Years after extreme breadth lows I'll define as 10MA of RHCOMPQ <10% or daily NYA200R below 20%. These tend to be very strong years almost straight up from March to Dec or March, but the trick is to avoid getting caught by an extreme double bottom which can be up to a year or more apart. The first pair of charts will go to 4/1/14 in case we get a double dip. I'm only going back to 1998 because in the 20 years prior to 2000 we generally had conditions of a strong economy, relatively high real rates, nominal rates gradually falling from multiyear highs, and extreme breadth lows usually only happening once or at most twice close together before the market continued strong rallies. In the years since 2000 we've had generally a struggling economy, low real rates, nominal rates ranging in multiyear lows, and extreme breadth lows bottoming roughly a year apart before the market could mount a strong rally, often from lower lows in price. The period of 2000-2002 is a special case of the tech crash followed by 9/11 to set up a triple bottom in breadth with lower lows in price. As you can surmise, I suspect we'll see another extreme breadth low within 12 months before the market gets going well again. Good luck trading, Don
Short signal. Yesterday generated a short signal with price at a lower high though upper BB100,1, RSI5 and CCI34 rolling over midrange without first becoming fully overbough, CCI100 below 100, IT breadth already showing negative divergence and a sell with 10dNH% below 70, BPI below its 20dMA. Compare to May of last year. Usual downside projection would be 2700 or lower. If we do see this sort of correction now or in the fall, then I would expect markets to reach another extreme breadth low this year or next. I'll prob post infrequently, best to all. Don
Natural gas at some point soon should be an excellent value buy. The ethanol hoax has already exposed for some time, and natural gas, while cheap and plentiful, should find a lot more use and demand as an energy source. A likely recession could see commodities at lower prices, so I suspect we'll see at least a W bottom to buy soon. Good luck trading, Don
Some weekly charts. Usual interpretations apply, ie Wms%R above -50 is a buy signal if a bit late, and esp if confirmed by 4/8EMAs crossing up. A weekly stochastic W crossing up usually leads to a tradeable bounce and can present very early. CCI20 staying above zero is a buy or hold. Good luck trading, Don
Bonds. While stocks were sick I traded the recent higher low in bonds for a 8-10% gain, selling near the old high. It's extremely rare that I trade bond funds or buy stock short funds, but doing both has worked out nicely. Usual interpretations apply. Note the weekly stochastic W at the start of the recent rally and the one early last year. Best to all, Don
Indicator buy signal. Charts show an indicator buy signal on daily price charts and %stocks above 50dMA, and I really like to see a positively divergent double bottom on CCI34. Breadth/sentiment/volatility are not at important intermediate term bottom levels. Usual course is a quick summer rally, then a dip to a fall low with better overall technicals, no prediction on whether a price low would be lower or higher. On the intermarket page goldstocks are leading the way, energystocks had a big day today, commodities are bouncing and bonds TLT took a big hit, glad I got out yesterday. SPDRs showed defensive sectors XLV, XLP and XLU underperforming today, another potential positive for a market rally. Good luck trading, Don
Election year summer rallies. I'd add a caveat that market rallies off bear market or extreme breadth bottoms don't neatly fit into 4 year election cycles, but since I'm limited to 4 charts I'll show election years. I'm also not showing 2008 since it was a strongly down year leading to an extreme low, not positioned where we are now. Anyway, there appears to be a tendency for a May or June bottom, then a fast, hard to catch rally followed by some broad topping before a July or Aug higher or lower low, then another fast bounce before typical Oct or Nov bottoming. I think the best conclusion about trading summer rallies is that it takes agility and courage to do so, and the old adage "sell in May and go away" seems suitable for longer term trading. That said, we have a fine indicator double bottom with positive divergence on rsi5 and CCI34, so I'm a player here but not as aggressively as the short I recently got out of off the early May lower high. It may take some careful swing trading to play this market well before the next important price/breadth/sentiment/volatility bottom, so as usual caveat emptor and batteries not included. Best, Don
Upside targets, sell criteria. If the two indices hit upper BB100,1 I'll kiss the ground and take profits on my trading position longs. If things fall apart sooner, my sell signal would be CCI34 going below zero. As you can see, breadth and volatility are not at usual important intermediate term bottom levels, and as mentioned previously it's usual for summer rallies to have some whipsaws before a better price/breadth/sentiment/volatility bottom in the fall. Good luck trading, Don
Sell signal. Charts show all indicators on a sell. Optimal Nasdaq target would be roughly 2500s to shake out to a better breadth/sentiment/volatility bottom for an important rally, but if a recession gathers steam things could get a lot worse. Today's candle hints for a shortterm bounce, but CPCE doesn't show enough fear for much of a bounce to happen. Good luck trading, Don
Dollar/Euro vs Gold for past six years. Typically, gold rallies when dollar/euro falls, unless there is a recession and unless euro is having its own problems. I don't remember exactly when the last recession was and when euro had initial problems from the PIIGS mess, but from looking at the charts, I'd guess the recession was worst late 2008 when gold and dollar both went down, and the euro troubles hit in 2010 when gold and dollar both went up. Just posting this to try to reply to an email discussion. Best, Don
Downside targets in a bull market pullback are usually near lower BB100,2 unless a bear market takes things much lower. So Nasdaq 2825 and S&P 1325 would be typical. Next year between financial cliff and PIIGroast possibilities things might be different. Best, Don
Upside targets for Nasdaq eyeballs to roughly 3225,NDX to 2900, S&P to 1530. These would be barely new highs for the year. Game plan is to follow sell signals if they occur sooner, otherwise will remove leverage on trading positions at old highs and reduce them to half invested if upside targets are reached, allowing some exposure in case a blowoff rally happens if/when the financial cliff is avoided. I know this goes against the notion of letting winners run, but we live in difficult times and there are too many wild cards that could throw kinks in the market next year. Good luck trading, Don
Second years after extreme breadth lows. Since I'm limited to four charts, I'm only showing price charts. Usual interpretations apply. The fourth chart I consider an aberration not fitting usual 4-5 year cycles, so that leaves only two charts since 2001 as precedents. In any case, market behavior after a Feb-Mar dip tends to be mixed with a safer bottom typically ahead in Aug-Sept, not surprising for Spring-Summer market behavior. I suspect this year the "sell in May" adage may play out. Best, Don
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