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Delayed Weekly Market Comment - Archive (example for Non-Members)

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March 27th 2011 - Short Sellers have been wiped out

U.S. strongly rebounded last week after two weeks of selling. For the week, the Dow Jones Industrial Average added 362 points, or or 3.1 percent, to 12,220.59. It was the best weekly performance for the Dow since mid July. In five trading sessions, the S&P 500 gained 2.7 percent, closing at 1313.80 while the Nasdaq rose 3.76 pecent. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell 39.1 percent last week, ending below 18.

On Wednesday the bearish xx- week crash-cycle took the Dow Jones Industrial Average down nearly 90 points on an intraday basis, but the Dow managed to close higher on that day; thanks to a late-day advance. Begining of the week, the so called market experts stated that the headline risks are tremendous, and therefore being short could be profitable. Despite mixed economic news, more debt troubles in Europe, unrest in the Middle East and Libya and a continuation of the nuclear tradegy in Japan, the market rallied, wiping out a lot of short sellers. Good that our indicators are just reading the market instead of newspapers.

Most of our short-term trend indicators (Trend Trader Index, Modified MACD and the Modified McClellan Oscillator Daily) have triggered fresh buy signals while the mid- to long-term trend remains strong (Global Futures Trend Index and the Global Futures Long Term Trend Index). This trend is widely confirmed by short- to long-term breadth (Upside-/Downside Volume Index Daily, Upside-/Downside Volume Index Weekly, Advance-/Decline Index Weekly and the High-/Low Index Weekly) while dumb money, sentiment and the options market (Put/Call Ratio OEX and the Daily Put/Call Ratio All CBOE Options) remain bearish.

Apart from that, the market is heavily overbought (Upside-/Downside Volume Ratio Daily, Advance-/Decline Ratio Daily and the Global Futures Trading Index) and since our reliable Smart Money Flow Index has not confirmed the latest rally of the Dow, it might be possible that we see a re-test of the bottom to complete the final stage capitulation phase, which would also represent a great buying opportunity. Stay tuned!

 

March 20th 2011 - After a capitulation period expect the global bull market to resume!

U.S. stocks fell the second straight week. For the week, the broad S&P 500 retreated 1.92 percent, closing at 1,279.20, the Dow Jones Industrial Average lost 1.54 percent, ending at 11,858.52 while the tech-heavy Nasdaq got hit the most, falling nearly 2.7 percent in the last five trading sessions. While the Dow Jones Industrial Average and S&P 500 remain modestly higher for the year, last week’s declines have now put the Nasdaq down 0.4 percent year-to-date. The CBOE Volatility Index, widely considered the best gauge of fear in the market, gained 21.81 percent last week, ending at 24.46.

On Monday, the S&P 500 broke its key support level of 1,294 on an intraday basis and stocks started the week with losses that persisted for three consecutive days. On Wednesday, the bears took the S&P 500 down to 1,249.05 on an intraday basis, triggering a 9-to-1 downday, which could be seen as a washout day, before stocks set to rebound, with the S&P 500 nearly rallying 2.5 percent until Friday. We saw a lot of smart buying that day, since on that day our Smart Money Flow Index did not drop as low as the Dow Jones Industrial Average did. In our view, the current washout was a good opportunity to build up positions in the market.

The nuclear tragedy in Japan has extended the global correction in terms of price, and now the market is heavily oversold (Advance-/Decline Ratio Daily, the Advance-/Decline 20 Days Momentum Indicator and the Upside-/Downside Volume Ratio Daily) and therefore the short squeeze potential is enormous. Most of our contrarian indicators have triggered buy signals (Market Timer Index, Global Futures Trading Index and the Global Futures Large Block Index) while the options market (Put/Call Ratio OEX, Daily Put/Call Ratio All CBOE Options and the Global Futures Put/Volume Ratio Oscillator) indicate that we are moving into a capitulation phase, that usually represents the final stages of a down move.

A caputilation phase takes normally about two to three weeks, where we see a volatilie bottoming process. This would be in line with our cyclical perspective since the bearish xx week crash-cycle (week of September 4th) is due next week, which will be followed by the bullish xx week cycle in four weeks and the bullish xx week cycle in five weeks. According to our Global Futures Dumb Money Indicator, which was hitting a new low since 2008, it could be possible that this bottoming out process will be shorter than usual.

All of pure price driven short-term trend indicators are in bearish territory right now (Trend Trader Index, Modified MACD and the Modified McClellan Oscillator Daily) while the mid- to long-term trend remains well in force (Global Futures Trend Index and the Global Futures Long Term Trend Index). This mid- to long-term trend is widely confirmed by breadth (Upside-/Downside Volume Index Weekly, Advance-/Decline Index Weekly and the High-/Low Index Weekly) and another strong bullish breadth signal comes from our WSC Sector Momentum Indicator (Charts of Interest), which shows that about 50 percent of all U.S. sectors are gaining momentum.

