Nasdaq Advance Decline Gives Swing Long Buy Signal

The Nasdaq Advance Decline ratio chart gave a swing long buy signal on Friday, August 25, 2017. The Advance Decline ratio chart shows the number of stocks that advance in value to the number of stocks that decline in value over a given time period. An increasing advance decline ratio signals a bullish trend while a decreasing advance decline ratio signals a bearish trend.

Nasdaq Advance Decline Chart

Nasdaq Advance Decline chart gives swing long buy signal.

It wasn’t just the Nasdaq Advance Decline chart that gave a Parabolic SAR buy signal. The S&P 500 Volume Advance Decline chart also fired off a SAR buy signal on Friday, August 25, 2017.

SP 500 Advance Decline chart gives swing long buy signal.

The thing you need to know about market breadth (advancing stocks versus declining stocks) data is that the exchanges do not publish the data themselves. It is left up to the data providers like StockCharts.com. The exception to this is the Common Only A-D numbers generated by the NYSE (which formerly were available on the NYSE web site a day later). The differences you see in market breadth data are because of the different databases and datafeeds run by stock market data vendors. In order to calculate advancing and declining issues, a data vendor must first know what stocks are traded on the exchange. A data vendor must know the price at which each stock closed yesterday. The data provider must know the current price of each stock and be able to compare that to yesterday’s close to determine if a stock counts as an advancer or decliner.

Both the S&P 500 and Nasdaq Advance Decline ratio charts do not support the more bearish price action on the S&P 500:

business spx chart 1100x823 - Nasdaq Advance Decline Gives Swing Long Buy Signal

I think in all cases with the Parabolic SAR buy signals, we need confirmation above the SAR buy level to confirm the signal. The S&P 500’s bearish inverted hammer candlestick on Friday does not support the SAR buy signals. Furthermore, the TSI is still giving a bear signal and the CMF just went negative which is yet another bearish signal.

TheStreet published an article on Friday, August 25, 2017, about the strong market breadth here.

Over the last three trading days, the S&P 500 has been doing a late day fade which also favors the bears:

Late day fades on the SP 500 last week.

For more advanced day traders, I did this lesson on day trading stocks and late day fading.

No Institutional Selling Detected Last Week

No institutional selling was detected by the TICK chart last week. This is an important fact as it applies to your trading psychology.

TICK chart of last Thursday's sell off

The TICK chart above is through the close of last Thursday and the big sell off on that day. Notice that the -167 at the close is consistent with normal retail trader activity. If institutional traders were selling last Thursday, the reading would have been below -700. The TICK suggests that you should be cautious about going long anything right now but not outright bearish.

I think we need to continue to screen for our favorite chart patterns and build a small list of stocks that you are ready to go long as soon as the major indices show more of a consolidation pattern.

Stock Market Correction and Waiting To Click The Buy Button

The stock market correction is likely going to push the S&P 500 to test its long-term rising trendline and support at 232.20. The bearish divergence on the Twiggs Money Flow likely signals that the pull back is not over yet.

Short-term stock market correction underway.

A few traders have asked me if now is the time to buy or if they should wait on the sidelines while the market pulls back. We all know that history does not predict future price direction nevertheless, it is useful to know what has and hasn’t happened in the past.

Looking at the last 110 years of stock market price action, the data reveals that waiting for a correction when the market was expensive would have reduced investor returns significantly. The reason is that the term “expensive” is a subjective term. Even if you use a more objective approach of looking at the P/E ratio, the data still shows that staying out of the market for months or even years waiting for a correction is a losing strategy.

Where long-term investors get themselves in trouble is that the correction they are waiting for may occur at a much higher market level than it is at today. Also, sitting on the sidelines for months or even years runs the risk of the investor losing patience and ultimately capitulating to the Bulls and buying back in to the market at a much higher level.

Few investors believe markets efficiently follow a random walk even though it’s a key component of market theory.

Short Term Stock Market Correction

Timing a stock market correction for profits is best done using a short-term swing trading strategy. The idea is that you don’t want to try and catch a falling knife.

Looking at QQQ, the Russell 2000, and the S&P 500, over the last week, you can see that the Russell 2000 and QQQ are leading the S&P 500 lower:

In stock market corrections, the Russell 2000 usually leads the other major indices lower.

