable trigger for a sustained up swing.

Since the last time the NYMO put in a low above a low on October 8th, SPY has rallied seven percent.

I would venture to suggest about the only thing that could abort the rally would be the Tweeter in chief scattering the trade-talk sticks again. Reportedly he is meeting tomorrow with advisors to discuss the proposed Dec 15th tariffs against China. Since when has he listened to advisors? So anything can happen.

In the meantime, one has to respect the signals and be long, and buying dips, until further notice.

(click on the chart for a larger view)

$SPY #Options – Day trading calls 12/6

INITIAL ENTRY:

FIRST HALF PROFIT:

CLOSE OF THE DAY:



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Divergences don’t matter…until they do…

Over and over again, especially in bull markets, prices keep going higher despite divergences on internal indicators, but when a tumble comes, a “pull back”, even a crash and one looks back at its beginning there is usually a divergence there.

Or a cluster of divergences.

So as of today, we have one in CNN Money’s “Fear And Greed” Index. That index has been wildly over bought as prices have surged on most major indexes (in the SPY ETF surrogate for the S&P 500). It is back off, risen again and as of today put in its divergence by making a lower low while SPY has hugged its high (see the chart below). It is not infallible but if history do tell, it is a reliable context (not the red lines on the chart and subsequent market drops).

And wonder of wonders, the FINRA Margin Debt reading for October came out today (see the second chart below). It is a monthly and always a month behind so there’s always some guess work to be done in real time, but this reading is, indeed, ominous.

Besides having risen way beyond the debt levels of both 2000 and 2007 before those bear markets arrived, it has now been carving out a ledge pattern on its chart (sometimes called a bear flag) for the past few months as the market keeps rising into thinner and thinner air.

Why ominous?

Note it’s the same pattern that was in place as the market was making highs last time and, when it finally fell apart, it was the precursor of the bear markets in both 2000, and 2008. Is it different this time? Is it ever different this time?

History, history, history.

This is to say nothing of the divergences on the McCellan Oscillator (the NYMO) with its Summation Index (the NYSI) declining for the past 10 days even as the market as advanced.

Does this mean we’re about enter a bear market?

Maybe not, divergence don’t always matter. But if a bear comes roaring now there is a good chance when we look back to this day this cluster of divergences will have mattered.

(FEAR AND GREED – CLICK ON THE CHART FOR A LARGER VIEW)

(FINRA MARGIN DEBET – CLICK ON THE CHART FOR A LARGER VIEW)

#MarketTiming – the NYMO low above a low

One of the signs of a true bull market is the follow through off a low-above-a-low pattern in short-term breadth (the NYMO).

The signal is displayed in the top portion of the chart below.

It is buy signal for aggressive traders looking for a rally to begin off a meaningful market bottom. In bull markets, it almost always has follow through to the upside immediately. That hasn’t quite happened in recent months, which has made everything in the current market psychology suspect. See August on the chart as an example.

But it did happen today — after triggering yesterday for today’s open, there was the immediate follow through to the upside.

Now the bulls need long-term breadth (the NYSI) to turn up in the next day or two, which is the trending signal. The NYSI is the smoothed line in the middle of the chart below. It is still falling but…

If both breadth indicators get in line, there is a good chance the market rallies strongly, possibly for several weeks, maybe back to the recent highs, maybe higher.

But, of course, as has happened all through these unstable times, it will be a rally that can be killed by a tweet.

(click on the chart for a larger view)

Margin Debt – setting up a S&P 50% plunge?

FINRA margin debt is a long-term indicator and always reported a month late.

So now we have the August numbers, down 6% month over month, as reported by Advisor Perspectives Monday (see the chart below). But it’s not the margin number that is concerning, it’s the chart pattern for the long term.

In the 1990s margin debt chugged along in a reasonable bullish fashion before finally going ballistic in 2000 just before the dot-com bubble burst. Then again, coming out of the 2003 bear market, it moved up gradually before going ballistic again in 2007 on a bubble in housing, fueled by excessively low interest rates for too long a time, and we had the financial crisis of 2008/2009. And now in 2018 margin debt has pushed higher than ever before on deregulation and tax breaks to corporations fueling stock buy backs, and some would say on a lot of hot air.