The bottom line: It does not necessarily mean that the market will take off tomorrow, but we would advise our aggressive traders to buy in tranches (although there could be another downleg next week) to get a good average price, since nobody will buy exactly on the low. More moderate members should wait until our Trend Trader Index is back on track while long term investors should keep their positions since our Global Futures Long Term Trend Index remains strong. Stay tuned!

 

March 13th 2011 - Bottoming out process in force but final wash-out possible!

U.S. stocks sank on Monday, closed broadly higher Tuesday as the bullish xx-week cycle hits the market, finished nearly flat on Wednesday, plunged sharply Thursday and posting decent gains during Friday's session.

 

For the week, the Dow Jones Industrial Average retreated 125.48 points, or 1.03 percent, to 12,044.40 while the broad S&P 500 fell 1.28 percent, closing at 1,304.27. The tech-heavy Nasdaq sank almost 2.5 percent in the last five trading sessions, closing at 2715.61. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose 6.56 percent last week to 20.31.

 

The mid- to long-term trend of the market remains outright bullish according to the Global Futures Trend Index, the Modified McClellan Volume Oscillator Weekly and the Global Futures Long Term Trend Index while market breadth remains strong (Advance-/Decline Index Weekly, High-/Low Index Weekly, Upside-/Downside Volume Index Weekly and the Modified McClellan Volume Oscillator Weekly). If we take a closer look on advancing issues and up-volume, we see that the gauges have slightly declined recently. Nevertheless, as long as there are more advancing issues than declining ones and as long as up-volume stays strongly above down-volume those indicators remain bullish.

 

The picture for the short-term looks different since the gauges of our entire short-term trend indicators (Trend Trader Index, Modified MACD, Volatility Index Oscillator and the Modified McClellan Oscillator Daily) are bearish at the moment. Normally, this would indicate another strong down-leg into deeper March, but since at the moment most of our contrarian indicators (Smart Money Flow Index, Daily Put/Call Ratio All CBOE Options Indicator, Global Futures Dumb Money Indicator and the ISEE Equity Options Call/Put Ratio) are outright bullish or got even stronger, we do think the market is already in the state of a bottoming out process. As the market tends to overshoot, it could be possible to see a final wash-out if the S&P 500 is breaking its key support level of 1,294.

 

The bottom line: since the bullish mid- to long-term trend is still in force which is widely confirmed by breadth and with most of our contrarian indicators triggering fresh buy signals, we believe that the market is in a bottoming out process, and this would represent a good buying opportunity for bargain hunters, who can stomach a few more days of volatility. Stay tuned!

 

March 6th 2011 - Further consolidation period possible but the tape remains strong!

U.S. stocks slightly advanced on Monday, tumbled Tuesday, with all three major indexes down more than 1 percent, ended slightly higher Wednesday, posted their best day in three months on Thursday as the bullish xx-week cycle hit the market and fell sharply Friday. In the end, all three major indexes closed higher for the week, with the S&P 500 rising 1.27 points or 0.10 percent, closing at 1321.15. The Dow Jones Industrial Average gained 0.3 percent, ending at 12169.88 while the tech-heavy Nasdaq advanced 0.1 percent in the last five trading sessions. The CBOE Volatility Index, widely considered the best gauge of fear in the market, closed at 19.09, nearly ending flat for the week.

 

As we already expected it in our last comment, the week turned out to be a rocky and volatile one, since the market has entered a consolidation period. The Modified MACD as well as the Volatility Index Oscillator are still indicating short-term weaknesses ahead, and since our reliable Smart Money Flow Index continued to drop further, we do think that we might see some further downtesting in the next couple of trading sessions. It might be possible that the Dow Jones Industrial Average will drop below 12,000, wiping out a couple of stop loss orders, before the rally is likely to resume.

 

Apart from that, the technical picture of the market remains outright bullish, since we have not seen a break of our Trend Trader Index so far and most of our mid- to long-term trend indicators are supporting our bullish position (Global Futures Trend Index, Modified McClellan Oscillator Daily, Modified McCellan Oscillator Weekly and the Global Futures Long Term Trend Index). Most stocks listed on Nyse are trading well above their moving averages (Charts of Interest), and there are hardly any stocks hitting new lows. Additionally, there are more stocks advancing than declining. Down-volume has picked up recently; nevertheless up-volume is dominating down-volume which could also be seen at our Modified McClellan Volume Oscillator Weekly. Additionally, we do expect the bullish xx-week cycle next week (week of March 18th).

