#MarketTiming – Bulls doing what they needed to do

What they needed to do was to push the market up some more.

In the process, the all important long-term breadth (the NYSI) has turned positive to go along with the short-term breadth (the NYMO) and price indicators with SPY finally edging above its 280/282 resistance (see the charts below).

That would suggest more advance to come. The upturn in the NYSI is buy signal for tomorrow’s open

But maybe not without a dip first, a “turnaround Tuesday”?

There are shaky signs that remain in this tricky time in the market. It’s kind of scary to jump in now with the market already up essentially six days in a row, both the Russell and the Dow at at the moment lagging the Nasdaq and the SPX as if not all the generals are as yet on the battlefield. My nifty-50 stock list has 29 stocks on buys and has been declining since last week, even slipping again today from 31 on buys Friday. CNN’s Fear and Greed Index is at a “greed” level and still working on divergence trailing the market’s up move these last six days.

Still, at this point there is no choice other than to be long until further notice.

Given that the NYMO/NYSI is positive and also has a cycle that usually runs ten to fourteen weeks (the sell down ending six trading days ago was in the 10th week) breadth could launch the market into rally into say…May…and maybe making a new high along the way.

I’ve been asked to explain what’s on the the triptych of stock charts below. They are an illustration of what I talk about over and over again as I try over and over again to simplify, simplify, simplify.

The top part is whatever is being traded on the signals. In this case TQQQ. Could be AAPL, GE, NFLX, options, whatever. The middle part is NYMO and NYSI. The next lower part is obviously SPY. Also use the Nasdaq composite here on other charts. And finally the bottom part is the profit reading, set for $100,000 in order to easily see the percentage move. The white flag on the lower left is the booked profit percentage on the signal year to date. The white flag on the lower right is the current profits if the signal is in play.

The chart on the left is the short-term breadth signal for March, in the middle is a pure price signal for March, and on the right is the long-term breadth chart, YTD (it is set to go long again tomorrow).

Remember this is day trading and swing trading, no long-term buy and hold in my world (far too risky).

(click on the charts for a larger view)

#MarketTiming – “a gift for the bears”…

I expect the market to go down tomorrow.

Really? Why?

Long-term breadth, as measured by the McClellan Summation Index (the $NYSI) is declining, and today short-term breadth, as measured by the McClellan Oscillator (the $NYMO) turned down after basically a four-day bounce in the market, but more importantly, timing-wise, this NYMO pattern is more than the usual turn down.

In this case it is a “high below a high below the zero line.”

And whenever this happens I believe it is a gift for the bears.

Take a look at the blue vertical lines on the chart below, which mark each time this pattern has repeated in the past six months. Focus on what happens next. It is always what happens next in the market that matters — not many indicators are consistent as this one – a sell off every time and usually hard downs the next day (tomorrow).

In addition, the SPX and Nasdaq Comp both clicked down today (to state the simply obvious, every dip or swing or slide or whatever the market wants to do to the downside has to begin with one down day), and VIX, after four days down, clicked up, giving its own first-day sell signal. Furthermore, my nifty-50 stock list which has 41 stocks on sells a week ago Wednesday rallied to 42 on buys yesterday before clicking down to 39 on buys today. CNN Money’s “Fear and Greed Index” is at a “greed” level trying to diverge with the rally highs. AAPL, by far the most important stock in the market and one capable of triggering a sell off all by itself, gaped up today on top of a five consecutive days up, but then sold off below its open (putting a black candle of indecision at a high on its chart).

But more important than any of that in my expectation is high below the high below the zero line, the gift for the bears, a gift in bull markets let alone in what may now be a bear market.

Okay, what if it doesn’t sell down? Well, that will be particularly bullish and I’ll take that up when and if it goes that way. As Trader Vic Sperandeo would say “if the market doesn’t do what’s expected, it usually does the opposite twice as much.”

(click on the chart for a larger view)

#MarketTiming – today’s “gasp” in the slow rollover…

Yesterday in this link below it was suggested that there might soon be a collective market gasp as the fierce bear-market rally might becoming to an end, possibly as soon as today:

$SPY – the slow roll over?

The rollover didn’t show up all that much today in the indexes but if the leverage ETFs across the most prominent sectors are any indication (see the illustration below), this could be the start of something big for the bears.

