Stock Market Analysis

Wednesday, August 28, 2013

Major Market Crash Coming?

The Dow lifted slightly today by 48 points as some limited bargain hunting set in after yesterday's big down day.

The Dow lifted slightly today largely on bargain hunting as economic data and geopolitical factors continue to worsen. On the economic data front, house data continues to deteriorate after months of great showing with Pending Home sales turning in disappointing. This was on the back of a worse than expected showing on the Case-Shiller HPI yesterday. It is clear from all of the recent housing data that the housing sector is going through a little cooling off period right now and that actually makes investors jittery because a strong house sector is crucial to the current US economic recovery. This along with the huge divide in Crude Vs S&P500, the rush for gold, the pending tapering, the Hindenburg Omen and the Syrian situation sets the market in a decidedly bearish tone. Even though investors did bargain hunt back from bonds into equities, options traders continue to keep total equities put call ratio above par in favor of put options trading, suggesting more downside risk is expected. All in all, there is little or nothing in the fundamentals to give support to the "rally" today, making it more like a bull trap "dead cat rally" than the beginning of a reversal.

Deteriorating fundamentals continue to support the technical picture here as the Dow heads strongly towards the June low. From the momentum of the drop and the overall technical picture that led to it, it seems unlikely for the June low to hold. In fact, the patterns we are seeing now so closely mirrors the one back in 2007/2008 that it seems very likely this is the start of something bigger than just a deep correction. We are now seeing the same close double peaks following a year long rally... the very same thing we saw back in 2007. The chart patterns so far completely agrees with the Hindenburg Omen... the kind of setups you get just before huge bear trends or market crashes... so far, I have pre-positioned my Master's Stock Options Picks Subscribers in several very profitable bearish picks as well as a good bullish position on Gold since a few weeks ago. Are you pre-positioned to profit from this?

For now, the Dow remains in short term bear trend within an intermediate neutral trend and primary bull trend.

Monday, August 26, 2013

More Evidence For Major Correction...

The Dow closed lower by 64 points today on worse than expected Durable Goods Orders, Tapering worries as well as Syrian worries.

US market started relatively softly in the morning due to much worse than expected Durable Goods Orders. However, bargain hunters were quick to dismiss the number as Durable Goods Orders do tend to be very volatile so a single month down really doesn't say much. US market then held on to small gains throughout the day until announcement was made towards the final hour of the market suggesting US action against Syria... which means paying money out of an already soft economy. This, along with possible tapering coming up in the coming months, took all the confidence away from the market as the market plunged decidedly into the red. Investors rushed back to the safety of bonds, depressing bond yields as options traders took total equities put call ratio higher as more options traders took up the protection of put options. On top of all these fundamental issues, the US market is also once again trading at high multiples (PE ratio) typical just before major market crashes. All of these, plus the Hindenburg Omen, are adding on to my prediction that the US market might be in for a big correction this time round with more than enough fundamentals to support my technical analysis...

I never expected the relief rally that I predicted the last time would end this quickly. With all technical indicators pointing to a strong short term bear, I have little reason to doubt it. In fact, all of my bearish positions and bullish position in Gold (definitely the go to bull in a bear market) in my Master's Stock Options Picks Service are doing very well. There is very little doubt left that the Dow is going to take out the June low and most likely head towards the 14,000 points area. Yes, bear markets can be profitable for options traders as long as we ride in the correct direction and so far, we seem to be doing fine.

For now, the Dow remains in short term bear trend within an intermediate neutral trend and primary bull trend.

Wednesday, August 21, 2013

Major Correction Coming?

The Dow took at 105 points last minute hit today as tapering fears hit the market.

The recent market weakness has been both fundamental and technical in nature with very strong indications on both sides. On the fundamental side, it is nothing other than the imminent tapering of the Fed bond purchase program. The fact that the minutes suggested hesitation in the tapering decision due to the still soft labor market, encouraged some buying into the release bringing the market into the black. However, investors who made their money this year so far are obviously selling into every bit of strength that presents itself in order to take profit in the face of the uncertain tapering. Yes, if it happens, it will be announced too quickly for most investors to react to. As such, we should see very limited upside for both the equities and bonds market as investors take profit from both the high equities and bond prices. Indeed, it is very rare to see investors get out of BOTH the equities and bonds market to hold cash and probably Gold. When does investors typically do something like that? Before major market crashes... and the evidence continues to present itself...

