Permalink

off

In Healthy Rallies, All Stocks Participate

Looking back at the 2000 bubble in stocks and the 2008 crash in stocks, the market flashed warning signs prior to those moves lower. If you bought the NASDAQ in 2000 at the highs, you still don’t have your money back. If you bought the S&P in 2008, you have just gotten your money back after 6 years. Here is another warning sign. Small cap stocks (Russell) are diverging from tech and large caps. Not a sign of a healthy rally. That said, small caps rally to support the move. Or Not!

Information coming from the market suggests paying attention to the potential for a substantial correction.  Of course, small caps can always rally to support the move, but until they do, managing risk may be the best strategy.INDICES 140721

Permalink

off

Long Term Demand For Stocks Is Waning (July 14, 2014)

I was looking at some longer term charts over the weekend.  I was surprised when I constructed the chart below of total NYSE volume and did an overlay of the S&P Cash Index.  If you look at the 2000 peak, volume increased right into that peak.  As the market sold off, volume stayed high as it supported the move.  In other words, buying volume supported the move into the 2000 high, but then selling volume took over and supported the move lower.

In 2008 the same situation occurred.  Volume supported price and then changed to selling volume that supported the move lower.  In both cases trade was being facilitated.  The only difference was the change from buying to selling.

Currently, volume is simply collapsing.  It is not supporting price.  What it is telling us is the demand for stocks is declining, even though price continues to push higher.  The result of this is going to be extreme, IF selling volume begins to increase.  Right now it is non-existent.   The question is how long will that continue.  Of course, buying volume could always increase, or is this a warning of some longer term potential move.

Retail investors are still adding to mutual funds in Q1 2014.  Institutions are slowly decreasing their long positions, as are hedge funds.  A lot of money can be made when stocks fall.  It will be critical to pay attention, not enter too early.  Then again, if you are long, it will pay to use good stop management on current positions.

NYSE VOLUME 140712

 

Permalink

0

The Markets in Development Briefing for April 23

In last night’s Briefing, I outlined a strategy to be aware of for trading today. That strategy was based on Globex futures being much higher as a result of Apple’s earnings release. However, if those gains could not hold in the first hour of trading, it would be at least a short term bearish event.

You can access the briefing by clicking the link below.

The Markets in Development Briefing for April 23

 

Permalink

0

The Markets in Development Briefing for December 11, 2013

Below is the link to today’s Briefing.  Stocks sold off impulsively.  In yesterday’s Briefing I suggested being short below 1800 in the S&P and 3500 in the NASDAQ.  There were no divergences in market internals on the move lower and the Indices closed near the low of the day, suggesting follow through tomorrow.  The only problem is the Indices have reached an extreme oversold condition, but that does not preclude them from moving lower.  Expect lower lows tomorrow, unless there is some intervention.  If there are lower lows and the internals begin to diverge, that will suggest the potential for a rotation up to work off the oversold condition.  If the internals support any lower low, stay short.  How any countertrend rotation up develops from here will determine the intermediate term direction.

https://dl.dropboxusercontent.com/u/24636462/DAILY%20BRIEFING%20131211.mp4

Permalink

0

I have just posted a complimentary copy of the Markets in Development October long term Newsletter.  You can access it by clicking the following link:

http://www.josephjames.com/markets-in-development

Stocks are ignoring any negative news and are powering higher based on the continuation of Federal Reserve liquidity.  At this point, it seems a low probability the Fed will be able to reduce that liquidity any time in the future.  Also, I do not believe Bernanke will want to do anything that will upset the markets in the last two months of his Chairmanship. Based on that, the trend is up… for now.

However, there will be a limit to the extent the Fed can continue without other repercussions.  The continuation of liquidity injections will not end in a positive way.  Consider the fact that in 2007 Stocks were lower than they are currently and unemployment was around 4%.  Today, Stocks are higher with a published unemployment rate of 7.2% and a “real” unemployment rate that is approaching 14%.