Besides the solid gains in these leveraged ETFs (see percentage change column on the chart below), 42 of the stocks in my nifty-50 stock list were in the red. That was mass selling, a veritable blood bath on the day. SPY puts in or at or near the money on the open, expiring today, were up a minimum of 93% from today’s open (the 279 put was up 243%, showing there is nothing “slow” about a rollover on an expiration day).

In addition, CNN’s Fear And Greed Index appears to have topped again at an extreme greed level and turned down (see the SPY chart below). And the VIX has edged up above 15 again, a key level in the ebb and flow between bull and in this case more importantly bear markets.

Again, as it was coming into today, the market looks primed for more down side. As long as the breadth indicators (NYMO/NYSI) are negative, shorts are in play.

(click on charts below for a larger view)

(click on the chart for a larger view of SPY in relation to CNN’s Fear And Greed)

$SPY – the slow roll over?

Given how sprightly the rally since December has been it’s hard to call a top. Actually it’s hard to call a top anytime but bear-market rallies are especially tricky.

Weeks ago it was suggested here this would be the rally to make everyone one believe the bull market has resumed, and it has been that kind of rally.

There is famous, familiar chart of investor emotions in the market (see below) that shows the various stages of market emotions from despair to euphoria and back again (see below). It’s worthwhile review that chart every so often and ask one’s self how am I feeling now. This is especially true for long-term holders and retirees who have their savings tied up in the market.

Looking at the chart below I would suggest we are at the “Return to Normal” stage. For any swing trader who played the upswing this has been a fantastic rally. For investors it’s been a big sigh of relief.

But… There are signs now that sigh may be about to become a gasp.

Long-term breadth, as measured by the McClellan Summation Index, the most important indicator of mass market psychology, turned bearish four days ago after several warnings from the declining highs on the McClellan Oscillator itself. My nifty-50 stock list has failed to get overbought since the rally’s kick-off’s first few days. While the indexes have worked higher, the stocks have rotated and paused and in some cases fallen under the surface (take a look at the rollover in the banking sector).

Weed stocks lead again (check out CRON up 87% on the YTD summation index run up or GWPH up 71%). While there’s a growth logic to the marijuana sector, that’s still just as crazy as the dot-com bubble of yesteryear.

Despite all those warnings until prices follow internals and drop with conviction (which could happen any day now, even tomorrow), and the VIX jumps back above 15 (it closed at 14.74 today), the sell off may not happen, and if the SPX, or in this case the SPY run up past the resistance at recent highs, it might go to all time highs before the bear market resumes.

Doubt that but we’ll see.

(click on the chart for a larger view)

#IPOs for “Dummies” – $GOSS $ALEC $HARP UPDATED

This an update of this post below: IPOs on buys.

As outline in that post, all three of these recent stock IPOs were crossing the highs of their first day of trading (the “IPO Day”).

Once in the trade, stops, at the individual trader’s discretion, can be on a close below the IPO-Day high (which is what I would use), or if one has the patience and risk tolerance as far down as the low of that day.

The numbers in the white flags on the charts below are the gains per $10K invested in each stock. The numbers, at 10K, also correspond to the percentage gains (for instance GOSS is on today’s close up 12%).

(click on the chart panel for a larger view)

$SPY – it doesn’t even rhyme, it repeats?

History…

Back in December there was this post:

$SPY – Simple black candle tops…

In which it was noted:

Again and again, market upswings end in black candles – a hanging man, a shooting star, a dreaded doji, or just a sign after six days up and two blasts of nothing-much news the buyers get tired. Not always it’s a black candle ends the rally, but it happens often enough, me thinks, for swing traders to take notice.

And it was further noted going into that December black candle:

“If I had to guess, I’d pick the 281 neighborhood as a place where the SPY may settle this trip up (see the chart). Maybe even a bit higher. It may not take long or it may chop up until January. After that all indications are we have not seen the eventual lows of this bear.

The December black candle (see the chart below) started the plunge into the December 26th buy signal from which we have rallied again to…you guessed it…280 on the SPY! Lots of traveling around in the market to go almost no where. Swing traders love this — after all what a rally! Long-term holders must sit grateful that it’s not as bad as it was…but is it going to get any better for them?