The Hindenburg Omen is triggered! This is a set of technical criteria that usually triggers just before major market crashes and has faithfully predicted the tech bubble crash and the 2008 crash. And sadly, it ties in quite nicely with my prediction this week... that the market is going to see some nasty drops. As mounting evidence presents itself to downside, I have also prepared my Master's Stock Options Picks (its only $99 per month for thousands in profits!) subscribers to downside... a few days ago... so we are holding in profit right now. However, I won't be surprised to see a few days of relief rally, or Bull Trap, after such strong consecutive drops. For those interested in the Hindenburg Omen, it is:

1) The daily number of stocks that hit 52-week highs AND the number of stocks that hit 52-week lows are both 2.2% or more than the sum of NYSE issues that rise or fall that day.
2) New 52-week highs cannot total more than twice the number of new 52-week lows.
3) McCellan Oscillator, which measures the difference between the number of rising stocks versus the number of falling stocks, is negative.
4) The NYSE Index rises above its 10-week moving average –meaning it’s greater in value than it was 50 trading days ago.

 For now, the Dow remains in short term bear trend within an intermediate neutral trend and primary bull trend.

Monday, August 19, 2013

Deeper Correction This Time?

The Dow lost another 70 points today this first trading day of the week as investors start to sell out of the equities market in anticipation of changes in Fed policy in September.

It was a quiet day without any major economic releases but the equities market still sold off shortly after a strong opening and never looked back. Even though news credited the move to investors selling out of the market in anticipation of next month's Fed policy change, the significant increase in bond yields across the board and total equities put call ratio remaining above 0.9 tells me that it is the traders that are running out of the market while investors are actually selling out of bonds and buying into the weakness in order to continue riding this 2013 bull market. This is particularly true for institutions who have actually missed a big part of this rally due to their skepticism. However, is this truly a good point to buy into the weakness at all?

The Dow cannot have formed a more dangerous pattern; Two significant retreats back to back within one quarter usually mean that the second retreat is going to be a much deeper one. Such a significant retreat on the back of a previous significant retreat suggests that investors were too quick to end the last correction and is now seeing more downside evidence and acting on it on regret. And regret is always sorrowful. Worse of all is the resolution of downside move after breaking the 30MA, without even popping to retest the 30MA. And even worse, it does have a credible "Fed Related" story to back it up. Such resolute move does look like it is going to test the 14,000 level that I said it will in the last correction in May but didn't. Truly the old adage "Sell In May and Go Away" does seem true this year. The rally this year has been strong all the way to May and since then, has been nothing but volatile.

My stock options picks subscribers and myself have profited from this bearish move so far, are you? Join my Master's Stock Options Picks Service now!

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

Monday, August 05, 2013

US Market Mixed on Better ISM Services

US market closed mixed with the Dow slightly lower by 46 points and the Nasdaq slightly higher by 3 points.

Despite much better than expected ISM Services report, US proceeded to opening in the red. Indeed, the ISM Services index has never been a market moving index and traders were taking some short term profits off the table from last week's better than expected Jobs Report. Bond yields rose across the board as investors actually reallocate back to equities from bonds and VIX actually dipped in support of upside movement as US market continues to be resilient. However, the stronger the market, the greater the sense of danger. The recovery in the market since 2009 has been the steepest and strongest market recovery out of any of the previous market crisis. In fact, from the extremely peaky look of the Dow and how short a time it took for it to get there, it seems like another huge market crash may be round the corner in the next year or so... truly dangerous times in the market.

The market continues to be stronger than most people have expected and at this point, I would say that it has shaken off the effects of the May intermediate correction and is once again set on its way upwards guided by the 30MA line. Indeed, even as the outlook gets more and more dangerous with each new high, swing traders should still stick to the prevailing trend and trade accordingly until evidences suggest otherwise. Remember, any volatilities above the 30MA line is irrelevant until the line is broken.

For now, the Dow resumes an all out bull trend.