It the fall of last year it topped and has not gone higher this year. That is ominous for long-term investors.

Consider the pattern on the chart below.

Note that in both 2000 and 2007 the market made a new high after margin debt topped and fell. Each time on the chart, the debt numbers formed a plateau lower than the peak as the market made those new highs.

What comes next?

That is always the most important question in the stock market.

In 2000, the S&P plunged 50% (the Nasdaq, 78%), and in 2008 the S&P plunged again down 56%. Note the pattern in place on the chart now. Same old same old.

So is another 50% bear market imminent? It’s likely because although they always say it’s different this time it never is, even though it sometimes takes a long slow time to get it done.

This is a bit tricky at the moment because of the late reporting. One has to guess what is happening with margin debt behind the monthly market moves. Since the August drop in price is reflected in the margin debt drop (big professional players lightening up, maybe desperately lightening up), and since the market has rallied so far this month, one can guess margin debt may move up a bit here in September but not a enough to head off what is to come.

And since the market likes to fool everyone into complacency at the last possible moment, a new high here would probably be just enough to lock long-term investors in when they should be at least shuffling, if not running, to the exit.

If by chance it doesn’t move up, October could become an October of old, which is to say…uh, crash… crash… crash.

(click on the chart for a larger view)

#MarketTiming – Some notes on the NYSI

MARKET TIMING SIGNALS FOR 8/22/2019.

Long-Term Breadth (the NYSI): Sell DAY 3
Short-Term Breadth (the NYMO): Sell DAY 1
Price (the Nasdaq COMP): Sell DAY 1
Volatility (the VIX): Sell Day 1
Nifty-50-Stock-List: 19 BUYS, 8 NEW BUYS, 4 OVERBOUGHT; 31 SELLS, 4 NEW SELLS, 17 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 16, Falling, EXTREME FEAR LEVEL.
Bellwether Stocks: 12 UP, 3 DOWN.

WHAT?

Going into the end of the week last week the market looked ready to rally strongly but Trump tweeted again and China talked and that was that as the Dow swooned nearly 700 points on Friday.

Despite what the nincompoop in the Oval Office has to say, trade wars are not easy. Here’s an assessment of that — THE COST OF A TRUMP TWEET.

Needless to say, when stuff like this holds sway the market has become absurd. But even in the midst of this news and dribble-driven market technical indicators, though inconsistent for a day or two, in the end will again stabilize and win out.

Let’s take long-term breadth, the all-important NYSI, as an example. Formulated by Sherman and Marian McClellan is the long-term measure of the McClellan Oscillator (the NYMO) registering gyrations on the NYSE advance/decline line. It is pretty much the broadest measure of mass market psychology and direction.

Except for a “ledge” at the very end of July (ledges are made to fall off of) and a couple of blips up last week when the market wanted to rally the NYSI has been falling since July 17th. As one focuses on the day to day moves in the market, it is often easy to overlook the longer term when breadth is is bearish so I thought I’d take a quick look back at NYSI’s damage on much of the market in the last month or so.

See the ETFs and stocks in the chart panel below for illustration.

Since the NYSI July 17th turn down, a little more than a month ago, TQQQ, the Nasdaq 3x-leveraged ETF has declined 12.5%; TNA, the Russell small-cap 3x-leveraged ETF has fallen 18.8%. Among notable bellwether stocks on my list FB is down 9.3%, AMZN down 10.9%, TSLA down 16%, NFLX 9%, GS 6.8%, and WYNN a whopping 22.9%.

Obviously, the NYSI is a powerful read on market direction, both on the upside, and now on the downside, and most stocks follow the general market.

When it’s falling be short or be in cash. And long term investors should resist “bargains” and wait for the turn before initiating new positions.

In other words, don’t fight it.

WHAT NEXT?

With short-term breadth turning down today with a high below a high in negative territory (see the second chart below), that is a renewed sell signal so the expectation is the market goes down tomorrow and maybe the rest of the week.

But who knows for sure these days? Some fools might think they hear a positive tweet, or China playing its own game may stand by and let the market bounce.

