Stock Market Analysis

Tuesday, February 20, 2018

Volatility Ahead!

Welcome back from the CNY holidays and coincidentaly, its was also President's Day long weekend in the US Market! Hope everyone had a lot of fun and is ready for action again!

AND Welcome to the Week 4 of February 2018!

How time flies! Before we knew it, even February is coming to an end soon! So far, February worked out EXACTLY how I predicted it to in my 2018 prediction report at the start of the year!

It has been an extremely volatile February so far, starting from the intermediate correction I predicted at the end of January and then I correctly predicted once again, the bottom of this intermediate correction 2 weeks ago. However, as I said before, I don't expect this intermediate correction to give up so suddenly, leading to a sharp V shape reversal. With how steeply the market has climbed since that bottom, making 6 straight positive days, I would expect this week to be very volatile as the market take back those gains and then reach a point where it finds real strength to bring this intermediate correction to a close.

Supporting this outlook is also how the S&P500 retreated back down after touching its 30MA intraday last Friday. The 30MA is a critical resistance level in every intermediate correction and this one looks like it is going to hold.

In fact, investors also secretly returned to the safety of bonds last Friday, depressing bond yields, even though the market closed a positive day.

For now, the market remains in a short term neutral trend within an intermediate neutral trend within the framework of a primary bull trend.

Monday, February 12, 2018

Bottom Reached?

Welcome to week 3 of February 2018!

The past 2 weeks unfolded exactly as I have predicted it to every single step of the way as the long long long overdue intermediate correction plays out at last. The S&P500 lost 142 points or 5.16% just last week alone and lost a combined MASSIVE 9% over the past 2 weeks alone. 

This is the kind of intermediate correction that has been overdue since 2015.

However, as I mentioned in my report for paid subscribers last week, I also think that this is just about as far down as the market can and should drop. Here was what I said last Thursday:

"However, I do believe that this is as far as the market is going to drop and that Friday might be a big come back day for the bulls."
(I only publicly post my reports here every other day. To receive all my reports by email, please subscribe now by hitting the yellow button on the right below my profile photo!)

And indeed it was so.

The bulls took back a massive 86 points or 3.4% intraday last Friday to take the S&P500 from a deep negative territory back up to closing positive for the day, forming a strong dragon tail formation on strong volume, which usually marks the bottom of such intermediate corrections.

Indeed, even though I do not think that this intermediate correction is done just like that and that last Friday would be the magic pivot point to turn the market back upwards in a grand V shaped reversal, I do think that at least this is where the S&P500 is most likely to trade largely sideways in a volatile pattern until the weekly 30MA catches up again, which could be completed as soon as this week.

This is also February options expiration week and with the tendency of large cap stocks gaining value going into options expiration, this could also provide the possible fuel for the end of this intermediate correction.

Yes, I do not think that this is a market crash!

This is a classic intermediate correction off an an extremely overbought condition, that's all. Its a healthy thing to happen in order to set up better entry prices for investors to come back in and push the market to new highs.

Yes, new highs...

Even though I think we should see a massive market crash towards the end of the year and in 2019, the pieces just aren't in place yet. This is still the classic run up to a market crash, just like what we saw back in 2007. So, enjoy it while it last!

For now, the market remains in short term bear trend within an intermediate neutral trend within the framework of a primary bull trend.

Wednesday, February 07, 2018

Market Is Tame As a Puppy...

Yes, even though everyone thinks the market is like a raging bear, it is more like a tame puppy to me because it is so predictable.
 
Can the US market be any more predictable than it is now?

First I predicted the plunge and then yesterday, just like a tame puppy, it closed positive strongly like I said it would in yesterday's report.

So, how about today? Is the bulls going to continue?

Well, I really don't think so.

From the cautiousness in the total equities put call ratio, I just don't see enough conviction in the market to say that this is a turning point
back upwards. In fact, going from past behavior, the market usually do that tug of war thing around this area before a new direction can be
decided upon. A tug of war of one big up day followed by another big down day and then up day etc in a largely sideways volatile pattern.

Yes, a plunge of such magnitude just isn't going to go away easy.

Lets be patient.

For now, the market remains in short term bear trend within an intermediate neutral trend within the framework of a primary bull trend.

Monday, February 05, 2018

Intermediate Correction Starts...

