The chances of the Market being close to an important long term bottom has increased as the McClellan Oscillator finally hit oversold levels on Friday (hasn't been there in months). This opens up two possible bottoming scenarios. Scenario 1, and the most obvious is the Market has already made a bottom. Scenario 2, the more likely, is the Market will make a lower low (after a short term bounce) and the $NYMO will show positive divergence (by making a higher low). Regardless of medium term Market price action, I still am bullish long term as I had posted prior in this blog.
Monday, April 14, 2014
The Market has had an ugly 2014, however there are some promising signs the Market is finally trying to put in a bottom. The chart below shows the S&P 500 and $TRIN indicator (Arms Index). When $TRIN is above 2 it often marks a tradable bottom (the bounce last at the minimum a few days, often longer) in the Market. What is interesting about this indicator is what happens when the Market has a pullback AND the $TRIN goes above 2 during the selling. When these two requirements are met (highlighted with red arrows), the Market ends up putting in a tradable bottom. The criteria for this signal was met on Friday, where we had quite a pullback lasting multiple days AND the TRIN indicator went above 2. It will be interesting to see if this signal will continue to work (so far so good as we bounced today), as the selling has been relentless in a lot of popular retail stocks.
Thursday, March 27, 2014
The Ratio Adjusted Summation Index is a great tool to measure the strength of a bull Market. The chart below is the Ratio Adjusted Summation Index ($NYSI). The $NYSI is calculated by adding the daily values of the McClellan Oscillator. Readings above 500 convey the message that we are in a bull Market and will continue to make higher highs. The Market has just had some extraordinary high readings compared to the last year (refer to the chart below). This chart continues to stay above the 500 threshold. Staying above a 500 threshold in a very convincing manner promises the Market will make higher highs (which it has done). The McClellan Oscillator as well as the Summation Index need to continue to work off its overbought readings. I am still of the belief the McClellan Oscillator needs to hit oversold levels until we can continue higher (which it still has not done as of today). Once we have fully worked off the overbought conditions, the Market will continue higher.
Wednesday, March 26, 2014
The tick indicator is a sentiment indicator used to see what everyone is doing the last second before the Market closes (using end of the day readings on this indicator). Lately, there has been a lot of sell orders at the close (lots of people/algos/funds wanting to get out of stocks). The chart below is the $TICK's 10 EMA; when it is above 400 it is good at catching tops, and when it is below 0 it is good at detecting oversold conditions/bottoms. Right now it is showing an oversold condition. Based on past examples this is a rough estimate of where the Market bounces. I personally think the Market will be going much lower until the $NYMO starts hitting oversold levels (-150). Despite my contradictory opinion the $TICK indicator is worth paying attention too. For now we can add it to the list of Market bottoming signals (we should expect more in the next few days).
Friday, March 14, 2014
I am doing some state of the art research in Market psychology. Please answer the following poll on whether the Market has ever made you cry (by either losing a lot or missing out on a lot of gains). You can comment below on your personal sob story if you want.