(click on the chart panel or a larger view)

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$SPY up against a high wall and ready to rise

MARKET TIMING SIGNALS FOR 8/22/2019.

Long-Term Breadth (the NYSI): Buy DAY 1
Short-Term Breadth (the NYMO): Buy DAY 1
Price (the Nasdaq COMP): Buy DAY 1
Volatility (the VIX): Buy Day 1
Nifty-50-Stock-List: 38 BUYS, 5 NEW BUYS, 10 OVERBOUGHT; 12 SELLS, 2 NEW SELLS, 3 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 25, rising, EXTREME FEAR LEVEL.
Bellwether Stocks: 12 UP, 3 DOWN.

WHAT?

After slamming up and down in a price consolidation for nine days (some might say twelve) it appears SPY, and the rest of the market is ready to rise.

After a one-day dip, short-term breadth (the NYMO) turned up today putting in a low above a low above the zero line (see the pattern on the chart below).

Just as highs below highs below the zero line are gift or the bears (see the most recent on the chart), today’s pattern should be a gift for the bulls.

In addition, both price action (TQQQ as well as SPY) and volatility (the VIX) gave buy signals on today’s close for tomorrow’s open.

The stocks in my nifty-50 stock list have been gradually making the turn in the midst of this consolidation on the indexes. At the bottom of the sell off in late July and early August there were as few as six on buys (8/5), and even just six trading days ago as few as sixteen, but now there are 38 on buys and only ten overbought.

But maybe the best case for expecting an upswing here and a bull run, is CNN Money’s “Fear and Greed” Index (see the second chart below with TQQQ). It has been at “fear” and “extreme fear” levels during this entire past twelve days and today the index put in a low above low pattern while still deep in the fear zone.

That may be a big clue as to what comes next.

WHAT’S NEXT?

If it can vault above the recent highs of the last few days, the market is going to rally strongly, maybe even explosively – and given how far “Fear and Greed” has to run to the upside, this rally could carry back to the highs and possibly beyond in the next few weeks…

It better.

I say “it better” because if it doesn’t off this setup it’s going to be as Trader Vic Sperandeo always says: “If the market doesn’t do what is expected, it will do the opposite twice as much.”

Overall, I must say I am long-term bearish. I think this became a bear market on the sell down last December when margin debt, which was at that point higher than both 2000 and 2007 started to come apart, and all this jerking around this entire year is so far the death throes (however spectacular) of a long-term bull. President Obama brought this out of the depth of despair and it has managed to keep going on the tax-cut buy backs and the deregulation under Trump, but it is a ten-year bubble now waiting for the prick to bring it down. No wonder Trump, with his trade war and farmers going broke all through the Midwest and layoffs creeping into the headlines, is screaming desperately at the Fed to cut rates.

But none of this is going to matter tomorrow.

(click on the chart for a larger view)

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$SPY – trudging higher but watching for a reversal day

MARKET TIMING SIGNALS FOR 7/16/2019.

Long-Term Breadth (NYSI): BUY DAY 12
Short-Term Breadth (NYMO): Sell DAY 1
Price: BUY DAY 2
Nifty-50-Stock-List: 20 BUYS, 4 NEW BUYS, 13 OVERBOUGHT; 30 SELLS, 4 NEW SELLS, 11 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 57, falling, GREED LEVEL.
Bellwether Stocks: 11 UP, 4 DOWN.

WHAT?

The market moved sluggishly higher today.

In the case of SPY it was five days in a row, and except for a minor blip in the middle of the advance, TQQQ would be the same. SPY, by my measure, has been overbought for three trading days, which is often all she wrote, but not always.

During this entire move up, my nifty-50 stock list has never had more than 25 stocks on buys. The last time I saw above thirty was two weeks ago (37 on 7/1). Those stocks are trudging through a muddle. That might or might now mean something. Notably TNA, the 3xLeveraged ETF for the Russell small caps has gone nowhere.

Still SPY has managed to make new all-time highs, which is either ragingly bullish, or it’s about to die on the first down day.

WHAT NEXT?