The crowd is searching for protection since the gauge of our Daily Put/Call Ratio All CBOE Options Indicator remains high. The ISEE Equity Options Call/Put Ratio went down significantly which is a strong bullish sign for contrarians. If we have a look at market sentiment, the AAII bulish consensus declined to 37 percent, which is the lowest level since August, indicating that even if we see a second down leg into March, it might be likely that this drop will be limited. Stay tuned!

 

February 27th 2011 - Market breadth remains impressive!

U.S. stocks fell, driving most major indices to their biggest weekly drop in three months. For the week, the broad S&P 500 retreated 1.7 percent, closing at 1319.88. In the last four trading sessions, the Dow Jones Industrial Average dropped 260.8 points, or 2.1 percent, ending at 12,130.45 while the tech-heavy Nasdaq fell 1.9 percent to 2781.05. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose nearly 17 percent for the week, closing slightly above 19.

The big question is, are stocks able to get back on track, after the oil-driven sell-off we have seen last week?

Some of our short-term trend indicators (Modified McClellan Oscillator Daily and the Modified MACD) have triggered a sell-signal, but the mid- to long-term tape is still growing strong (Global Futures Trend Index, Modified McCellan Oscillator Weekly and the Global Futures Long Term Trend Index).

Market breadth remains powerful (Advance-/Decline Index Weekly, High-/Low Index Weekly, Upside-/Downside Volume Index Weekly and the Modified McClellan Volume Oscillator Weekly), and more than 60 percent of all stocks listed on Nyse are still above their 50 day moving averages (Charts of Interest), indicating that the advance is likely to resume.

If we have a look at our Global Futures Dumb Money Indicator and the Daily Put/Call Ratio All CBOE Options Indicator, the crowd remains quite bearish. This could also be seen, if we have a look at the gauge of the ISEE Equity Options Call/Put Ratio, which was dropping significantly last week. Another strong bullish sign is comming from our Global Futures Trading Index as well as from our reliable Global Futures Bottom Indicator. Additionally, we do expect the bullish xx-week cycle next week (week of March 4th).

The bottom line: in our opinion, the market was overbought and overdue for a set-back. The recent surge in oil-prices has helped the market to overcome its overbought condition and in bringing down investors sentiment. It could be possible to see a period of consolidation ahead, since smart money has not confirmed the relief rally on Friday. Nevertheless, we would advise our members to buy aggressively into any upcoming weaknesses since the mid- to long-term tape as well as market breadth is still growing strong. Stay tuned!

 

February 20th 2011 - Buy aggressively into any upcoming weaknesses!

U.S. stocks continued to push higher for a third week, sending the Standard & Poor’s 500 Index to its highest level since June 2008. The S&P 500 advanced slightly more than 1 percent in the past week, closing at 1,343.01, while the Dow Jones Industrial Average rose nearly 1 percent, ending at 12,391.25. For the week, the tech-heavy Nasdaq gained 0.9 percent, closing at 2,833.95 while the CBOE Volatility Index, widely considered the best gauge of fear in the market, stayed below 17. In line with our recent call, copper lost about 1.2 percent for the week.

If we have a look at our trend indicators (Trend Trader Index, Global Futures Trend Index, Modified McClellan Oscillator Daily, Modified MACD, Modified McCellan Oscillator Weekly and the Global Futures Long Term Trend Index), the uptrend of the U.S. stock market remains well intact on all time frames and especially the gauge of the Global Futures Trend Index stays strongly above the 90 percent threshold, indicating a healthy trend.

 

The bullish trend is widely confirmed by short- and long-term volume, since up-volume stays strongly above down-volume. This could be also seen at the Modified McClellan Volume Oscillator Weekly, which is showing no signs of weaknesses. If we have a closer look at the Advance-/Decline Index Weekly (which was our main concern a couple of weeks ago), the gauge is regaining momentum, which could be seen as another positive sign while the gauge of High-/Low Index Weekly picked up again.

 

Smart Money continued to buy any small pull back, while dumb money and the crowd is pretty scared about all the jitters of an upcoming correction. This bearish sentiment could be also seen on the options market, since our reliable All CBOE Options Call-/Put Ratio Oscillator is nearly in bullish territory. After the rally we have seen in the last couple of weeks, the market is slightly overbought according to the Arms Index and the Global Futures Advance-/Decline Indicator and therefore the pace is likely to slow down in the next couple of trading sessions.

PS: We have closed our tactical short position in copper.

 

February 13th 2011 - Go with the flow but keep an eye on the Trend Trader Index!