The market is telling us that what happens in the FANG stocks and QQQ will likely dictate market direction on the S&P 500.

business QQQ chart 1100x953 - Stock Market Correction and Waiting To Click The Buy Button

With the Twiggs Money Flow breaking below zero for the first time in 2017, I think a retest of the $136 support level is likely.

Right now being in cash is an excellent move. Continue to stalk your favorite stocks for a swing long entry. I wouldn’t be too quick to jump back into this market yet. Consider using stop limit orders as taught in the lesson here.

The main thing to watch out for is the Establishment ‘Defeat Trump’ propaganda in the WSJ, CNBC, CNN, and elsewhere. These media groups are so dishonest that some were even claiming that the stock market went up because Steve Bannon left the White House. That was the propaganda narrative with CNBC claiming that traders on the NYSE floor cheered as proof. First of all, those old left-leaning talking heads in stock exchange clothing walking around looking stupid on the NYSE floor are not representative of the stock market as a whole.

Just as the Establishment media was advancing the false narrative that markets were up because of Steve Bannon being out at the White House, markets turned back down and so they quickly killed that false narrative. Another example is CNN’s propaganda that the entire market is worried because of Trump.

For the first time in our life-times, we have a President who is exposing the Establishment propaganda media in this country. There is a major information war going on right now.

As a trader, you can’t get caught up in the propaganda and the power struggle going on for control of public perception. You have to check yourself every day and make sure you aren’t making trading decisions based on propaganda. If you think the mainstream media is getting into your head too much, cancel your subscriptions like I did with CNBC Pro last week, and the WSJ and Barron’s the month before. Just turn it off because these propaganda machines are not going to help you make more money at stock trading.

Remember folks, markets mostly do random walks, especially during intra-day trading. No left-leaning propaganda media outlet can peer into the minds of millions of traders around the world and claim to know what they are thinking. These propaganda publications believe that perception is reality so if they can control the public’s perception, they can control reality.

The U.S. stock market is overbought, and the weak seasonal period is upon us. May through October marks the weakest 6 months of the year.

I don’t want to beat up on the mainstream media too bad so I’m not going to mention where I read the following bogus analysis:

Overbought markets look for excuses to sell off. Will Trump’s lack of leadership become an excuse for a big selloff in stocks?

The mainstream media is actually talking about a stock market correction as if it is some type of external beast that thinks for itself and makes up excuses. Reality check: you and I are the markets. People that work at institutional trading firms and hedge funds are the markets. Are you looking for an excuse for the market to sell off? I’m not either. Nobody is. We’re just reading the charts, analyzing the fundamentals, weighing external news events, and making our decisions. Nobody is searching under desks and looking everywhere for excuses to sell out of their positions. Especially not some make-believe entity called Overbought Markets.

Did you notice the Establishment propaganda “Trump’s lack of leadership…”? You can criticize the President on a lot of things but one thing you can’t criticize him on is a “lack of leadership”. President Trump is a strong leader with strong ideas and a vision on which he is moving to execute those ideas. Get in his way and “you’re fired”. Trump demonstrated his very strong leadership skills for over a decade on the hit-show The Apprentice. President Obama isn’t even in the same ballpark as President Trump when it comes to having strong leadership skills.

Mainstream media propaganda about stock market corrections.The main factors influencing a short-term stock market correction right now are: the speed of Fed rate hikes and balance sheet reduction, North Korea, the debt-ceiling, the economy, and the speed at which the Trump America First agenda is moving forward. Anything outside these main themes is likely Establishment propaganda by powerful groups battling to control public perception and thus reality.

What is Dow Theory Saying Now? It Is Screaming Buy!

So what is Dow Theory saying now? It is saying that the eight-year Bull market is still going strong. The Dow Jones Transports Average did a breakout on the chart this week.

What is Dow Theory Saying Now

Dow Transports are in a strong uptrend right now and have done a breakout to an all-time high this week. We need to see confirmation of that breakout on the Dow Jones Industrial Average chart as well.

We have it! With the new all-time high in both the DJIA and the Transports, this means, according to Dow Theory, that markets are headed higher and the 8 year Bull market run still has more to go. This is great news for traders and investors.

What is Dow theory saying Now? It’s screaming BUY! Before you dismiss this indicator with your negative bias argument, consider that there’s a reason that its been around for more than 115 years. Remember, it warned of trouble in 1999 just months before the dot-com crash in March 2000. It also gave a buy signal in April 2009, almost exactly at the start of the current eight-year-old bull market.