Let’s consider that first day down for a moment, especially since short-term breadth, which has been putting in highs below high (see chart below), turned down today with SPY overbought and up five days in a row (see this many times before a dip).

Trader Vic Sperandeo noted one time that any time a major index goes four or more days in one direction at the end of an intermediate advance or decline the first reversal day is the change of trend. Trouble is I don’t think he ever quite defined what constitutes an intermediate advance or decline. One can look at charts and see he has been right again and again and again but then there is that one time…and that one time can kill anyone who doesn’t play defense. This advance is essentially five weeks old with a minor drop in the middle, projected here in this post below :#MarketTiming – a black candles Thursday leading to….

In addition SPY ended the day in a black candle. The black candle makes today’s high (301.13) and today low (300.19) key numbers, above the former there more rally to come, below the latter a dip to the downside, a easy read of price action. Those highs below highs on the NYMO (again see the chart below) are a warning. There is a divergence in CNN Money’s Fear and Greed Index not confirming the new highs. There’s the Russell stall so far… These things are beginning to pile up.

Five weeks of solid gains may not be the end of the upswing but it is worth guarding against Trader Vic’s “first reversal day.”

All that aside. until long-term breadth turns down, the long side will remain the side to play. Dips are to be bought in the indexes, the ETFs, stocks. Eleven of my bellwether stocks were up today with decent gains, see AAPL, TSLA, SHOP, BABA as examples. So there is still strong buying in big names, which is probably the place to focus most trades.

It always sounds stupid with one says it but it is the one simple, absolute truth — the market will go up until is doesn’t.

(click on the chart for a larger view)

#MarketTiming – Stall or drop?

Been on vacation so haven’t been able to keep this blog as timely as I would like.

And besides, being in places where there was not even cell-phone coverage, I see I’ve missed a pretty sprightly rally. That’s the way it goes sometimes.

Anyway, TQQQ, my favorite leveraged ETF, is up 21% on the short-term breadth signal (the NYMO), six trading days ago. That signal triggering from double-bottom territory on the NYMO set the stage for the rest of the signals. Consequently, TQQQ is up 12% on its price signal and 8.3% on the long-term breath signal (the NYSI).

See the charts below — from left to right, short-term breadth, price, long-term breadth.

Since the rally’s start on the open of 6/4, other leveraged ETFs of note were SOXL (semiconductors) up 23.7%, FAS (financials) up 11.6% and FNGU (fang stocks) up 25.8%.

Gains among my be “bellwether stocks” were led by TSLA up 20%, coming from deeply oversold, AAPL up 11%, WYNN up 12.4%, SHOP (newly added to my list) up 14.4%, AMD up 14.5% and even a biggie like MSFT was up 9%.

Did I mention that we’re talking just six trading days, from Tuesday last week to Tuesday today? I guess I did. Six days, needless to say, that is what swing trading is all about.

So what now?

Both short-term breadth and price gave sell signals today with much of the market still wildly overbought. Likely we get a pullback starting tomorrow. Or at least a sideways stall to work off the overbought conditions. Note the big black candle of indecision today on the chart to the right. Below the low of that candle it’s a drop, above the high a resumption of the bounce.

If, by chance, this upswing was just more of the thrust from December to make everyone believe the bearish growl last fall was nothing to listen too, I suppose this rally could drop right out of the sky.

Either way, as long as the long-term breadth (the NYSI) is rising, the path of least resistance is up.

(click on the charts for a larger view)

#IPOs – no shares to ride for $UBER and $LYFT yet

Since BYND, with a big jump, is making noise again today, thought it’d be a good time to take a quick look at recent IPOs still in play as per this criteria:

Buying IPOs For Dummies

See the charts below. Each is set at a $10K investment to show the percentage as well as dollar gain for each stock in the white flag on the lower right of each chart — for example, SWAV is up 99% since its IPO buy, SOLY up 115%, and so on.

UBER and LYFT have not climbed above the hype on each of their first days of trading so they are not long investments. At best, LYFT particularly is a short.

Of note, if APLT holds its gain for today, it will be a buy either at the close today or on tomorrow’s open.

(click on the chart panel for a larger view)