U.S. stocks rose for a second week, sending U.S. benchmark indexes to fresh multi-year highs. For the week, the S&P 500 climbed 1.4 percent to 1,329.15, reaching the highest close since June 19, 2008. The Dow Jones Industrial Average added 181.11 points, or 1.5 percent, in five trading sessions, closing at 12273.26, while the Nasdaq rose 1.45 percent for the week. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 16.

If we have a look at our trend- and breadth indicators, there is plenty to like about the stock market right now. The tape is continuing to grow strong (Trend Trader Index, Global Futures Trend Index, Modified McClellan Oscillator Daily, Modified MACD and the Global Futures Long Term Trend Index) which is widely confirmed by short- and long-term breadh (Upside-/Downside Volume Index Daily, Modified McClellan Volume Oscillator Weekly , Upside-/Downside Volume Index Weekly, Advance-/Decline Index Weekly and the High-/Low Index Weekly), while our reliable Volatility Index Oscillator is still in bullish territory

 

As the market is moving higher and higher, dumb money is getting quite cautious about the continuation of the rally and the bears among Wall Street are increasing, while smart money is confirming the latest high of the Dow. The options market is more or less in line although the Daily Put/Call Ratio All CBOE Options Indicator has dropped heavily but has not reached contrarian territory right now while the ISEE Equity Options Call/Put Ratio did.

 

The bottom line: since the bullish trend is widely confirmed by breadth and dumb money, sentiment and the option market are quite cautious, we will stick to our investment process, and therefore we remain bullish for the short-term. From a long term perspective, we do not see the main bullish trend in danger since our Global Futures Long Term Trend Index is still growing strong. Stay tuned!

P.S.: The commercial hedgers have not confirmed the latest high of copper!

 

February 6th 2011 - Back on track!

U.S. stocks bounced back last week, pushing the Dow Jones Industrial Average to its first close above 12,000 since June 2008. For the week, the Dow Jones Industrial Average rose 268.45 or 2.27 percent, the best weekly gain for the Dow since December. In the last five trading sessions, the broad S&P 500 increased 2.7 percent to 1,310.87 while the tech-heavy Nasdaq rose 822.41 points or 3.07 percent, closing at 2,769.30. On Friday, the CBOE Volatility Index, widely considered the best gauge of fear in the market, fell back below 16.

The market internals have changed massively compared to last week, after the last week’s strong bounce. Our short-term Trend Trader Index is back on track and the Modified McClellan Oscillator Daily as well as our Modified MACD have triggered a buy signal (although the structure of those indicators are still showing a bearish divergence, since they did not rise as high as the market did). The mid- to long-term trend of the market got even stronger since the Global Futures Trend Index has pushed through its 90% threshold while our reliable Global Futures Long Term Trend Index remains bullish.

 

Short-term upvolume also bounced back, and is now confirming the short-term trend of the market while long-term upvolume remains powerful (Upside-/Downside Volume Index Weekly and the Modified McClellan Volume Oscillator). Market breadth has also improved a lot, if we have a look at our Advance-/Decline Index Weekly, which is narrowing its short-term bearish divergence to the market while the new highs made on Nyse have picked up again (High-/Low Index Weekly). Since the Volatility Index decreased quite a lot last week, our Volatility Index Oscillator went back to bullish territory.

 

The Egypt riots have scared dumb money (Global Futures Dumb Money Index, Daily Put/Call Ratio All CBOE Options) while smart money bought the pull-back from last week.

Our long-term bullish view has not been changed so far, but the market has gone now over 110 days without a correction of at least 5 percent. The normal tendency is about 50 days while sentiment as well as the options market (Global Futures Put/Volume Ratio, ISEE Equity Options Call/Put Ratio) remains complacent. Additionally, the short positions of the commercial hedgers for the S&P 500 remain high. Nevertheless, we stick to our investment process, and therefore we have closed our tactical short-term hedge for the S&P 500, but we will watch our Trend Trader Index carefully in the next couple of trading sessions! Stay tuned!

 

January 30th 2011 - Break of the Trend Trader Index - Great Buying Opportunity!

On Friday the bears showed up right on time and U.S. stocks plunged for the week, after four days of solid gains. In line with our recent call, the S&P 500 had hitted the 126.6% Fibonacci Retracement Levels (Charts of Interest) several times on an intraday basis, before the sell-off begun.

 

The S&P 500 fell 23.20 points, or 1.8 percent, to close at 1,276.34 on Friday. For the week, the broad market index declined 7.01 points or 0.55 percent. The Dow Jones Industrial Average fell 166.13 points, or 1.39 percent on Friday, to close at 11,823.70. For the week, the Dow Jones Industrial Average fell 48.14 points, or 0.41 percent, snapping an eight-week winning streak while the Nasdaq lost 2.5 percent for the week. The Chicago Board Options Exchange Market Volatility Index or VIX skyrocketed to nearly 24 percent, to more than 20. It was the biggest daily spike in the VIX since June 4.