 

Thanks,

Joe

Permalink

0

Markets in Development September Newsletter

You can access a complimentary copy of the September Markets in Development Newsletter by clicking the following link: http://www.josephjames.com/markets-in-development

We are coming into a timeframe that has proved to be very precarious for the financial markets.  Economic and geopolitical events will have an impact on the markets in the coming weeks.  It will be important to determine if participants are changing their perception of value and we begin to see some rotations.  If that occurs, the development of those rotations will determine the longer term implications.

Permalink

0

Stock Indices Correcting

It is important to understand the trend of a market.  However, it is also critical to determine the timeframe of the trend.  Over the past few days Stocks have been selling off.  The immediate trend is down.  However, the move down could be simply correcting the longer term trend that is up.  Right now it is impossible to tell whether the move down is a longer term trend change or a simple correction.  That said, it appears the rotation up today is not the beginning of a new bull leg higher.  It appears to be correcting the move down from the highs.

As of Tuesday, the Indices were extremely oversold.  As per last night’s Briefing, it suggested the greater probability was for rotation back up.  That is exactly what is happening.  Also, that rotation is weak but is working off the oversold condition.  Unless the move up becomes more impulsive, the Indices are likely to become extremely overbought, allowing for another thrust lower.

The chart below is a chart of moving averages of Breadth (advancers minus decliners).  You can see how Tuesday the indices were extremely oversold.  Today, without much price appreciation, the averages are pointing straight up and will likely be overbought by the end of the day.  Volume is extremely low.  Therefore, unless something changes, the higher probability is for another push lower.

There is one very important aspect of the chart.  The second red arrow at the bottom shows a lower Breadth reading on August 15 with a higher price.  The reading from Tuesday was not as low as the previous one but price was lower.  This suggests a divergence that could mean strengthening internally.  It will be important to watch this carefully.  If the Indices begin to strengthen from here, it will mean the move down from the highs is a simple longer term correction and we are headed back to test the highs again.  If there is a thrust lower and that divergence is eliminated, it could be signaling a trend change.

Permalink

0

AAPL Analysis 7/30/2013

For three days in a row, the day pattern for AAPL has proved to work perfectly.  If you took the long trade on either day, stops should be tightened up.  AAPL has reached the area of first resistance at 459.00 by putting in a high today of 457.15.  While there may still be some upside left in the move, it may be time for some type of countertrend rotation.  I noticed, as the stock moved into the upper extreme, volume was declining, suggesting buyers may be tiring.

In addition to the above, there is a FOMC announcement tomorrow.  That announcement can change the environment for equities no matter the instrument.  It is likely time to take some risk and profits off the table.  Today’s day pattern was again exhaustive in nature.  Therefore, the higher probability is for rotation down, unless new buyers (again!) come into the market in the first hour of trading.  If this is the case, watch carefully what happens as 459.00 is approached.  If the stock continues to extend above 459.00, follow up closely with good stops, especially in front of the FOMC announcement.

If there is rotation down in the morning and the extensions we have seen the last few days do not continue, it would be good to take some profits off the table.

Permalink

0

AAPL Analysis 7/29/2013

In yesterday’s post, I outlined the fact that AAPL offered an opportunity on a breakout of either 444.00 or 434.00.  I also stated the day pattern from Friday was exhaustive in nature, suggesting the greater probability was for rotation down.  However, if new buyers came into the market in the first hour of trading and AAPL held above Friday’s high in that first hour, then it was a bullish pattern.  That is exactly what unfolded.

If you took the trade and are still holding long positions, stops should be at breakeven or just below 444.00.  Today’s pattern was again exhaustive in nature, suggesting rotation down tomorrow, unless new buyers hit the stock in the first hour of trading tomorrow.  If this is the case, enter long above today’s high.  If long already, move stops up to just under today’s high on the continuation of the breakout.

I would not hold long positions from our entry point much below 444.00.

AAPL 130729