#MarketTiming – Long-term breadth says sell the rally

MARKET TIMING SIGNALS FOR 7/18/2019.

Long-Term Breadth (NYSI): Sell DAY 1
Short-Term Breadth (NYMO): Sell DAY 3
Price: Sell DAY 2
Nifty-50-Stock-List: 13 BUYS, 1 NEW BUYS, 4 OVERBOUGHT; 37 SELLS, 11 NEW SELLS, 12 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 46, falling, NEUTRAL LEVEL.
Bellwether Stocks: 6 UP, 9 DOWN.

WHAT?

The market took the tumble that been brewing for the past couple of days.

First short-term breadth turned down after a sequence of highs below highs, then price triggered a sell on today’s open, and now long-term breadth has given a sell signal for tomorrow’s open.

That last part is the most significant. Long-term breadth (the NYSI) is the primary context behind the entire market. If it is going up the bulls have the ball, if it is going down the market will tumble too. Maybe not right away — it can whipsaw like anything else, but if it keeps going down most stocks will follow.

Technically the sell signals are on tomorrow’s open but at today’s close this upswing, which began on the open of 6/28 (13 trading days ago), took TQQQ up 8.2%, UPRO up 5.1%, FNGU (the FANG ETF) up 12.4% and TNA remarkably was flat. Among notable stocks TSLA advanced 15.1%, SHOP 7.3%, TWLO 6.1%, WYNN 99%, FB 5.9% and AAPL lagged at up 2.3%.

The Nifty-50-stock-list was a mixed bag with as many stock down double digits as those up double digits. In retrospect that was probably a read on the raggedness of the rally.

However, INS, the number-one stock on the list coming into the upswing vaulted a spectacular 49.4%.

Interesting to note the divergence that registered on the overbought Fear-and-Greed Index, kept by CNN Money, called the exact top two days ago in SPY and in QQQ (see the chart below) and was telling across the board.

WHAT NEXT?

With the NYSI declining, one can only assume swing traders will be looking for short entries, options traders playing puts predominantly (see the post below), and long-term investors should tighten stops to their individual risk tolerance or just hold their breath and hope not to die.

Of note: NFLX after the bell reported earnings, a shortfall in expected subscriptions, and is getting clobbered in overnight trading. That may set a tone for trading tomorrow. Intriguing how often news comes along from somewhere to agree with the NYMO/NYSI breadth indicators.

Nothing much more to say. The market will go down until it doesn’t, and granted, that could be even as early as tomorrow. The VIX remains below 15, which is a bullish level indicating this is likely a pullback and not a serious correction.

(click on the Fear-and-Greed chart below for a larger view)

$SPY – engulfed by a bear in a grove of black candles

MARKET TIMING SIGNALS FOR 10/17/19.

Long-Term Breadth (NYSI): SELL FROM 4/17.
Short-Term Breadth (NYMO): SELL FROM 4/15.
Price: SELL FROM 4/17.
Nifty-50-Stock-List: 15 BUYS, 2 NEW BUYS, 7 OVERBOUGHT; 35 SELLS, 6 NEW SELLS, 23 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 71, RISING, GREED LEVEL.
Bellwether Stocks: 8 UP, 7 DOWN.

OF NOTE, $10K Swing Trades, SPY OPTIONS:
SPY CALLS, 288, 289 STRIKES FOR MONTHLY 4/18 EXPIRATION, 292, 291 PUTS.

OF NOTE, $10K Swing Trade Stocks:

BLACK CANDLES OF INDECISION ON CLOSE: TAN, SOXL, FNGU, TNA, TQQQ.

WHAT’S NEXT?

The market pulls back based on:

Long-term breadth (NYSI) triggered a sell signal today as the McClellan Oscillator (NYMO) continued to slide and fell through its zero line.

All of the black candles coming at the end of the recent rallies (see the charts below) coupled with the bearish engulfing candle on the SPY (although that was not with a notable increase in volume off the top). Price action during the days this week tended to gap up in the over-night futures market and then sell down steadily during the day session – and that felt like a bearish istribution under the surface.

CNN Money’s Fear and Greed Index remains at a greed level that is unsustainable.

Not much more to say except watch for follow through on the open to the downside.

(click on charts for a larger view)