EXACTLY as I have predicted over the last 2 weeks, the US market took a plunge last week with the S&P500 plunging -3.85% in a single week! Here was what I said last Monday:

"the market is in an extreme short term overbought condition with the timing and position well placed for an intermediate correction this week or the next."

And indeed it was so! (again, who said the market is an unpedictable random walk?)

In fact, last week's pullback as the strongest single week pullback in 2 years with the last time being in January of 2016!

So, is the pullback done?

Well, I am afraid I do not think so.

The US market remains in grossly short term overbought condition and  it would take quite a few bearish/sideways inclined weeks to wear off this condition and for the SMA30 to catch up, before the  market can find enough strength to make new highs.

Yes, this is what an intermediate correction is like and its not reasonably going to end without a month or so's volatility.

However, I do  not think this is the start of a market crash. Yes, this is just a classic intermediate correction pattern that will set up yet another bull leg going running through the year before the real market crash comes towards the end of the year.

That said, I won't be surprised to see the bulls fight back a bit this week in an attempt that is not likely going to just turn the market back around upwards from here. 

Fortunately, despite the volatility, my Ride the Flow strategy continues to profit! Yes, profiting in both steady up trend and even in sudden pullbacks like this! (Learn my Ride the Flow method at http://www.mastersoequity.com/MOE_ridetheflow.htm )

For now, the market turns a short term bear trend within an intermediate bull trend within the framework of a primary bull trend.

Wednesday, January 31, 2018

Market Takes a Hit Exactly As Predicted...

So it starts exactly on time and exactly when I said it would...

The US market took punishment this week as it made two consecutive negative days this week so far. In fact, it was the most bearish two days of 2018 so far, with the S&P500 clocking a total retreat of -1.76% or about 50 points. In fact, it was the biggest two days retreat since August of 2017!

But is this enough?

Is this enough of a retreat to bring the US market out of short term overbought condition and back onto a level which encourages healthy buying and therefore new highs?

Well, not quite yet as it seems. I won't be surprised to see a period of bearish / sideways inclined trading for the rest of the week for the 30MA line to catch up a bit before this market is healthy again.

The Feds will be making their announcement this afternoon and once again, with little more bullets on their plates, it is not expected that they will be doing anything today. However, at this point of time, under such economic conditions, any rate hikes by the Fed will only be construed as a vote of confidence in the growth and strength of the economy and end up being a positive thing for the market anyways. As such, this is no longer an event to be negatively concerned about for now.

Even though the market did take a plunge (not surprisingly since I have largely expected it), my Ride the Flow options residual income strategy continues to stay on track to making about 15% this month without any form of adjustments!

Yes, thats the power of this trading system that I have created. Learn about it at http://mastersoequity.com/MOE_ridetheflow.htm

For now, the market turns a short term neutral trend within an intermediate and primary bull trend.

Monday, January 29, 2018

Final Week of January 2018

Welcome to the final week of January 2018!

Before we knew it, the first month of the new year has come to an end.

How was everyone's first month of 2018?

So far, January 2018 is ending exactly the way I predicted it to in my 2018 prediction and outlook report. (read it here if you hadn't: http://sharemarketcomments.blogspot.kr/2018/01/my-2017-review-and-2018-predictions.html )

The US market survived going into the intermediate correction that I expected last week as the US government ended a government shut down that could have gave the market the reason to take a breather across the weekend.

However, like I mentioned last week, that doesn't change the fact that the market is in an extreme short term overbought condition with the timing and position well placed for an intermediate correction this week or the next.

Supporting my opinion is the rising implied volatility in the market which usually precedes periods of volatility.

So, lets look forward to a great close to Jan 2018 and be cautious going forward.

For now, the market remains in all out bull trend.


Thursday, January 25, 2018

Danger Building Up...

US market continues to power upwards so far despite my very gloomy outlook for this week.

In fact, even though the market did close just a tad negative yesterday, it was still a largely positive day which made a new historical high intraday. The bullish undercurrent was supported by rising bond yields and put call ratio staying strongly in favor of call options trading. Both signals are strong bullish supporting signals.

However, this continues to be a condition in which I would continue to favor profit taking over putting on new positions as the market persists in grossly short term overbought condition which makes every single new high ever more dangerous and the resulting pull back more severe. Indeed, danger is just building up with every such days...

As such, I continue to maintain my outlook that this week or the next is going to see a very dangerous intermediate pull back.

For now, the market remains in all out bull trend.