 

With a fresh short signal in our Trend Trader Index, all of our short-term trend indicators (Modified MACD, Modified McCellan Oscillator Daily and the Modified McCellan Oscillator Weekly), are bearish at the moment, and therefore we do expect more weaknesses to come ahead. Our reliable Volatility Index Oscillator went even deeper into the bearish territory and the momentum of the market is still deteriorating (Advance-/Decline 20 Day Momentum). The options market (Daily Put/Call Ratio All CBOE Options and the Global Futures Put/Volume Ratio) and Dumb Money (ISEE Equity Options Call/Put Ratio and the Global Futures Dumb Money Indicator) are still too optimistic in our view, although Dumb Money has reduced some of its bullish positions while Smart Money was selling into strengths.

 

Market breadth remains quite mixed. On a short-term basis, we still see a big bearish divergence between the market and the High-Low Index Weekly and the Advance/Decline Index Weekly, as those indicators have not confirmed the latest highs we have seen. On a long term basis, market breadth remains powerful, as the Upside-/Downside Volume Index Weekly and the Modified McCellan Volume Oscillator Weekly are still growing strong, and there are more advances than declines and more new highs than new lows. The mid- to long-term trend of the market is still in force according to the Global Futures Trend Index and the Global Futures Long Term Trend Index.

 

The bottom line: since we have several trend breaks on a short-term basis, we do think the market is ready for a 5 to 8 percent pullback. It might be possible that the market could go down to 1,217 - the 100% Fibonacci Retracement Level (Charts of Interest) - which would represent a 6 percent decline from the recent high. This would represent a great buying opportunity for latecomers. Stay tuned!

 

January 23rd 2011 - Another Pullback likely!

The bearish xx-week crash cycle as well as the bullish xx-week cycle came right at time and in the end, two out of three major U.S. indices fell for the week. Stocks rallied Tuesday as the bullish xx-week cycle hit the market, stumbled on Wednesday when the xx-week crash cycle was due, seesawed Thursday and brought some slightly gains on Friday. As we already predicted it in our last comment, the week turned out to be a rocky and volatile one. The Volatility Index, widely considered the best gauge of fear in the market, rose 20 percent for the week to close above 18 for the first time since December 6, 2010.

For the week, the S&P 500 declined 0.8 percent to 1,283.35, the first drop after seven straight weeks of gains. On Wednesday when the xx-week crash cycle was due, the broad index retreated 1 percent, the biggest one-day drop since November. The Dow Jones Industrial Average was the only index closing higher for the week. The blue-chip index rose 84.46 points or 0.7 percent in four trading sessions, while the Nasdaq declined 65.76 points, or 2.4 percent. It was the second weekly drop in nine weeks for the tech-heavy index.

 

The Q4 earnings season is off and running, with most stocks beating expectations, but we would not ignore the signs that a lot of good news is already priced in, if we have a look at our sentiment indicators. The December rally is extending in terms of price and time and has left Dumb Money (ISEE Equity Options Call/Put Ratio and the Global Futures Dumb Money Indicator) and the options market (Daily Put/Call Ratio All CBOE Options and the Global Futures Put/Volume Ratio) complacent while Smart Money is already selling into strengths (Smart Money Flow Index and the Global Futures Large Block Index). Additionally our reliable Volatility Index Oscillator went into bearish territory and the momentum of the market is deteriorating (Advance-/Decline 20 Day Momentum). Additionally the Modified MACD as well as the Modified McCellan Oscillator Daily and the Modified McCellan Oscillator Weekly triggered a sell signal. Like the Global Futures Long Term Trend Index, the Advance/Decline Index Weekly as well as the High-Low Index Weekly are bullish for the long term since the advances are still above the declines and the new highs are above the new lows but they have not confirmed the latest high of the market, highlighting another big divergence.

 

If we have a look at volume, this rally is mainly driven by liquidity since long-term upvolume and the Modified McCellan Volume Oscillator Weekly are still growing strong. Nevertheless, the market appears ready for a 5 to 8 percent pullback. We do not think the market has enough breadth and momentum to be able to break or to stay strongly above the 138.2% Fibonacci Retracement Levels (Charts of Interest). Since we do stick to our investment process and we do not fight the tape, we wait until we see a break of the Trend Trader Index before we will switch to the bearish camp. We would advise our members to take some profits and/or to use close stopps. Stay tuned!

 

January 16th 2011 - Pullback ahead!