Well, we’ll see. Like last time we were here, there are again simple black candles everywhere: besides SPY (the chart below), and QQQ they are in a slew of ETFs – TAN, FAS, SOXL, FNGU, TNA, TQQQ, UPRO — as well as DB and C in the banks and no less than eight staring me in the face in my nifty-50 stock list (that a lot for a single pattern all at once).

So what’s it mean? Maybe nothing since all-important long-term breadth continues to rise, but then short-term breadth (measured by the McClellan Oscillator, $NYMO), continues to wind down (see the lower portion of the chart below), giving warning signs of a turn to the downside coming near. To keep it simple, let me say it will not surprise me if a dip starts Tuesday and goes down a while.

(click on the chart for a larger view)

#MarketTiming – the rally to fool everyone continues

Been on vacation and been lazy so haven’t updated this blog for a month or so.

No matter. Nothing has changed much since first getting the buy signal on this upswing way back on the open of December 24th in this POST BELOW. Along the way I made the quote below in this entry back on January 7th — Santa leaves behind a “fast up” rally. :

So what now?

Probably more upside but it would be prudent to set stops to preserve swing profits. I’ve cautioned in the posts below that this longer term is a relief rally, and likely just the kind of rally the market uses to make everyone believe it’s the resumption of the multi-year bull.

The key here is go along for the ride but guard against being fooled by how fast the up.

This is still my overall opinion. This is a bear-market rally. It has been and continues to be spectacular but it is still likely to be the rally to fool everyone into believing the bull is alive and well. And maybe it will turn out that it is but no matter. The key is be long as long as it lasts but don’t fall in love with it.

Long-term breadth, as measured by the McClellan Summation Index, the $NYSI (obviously the most important stock market timing signal there is), has been rising now for 37 trading days and yesterday short-term breadth, as measured by the McClellan Oscillator, the $NYMO, turned up from a dip last week giving a renewed general market buy signal for today’s open (see the chart below).

It is a notable uptick since the $NYMO, as it often does ahead of a downturn, was giving warnings that the rally was flagging but the new low above a low in the $NYMO pattern (see green circle on the chart) suggests there is at least a week more of rally to come.

So, as I said above, nothing much has changed this year. The trend is up. Be long and don’t even think short. For now.

(click on the chart for a larger view)

$SPY – Santa leaves behind a “fast up” rally

Despite AAPL’s bite of the Santa rally two days ago, it appears the rapid bear-market rally that began the day after Christmas has gone on to a bigger thing.

That is good news and bad news for the bulls. The good news they have received remarkable relief from the drubbing in the fall. The bad news is this rise still looks like a typical bear-market rally. Just as bull markets grind up, then drop hard, then grind up again and so on, bear markets tend to grind down, rise up fast, then grind down again and so on.

This up swing truly fits that later description.

On the plus side, both short term and long term breadth have had a screaming flight out of the massive oversold low to a massive overbought high (see the chart below). That breadth blast has a lot of analysts commenting on the history of “breadth thrusts” and generally indicating the market has had its correction, maybe even an entire bear market when the S&P tapped a 20% decline (for one day).

That may turn out to be so but I doubt it.

I suspect this more likely just a bounce on the road to the next grind down, but it could go up more or chop sideways for a while before the grind begins again. Margin debt has likely not finished its fall (we won’t know how far it has to go until its reported for December at the end of this month) and that means more downside to come (take what just happened in November and December and do it again).

But, granted, this has been a spectacular rise with the 3x-leveraged TQQQ up 26%, TNA up 32%, UPRO up 23%; and leading the leveraged sector ETFs, LABU (biotech) up 67.5%, ERX up 35% and FAS up 23%.

NFLX, among my bellwether stocks, is the star of the show so far in this rally , up 32.5%.

This is eight days in the market and again prime example of the value of swing trading over buying and holding through declines. There are numbers in stocks’ advances during these last eight days that would make an asset manager’s entire year (and maybe will). Forty-eight of the stocks in my nifty-50 list are on buys. Today 43 of the 50 were up. And finally 40 of them are overbought.

And SPY itself is coming into the 255/260 resistance suggested here when this rally kicked off.

So what now?

Probably more upside but it would be prudent to set stops to preserve swing profits. I’ve cautioned in the posts below that this longer term is a relief rally, and likely just the kind of rally the market uses to make everyone believe it’s the resumption of the multi-year bull.

