Stock Market Analysis

Tuesday, May 26, 2015

The Perfect Storm is Brewing...

Lately, more and more market-doomsday-sayers are hitting the wire and this time round, I am putting one foot in their camp because I think a perfect storm is brewing right now. How so?

1. Stock market cycle, its been 8 years since the last crash and time for another major crash if history is any reference. (Tea party needs to cash out too)

2. Stock market making historical highs with little to no fundamental economic backing. Tower built on paper foundation is largely unsustainable.

3. Interest rates can't go any lower, the only way is up but raising interest rates now when the economy is not ready is again catastrophic.

4. Hindenburg Omen... always a bad thing to hang over our heads

5. NYSE margin debt at a low and possibly turning upwards. Market jumps through the window whenever that happens.

One thing different about this is that the previous stock market crashes has been the result of an overheated economy so all it did was bring the heat back down to normal levels and wash out some of the toxins accumulated in the process. However, if a market crash happen in such a cold economy, what would the result likely to be?

I would think that the pieces are not yet in place for the crash to happen in the short term. However, I do think the tail end of 2015 and 2016 is going to be dangerous. There should be one final run before the steam run out, probably riding on the Asian stock market boom.

All in all, this is the time to be extremely nimble, take profit on profitable long term or mid term positions and be extremely nimble for short term opportunities.

Sunday, May 17, 2015

Imminent Breakout!

Remember I predicted that this market is going to look for a topside breakout? Well, so far, the SP-500 has rode a rising 30MA strongly and has not broken below that line despite the barrage of negativity in the market over the past weeks. Last Thursday's critical rebound off the 30MA and the subsequent closing yet again positive on Friday puts the odds in favor of this being the breakout move. Total equities put call ratio has also persisted below par in favor of call options trading the past week as options traders anticipate a topside breakout as well. I do think the market is due for a significant correction very soon, very likely sometime in June like the market did so many times before. As such, I have prepositioned my Master's Stock Options Picks Subscribers on call options over the past week in order to profit from this final leg before it all goes down. Are you ready for this move?

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

Tuesday, May 05, 2015

Is It Time For a Market Crash?

The US market took a beating today on multiple fronts; Trade deficit pointing to a potential lower revision of the already dismal first quarter GDP and Asian stocks taking a beating. All these reasons simply add on to the profit taking sentiment that is already in the market as evident by the significant selling pressure each time the S&P500 flirts with an all time high. Total equities put call ratio also surged into the bearish zone in favor of put options trading for the first time since 6 March.  (Learn about what put options are)

So, is this the start of a market crash?  Its after all 6 years since the end of the last market crash and the 2008 market crash took place 5 years after the end of the tech bubble crash.

From the looks of it, I don't think so at this point in time. There simply isn't enough evidence to convince me that this is a turning point yet. Bond yields have been rising the past few trading days even though the stock market has been dropping. This shows that real investors are still reallocating into equities from bonds and buying into the weakness from the traders who are taking profit and displaying strong short term bearishness (as evident from the total equities put call ratio). The single day surge in total equities put call ratio also isn't enough data to say that traders have turned bearish for real because the last time total equities put call ratio did this back in 6 March, it lasted only one day and immediately turned back down the next day, leading to a bottom in the market over the next few days that follows.(So did the time before that back in January) However, it is also evident that the market is now needing an intermediate correction in order to take a breather and set up for better entry points.

All in all, plenty of reasons to take short term profit and plenty of reasons to accumulate into the weakness depending on which side of the camp you are in now. Such is the typical sentiment of a toppy neutral market. This is also when smart traders wait for more evidence before taking action rather than try to predict which direction the next run would be. However, going by the fact that the market is still in an intermediate and primary bull trend, I maintain that the inclination for such a breakout would be bullish.

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