Last week the bullish xx-week cycle came right at time and U.S. stocks rose for a seventh straight week, sending the S&P 500 to its highest highest level since August 28, 2008. For the week, the Dow Jones Industrial Average added 112.62 points, 0.96 percent, to close at 11,787.38. The S&P 500 rose 21.74 points, or 1.7 percent, to close at 1,293.24 while the Nasdaq rallied 1.93 percent, to close at 2,755.30.


It has now been 103 days since the end of the last 5 percent correction. The statistically historical tendency for a 5 percent correction within a technical bull market (Global Futures Long Term Trend Index = bullish) is about 45 days. If we have a look at the VIX Index (Charts of Interest), volatility went more or less back to normal, indicating that the market is likely to follow more normal rally-correction pattern. Therefore the market appears ready for a 5 to 8 percent pullback within the primary uptrend (Global Futures Long Term Trend Index = bullish).

 

This picture is widely confirmed by sentiment, if we have a look at our dumb money indicators (ISEE Equity Options Call/Put Ratio and the Global Futures Dumb Money Indicator), the options market (Daily Put/Call Ratio All CBOE Options and the Global Futures Put/Volume Ratio) and sentiment surveys. The Advance.-/Decline Index Weekly as well as the Modified McClellan Oscillator Weekly have not confirmed the latest high of the market and the amount of stocks reaching a new 52 weeks low is increasing compared to those which made a new 52 weeks high. The Modified MACD as well as Modified McClellan Oscillator Daily are still bullish, but they do also show a big divergence to the S&P 500, since they do not show any signs of strengths. Since we do expect the bullish xx-week cycle and the xx-week crash cycle next week (week of January 21st), we expect more volatility ahead.

 

That does not necessarily means that the pullback will start next week but we would advise our members to watch the Trend Trader Index carefully. Since the market tends to overshoot and noboday can exactly tell when the bulls’ party might be over, we will switch to the bearish camp if we see a break in our Trend Trader Index. Stay tuned!

 

January 9th 2011 - Bullish for now but still some red flags for the short term!

Last week, U.S. stocks advanced for the sixth straight week, marking the longest winning streak since April. For the week, the S&P 500 climbed 1.1 percent to 1,271.50, logging in its biggest weekly gain in four weeks. The Dow Jones Industrial Average added 0.8 percent in five trading sessions, closing at 11,674.76 while the Nasdaq rose 1.9 percent for the week.


All of our short- to long term trend indicators remain bullish (Trend Trader Index, Modified McClellan Oscillator Daily, Global Futures Trend Index, Modified MACD, Global Futures Long Term Trend Index and the WSC Global Momentum), except the Modified McClellan Oscillator Weekly. The Modified McClellan Oscillator Weekly is lagging behind, since it is derived from the weekly net advances (the number of advancing issues less the number of declining issues) which have been quite weak in the last couple of weeks. This could also be seen in our Advance.-/Decline Index Weekly which has not confirmed the latest high of the S&P 500.

 

Apart from that, most of our breadth indicators (High-/Low Index Weekly, Modified McCellan Volume Oscillator Weekly) are still bullish and especially long-term upvolume is growing extremely strong. Our reliable Vix Index Oscillator is still in bullish territory and we have not seen any divergences between the market and our Smart Money Flow Index. We do additionally expect the bullish xx-week cycle (week of January 14th) next week, to help the market to overcome its overbought (Trin Daily) condion.


Market sentiment, the option market (Daily Put/Call Ratio All CBOE Options and the Global Futures Put/Volume Ratio) and most of our dumb money indicators (ISEE Equity Options Call/Put Ratio and the Global Futures Dumb Money Indicator) showing the same status as last week. This could be seen as a red flag on the horizon. We hope that the bullish xx-week cycle and the xx-week crash cycle in two weeks (week of January 21st) will bring some more volatility to spook dumb money and the option market, which might give way to some more rallying into Q1.


The bottom line: since the trend is widely confirmed by breadth and only dumb money, sentiment and the option market are bearish, we will stick to our investment process. Therefore we will ignore those trend breaking divergences until we see a break in our Trend Trader Index. From a long term perspective we do not see the main trend in danger. If we have a look at our Global Tactical Asset Allocation Strategy, the strongest markets are still to find in the Emerging Markets, indicating that the risk appetite among equity investors remain high. Stay tuned!

 

January 2nd 2011 - Short term trend still in force but clouds are gathering

Last week, the S&P 500 rose 0.1 percent to 1,257.64, extending its biggest December rally since 1991 and boosting its 2010 gain to 13 percent after a 23 percent rise in 2009, the biggest two-year advance since the Internet boom in 1998 and 1999. The Dow Jones Industrial Average climbed 4.02 points, or less than 0.1 percent, to 11,577.51 in the last five trading sessions, extending its yearly increase to 11 percent while the Nasdaq lost 0.48 percent for the week.

