The Stock Market Is Not Well

In my last post in April I discussed a potential top in the Stock Market. As of early June 2017, this Market has not topped out. I am here to remind my fellow readers, do not let complacency get the best of you. If anything in the last 2 months Market conditions have gotten worse.

The stock chart above is the McClellan Oscillator, which is used to determine the overall strength and liquidity for the Stock Market within a medium term time frame (months). As the Market continues to go tread higher, this indicator has not confirmed these "highs". Meaning, there is a high chance the market will be susceptible to a significant correction. 

What would one expect from this indicator is for readings above 150 to hit at least for a few days. The issue is, this indicator has not shown strength for a very long as shown in the chart above. The last time this indicator confirmed true strength of the Market was back in December 2016 (by which the Market proceeded to go on a bullish tear in 2017).  

In short, until this chart shows bullish confirmation (hitting readings above +150 comfortably), I would be very hesitant of investing in the long/medium term when it comes to this Market.

Is The Market Going To Top Out in 2017?

The chart above is the Ratio Adjusted Summation Index ($NYSI).  The $NYSI, which is a great tool to measure the strength of a Bull Market, 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.

However, over the last year a bearish divergence has formed. As the Market continues to go higher, the $NYSI continues to trend lower (shown on the chart above). Thus, this indicator is signaling a potential significant top looming for the Stock Market.

Unfortunately, what this indicator does not tell us is the timing of such a top. A significant pullback could range from days to months from now. That type of information is better left to other indicators such as RSI, the VIX or perhaps Bollinger Bands.

Regardless of timing, this indicator is telling us the risk of investing/trading in this market has greatly increased via negative divergence. Trade and invest with caution!

The Stock To Buy On A Market Pullback

Nvidia ($NVDA) had an amazing year in 2016. Not only did the stock gain massively, it did so in a parabolic fashion (refer to weekly chart above). These types of moves are rare and often signal massive strength for years to come. For example, refer to Tesla ($TLSA) in 2013, as well as Apple ($AAPL) in 2012.

Parabolic moves are often followed by violent pullbacks due to the fact that these stocks tend to be very overbought. However, once the overbought condition is alleviated these stocks tend to go straight back up. That is why I recommend investors/traders pay attention to Nvidia, it's in the process of pulling back.