The key here is go along for the ride but guard against being fooled by how fast the up.

(click on the chart for a larger view)




#MarginDebt – The Reckoning has arrived…

You know those recaps that begin each new episode of TV shows with words like “Previously on Mad Men…Previously on Shameless…” or most appropriately in this case “Previously on Breaking Bad”?

For a year I’ve been watching for the end of this bull bubble and chronicled it’s slow rollover in the links in this link so let’s call this recap “Previously on Margin Debt”:

Margin Debt – the divergence that kills the bull

As has been noted before the trouble with this gauge from FINRA (it used to be from the NYSE) is that it is calculated and released always a month late. So during any given month one pretty much has to guess from price action what’s going on with the margin debt. Given how over extended it was, my guess October’s price action was probably finally killing the bull market (see the link above), and November would probably be the confirmation that the bear was out of it’s nine-year cave. Indeed, it was confirmation and the bear did emerge.

If one stares at the chart below for a while, it’s clear if history is any guide (at least based on the 2000 and 2007 bull bubbles) when margin debt comes apart it does not quit feeding on itself until the SPX declines 40 to 50 percent.

Ai-yi-yi, long-term holders!

But can this time be different? Of course it can. Margin Debt this time is coming down from higher levels than even 2000 and 2007. What if different turns out to be the same as 1929-1932? Talk about a “Presidential cycle” – the last “businessman” to be President was Herbert Hoover who presided over the worst bear market in history.

Different is never really different. It really means all things must change so that all can return to being the same.

America has had magnificent prosperity from 1945 to… Picking a time depends where one sits on the income inequality scale but I suppose for the vast majority of Americans the time was the 1980s when prosperity began to fray, the American dream began to fade. Read an telling opinion piece on this just yesterday – American Capitalism Isn’t Working. Needless to say it can be fixed but the fix is going to take a lot of year now. It’s going to be long climb back and we’ve not even hit bottom.

I could be wrong about this, of course, since market psychology can run amok even in the face of time and all sorts of fundamental foolishness.

In the meantime, as J.P. Morgan so famously put it “the market will fluctuate.” There will continue to be plunges to buy and bounces to sell. For those of us who actively play this game, that’s all that matters to make money.

(click on the chart for a larger view)

$SPY $TQQQ – if Santa’s rally is coming to town…

It appears it started today and triggered the likelihood of more to come tomorrow…

This should be a rally all the way to Christmas and possibly a bit beyond.

Why?

Because the market has been pounded hard to the downside since, in some index cases, early October. But more importantly short-term and long-term breadth, measured by the McClellan Oscillator and Summation Index (see the chart for today below), has simultaneously given buy signals for tomorrow’s, Tuesday’s, open. And they have done it with a telling divergence – see on the chart how deep the breadth plunge was on the lows in late October, and how the breadth numbers failed to confirm the price lows at the same levels last week.

In addition, my nifty-fifty stock list had 44 sells on the first plunge (usually the sign of a swing bottom) but could not muster more than 39 on sells during the last sell-off. Forty-five of them are now on buys.

I have major 3xleverage ETFs giving new individual buy signals for tomorrow’s open – FAS, SOXL, FNGU, TNA, TQQQ, UNPRO — and major bellwether stocks doing the same – AMZN, NVDA, TWTR, GS, BABA, FB. But neither TSLA nor NFLX can be ignored on any market bounce.

While AAPL missed an individual buy signal today by a whisper, this market is not going anywhere without it. However, I see, it closed at 174 and is down to 170 after-hours (a better bargain?). That AAPL has an after-the-close sell down raises the possibility the downside is not yet done.

Highly likely we are now in a bear market with Finra (NYSE) margin debt unraveling. If so, there’s going to be downward pressure on this rally almost every day. This is the time for traders to take advantage of sharp upside bounces like today and for long-term investors to lighten up on their holdings if not to get out completely. Every time margin debt has come apart (and this time it is from a higher level than both 2000 and 2007) the SPX has lost 40% to 50% before the bear market ended in 2003 and 2009. See this LINK – the divergence that kills the bull.

Bear-market rallies tend to be fast and furious so we’ll see how this one goes, but if it is truly a bear-market rally, it will as time goes by take a lot of time to recover from the its eventual bottom whenever it comes and at whatever price level.

(click on the chart for a larger view)