 

Most of our short- to mid-term trend indicators remain bullish (Trend Trader Index, Global Futures Trend Index and the Modified McClellan Oscillator Daily), and the long term trend of the market is still growing strong according to our Global Futures Long Term Trend Index. This trend is widely confirmed by volume (Upside-/Downside Volume Index Daily, Upside-/Downside Volume Index Weekly) and partly by breadth (High-/Low Index Weekly).

 

Apart from that some of our trend indicators are already lagging behind if we have a look at the Modified MACD and the Modified McClellan Oscillator Weekly. In the meantime, the Advance.-/Decline Index Weekly lost momentum, not confirming the latest move of the market. About seven stocks declined for every five that rose on U.S. exchanges. That indicates that only heavy weighted stocks have been growing strong while small caps have been sold by investors! Additionally the market remains overbought (Trin Daily), indicating that the consodidation period might continue for a while. Market sentiment, the options market (Daily Put/Call Ratio All CBOE Options and the Global Futures Put/Volume Ratio) and dumb money (ISEE Equity Options Call/Put Ratio and the Global Futures Dumb Money Indicator) are still in contrarian territory.

 

The bottom line: we still do see a significant risk of a second wash-out and/or a continuation of the consolidation period. This would give way to renewed rallying into Q1, therefore long term investors should ignore those trend breaking divergences as we do not see the main trend in danger. Apart from that we would advise our short- to midterm oriented traders to start taking profits slightly, able to average down their portfolio in the near term. Stay tuned!

 

December 26th 2010 - Slightly start taking profits, able to average down your portfolio in near term!

Last week the bullish xx week-cycle came right at time and U.S. stocks rose for a fourth week, sending the Dow Jones Industrial Average to its highest close since August 2008. For the week, the Dow Jones Industrial Average added 81.58 points, or 0.7 percent, to 11,573.49. The S&P 500 rose 1 percent, closing at 1,256.77 while the Nasdaq gained 0.86 in the last four trading sessions.

 

From a pure price point of view the technical picture of the market has not changed a lot compared to last week. All of our short-, mid- and long term trend indicators remain bullish (Trend Trader Index, Modified MACD, Modified McClellan Oscillator, Global Futures Trend Index and the Global Futures Long Term Trend Index). Smart Money was doing ok in the last trading sessions and our Vix Index Oscillator is still bullish.

 

The trend is mostly confirmed by long term breadth (Upside-/Downside Volume Index Daily, Upside-/Downside Volume Index Weekly, High-/Low Index Weekly and the Modified McClellan Volume Oscillator) although some of our breadth indicators are already lagging behind (Advance.-/Decline Index Weekly, Modified McClellan Oscillator Weekly) not confirming the latest high of the market. In our last reports we highlighted the evelated market sentiment and most of our sentiment indicators are approaching contrarian territory (Daily Put/Call Ratio All CBOE Options, ISEE Equity Options Call/Put Ratio, Global Futures Dumb Money Indicator as well as the Bull & Bear surveys). The bottom line: we still do see a significant risk of a second wash-out and/or a short consolidation period in the near term and this period would give way to renewed rallying into Q1.

 

Therefore long term investors should ignore those trend breaking divergences as we do not see the main trend in danger. Apart from that we would advise our short- to midterm oriented traders to start taking profits slightly, able to average down their portfolio in the near term. Stay tuned!

 

 

December 19th 2010 - Buy aggressively into any upcoming weaknesses!

Last week the bullish xx-week cycle came right at time and U.S. stocks rose for a third week, sending the S&P 500 to a two-year high or the highest close since September 2008. For the week, the S&P 500 rose 3.51 points or 0.3 percent, to 1,243.91. The Dow Jones Industrial Average added 81.59 points, or 0.7 percent, to 11,491.91 while the Nasdaq rose 5.43 points, or 0.2 percent in the last five trading sessions.

 

The technical picture of the market has not changed a lot compared to last week. The market remains heavily overbought according to the Trin Daily. Apart from the Modified McClellan Oscillator Daily, all of our trend indicators are remain bullish (Trend Trader Index, Modified MACD, Global Futures Trend Indicator, Modified McClellan Oscillator Weekly, WSC Global Momentum, Global Future Long Term Trend Index) which is widely confirmed by short- and long term breadth (Upside-/Downside Volume Index Daily, Upside-/Downside Volume Index Weekly and the High-Low Index Weekly). Additionaly we do expect the bullish xx-week cycle next week (week of December 24th).

 

With the Daily Put/Call Ratio All CBOE Options at its lowest level since the April top and with our Dumb Money Indicators (Global Futures Dumb Money Indicator, ISEE Equity Call/Put Ratio) moving closely to their highest level this year, combined with rising sentiment among investors, and within the option market (Global Futures Put/Volume Ratio), the short term market sentiment is too bullish in our view. Additionaly the Advance-/Decline Index Weekly has lost momentum, indicating a possible short period of consolidation ahead. Therefore we foresee a significant risk of a second wash-out and/or a short consolidation period in the near term.

 

As we already mentioned last week, this wash-out and/or consolidation period would give way to renewed rallying into Q1. We would advise our members, to buy aggressively into any upcoming weaknesses. Stay tuned!

 

 

December 12th 2010 - Buy aggressively into any upcoming weaknesses!

U.S. stocks rose for a second week, sending the Standard & Poor’s 500 Index to the highest level since September 2008. For the week, the broad index rose 1.3 percent, to 1,240.40, extending its 2010 gain to 11 percent. The Dow Jones Industrial Average is up 0.3% for the period, closing at 11,410.32 while the tech-heavy Nasdaq rose 46.08 points, or 1.78 percent.


All of our short- to long term trend indicators remain bullish (Trend Trader Index, Modified MACD) which are widely confirmed by short- and long term breadth (Upside-/Downside Volume Index Daily, Upside-/Downside Volume Index Weekly, High-Low Index Weekly, Advance-/Decline Index Weekly, Modified McClellan Volume Oscillator Weekly).


Most of our sentiment indicators are at extreme levels right now, since the November reversal we have seen, was modest in its nature (as we have already forecasted it in late October). Market surveys, Dumb Money (Global Futures Dumb Money Indicator, ISEE Equity Call/Put Ratio) as well as the option market (Daily Put/Call Ratio All CBOE Options, Global Futures Put/Volume Ratio) are indicating excessive optimism among investors. Additionally Smart Money was not confirming the latest high of the Dow Jones, and according to the Trin Daily and the Upside-/Downside Volume Ratio Daily, the market is heavily overbought.


Therefore we believe there is still a significant risk of a second wash-out or consolidation period, which could be followed by the bullish xx -week cycle (week of December 17th), bringing some more volatility into the market to spook Dumb Money. That would give way to renewed rallying into Q1. Examining the four year presidential cycle for the S&P 500 since 1932, we found that stocks have tended to perform relatively well in late December, and the following January has tended to be the best single month of the entire cycle.


Therefore we would advise our members, to buy aggressively into any upcoming weaknesses and this might be also a good chance for latecomers to get into the market again. Stay tuned!

 

 

December 5th 2010 - X-Mas Rally Ahead!

U.S. stocks rose for the week, with the Nasdaq nearing a three-year high. Up nearly 3 percent for the week, the S&P 500 finished at 1,224.71, the Dow Jones Industrial Average increased 2.6 percent, to 11.382.09 while the Nasdaq gained 2.2 percent, closing at 2,591.46.


On Monday we have seen a strong wash-out by the market - stocks had fallen nearly 1.5 percent earlier in the session, sending the Dow temporarily below 11,000, triggering a huge amount of lot of stop-loss orders, before bouncing back strongly, finishing the day with a 0.4 percent loss. There had been a lot of smart buying on that day because our Smart Money Flow Index was reaching a new high on Monday, triggering a strong bullish signal which was followed by a 9-to-1 upday on Tuesday.


After the strong week, the market is slightly overbought according to our Upside-/Downside Volume Ratio Daily. Apart from that, nearly all our short term trend indicators (Trend Trader Index, Modified MACD, Modified McClellan Oscillator) are back on track. The long term tape (Global Futures Trend Indicator, Modified McClellan Oscillator Weekly, WSC Global Momentum, Global Future Long Term Trend Index) is still growing strong.

 

This short- and long term trend is widely confirmed by short- and long term breadth (Upside-/Downside Volume Index Daily, Upside-/Downside Volume Index Weekly, High-Low Index Weekly, Advance-/Decline Index Weekly) and our Vix Index Oscillator is back into bullish territory. We have seen two 9-to-1 downdays in this consolidation period which have been followed by only one 9-to-1 upday. We therefore think that the chances are quite big to see at least one more 9-to-1 upday in the next couple of weeks. Since dumb money is still kind of greedy (Global Futures Dumb Money Indicator, ISEE Equity Call/Put Ratio) and the bulls among Wall Street remain high, it could be possible to see some more volatility or a couple of rocky sessions ahead.


But apart from that, the picture is quite clear and therefore we stick to our bullish outlook and any weaknesses should be regarded as great buying opportunity! Stay tuned!

 
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