Heavy Buying In Cincinnati Bell

The stock of Cincinnati Bell has had heavy buying over the last month. Institutional investors have increased their long positions by 5.15% over the last 3 months.

Positive earnings revisions are what is driving the stock higher. In the past 30 days, one estimate has gone higher for Cincinnati Bell while none have gone lower in the same time period. The estimate was increased from 3 cents a share 30 days ago, to 9 cents today, a move of 200%. The forecast EPS for CB has increased to $0.91 from $0.82 in the last week.

Cincinnati Bell Stock Chart

The stock is coming off of a Triple Bottom. The blue dots represent all the bullish Pocket Pivot signals over the last few weeks and notice how the Effective Volume shows large players are buying the stock like crazy. The Twiggs Money Flow is rising and looks bullish.

CBB shows a decent setup pattern. We see reduced volatility while prices have been consolidating in the most recent period. There is a resistance zone just above the current price starting at 19.54. Right above this resistance zone may be a good entry point. There is a support zone below the current price at 19.12, a stop order could be placed below this zone.

GO HERE TO CHART LARGE PLAYERS AND THE TWIGGS MONEY FLOW LIKE THE CHART ABOVE… AWESOME TOOL

Amazon Stock Price Moving Higher As Monopoly Expands

A week later after upending the grocery industry, Amazon.com Inc. is taking aim at fashion as Amazon stock price continues to trend higher.

The e-commerce giant’s latest service, which lets consumers try on items at home before they purchase them, prompted a downturn in stocks of Macy’s Inc. and Nordstrom Inc., in addition to European on-line specialists Zalando SE, Boohoo.com Plc and Asos Plc. It was a rerun of what happened to supermarket shares when Amazon announced a $13.7 billion agreement for Whole Foods Market last week.

The new Amazon service is called Prime Wardrobe. Prime Wardrobe aims to eliminate one of the main drawbacks of online clothing shopping — the minute when clients realize they’ll never have the ability to squeeze into those new jeans that looked great on a website. Shoppers have been able to get around that hassle by buying several pairs but that means having to return those that are big or small for a refund.

Prime Wardrobe allows Amazon’s Prime members try on clothes first and if they enjoy the fit and look, to then purchase. The business is currently offering free delivery both ways and a seven day trial period at no subscription price. Amazon is enabling customers to pick the clothes themselves and isn’t charging any membership fee for the service. This seems to be an attempt on the part of the e-commerce giant to overcome the objection many customers have to buying clothes online as many customers prefer to try them on before making a decision.

Amazon stock price is expensive with a Price/Earnings ratio of 188.21. This indicates investors are willing to pay a high price for the stock in the present because of where they think it will be in the future. Indeed, AMZN shows a strong growth in revenue. Measured over the last 5 years, revenue has been growing by 36.57% annually.

Amazon Stock Price

A Pocket Pivot (blue dot on chart above) took place on June 16, 2017 after the company announced it would be buying Whole Foods. The Twiggs Money Flow is bullish and shows that traders are accumulating on pullbacks. Large players continue to pile into this stock.

I think Amazon stock price action on the chart and the most recent consolidation pattern shows a good setup pattern for a long entry. There is a resistance zone just above the current price starting at 1006.74. Right above this resistance zone may be a good entry point. There is a support zone below the current price at 993.08, a stop order could be placed below this zone.

GO HERE TO CHART LARGE PLAYERS AND THE TWIGGS MONEY FLOW LIKE THE CHART ABOVE… AWESOME TOOL!!!

Jim Rogers Doom Predictions Are Nothing New

Jim Rogers recently claimed that he was expecting the worst market crash in modern times to hit within the next two years. Mainstream and alternative news sites are acting as if what Jim said is really alarming. It’s not.

Jim Rogers said the next time we have an economic problem in the US it’s going to be the worst of our lifetime.

Jim’s logic is that the world has been printing a lot of money and the whole world has a lot of debt. In 2008, we had a problem caused by too much debt, but now the debt is much larger than it was in 2008, so the next time we have a problem, it’s going to be even bigger than 2008.

The 74- year-old investor also repeatedly stressed that the crash was “going to be worst in your lifetime.”

Rogers said we’ve had financial problems in America every four to seven years, since the beginning of the republic. Well, it’s been over eight since the last one. This is the longest or second-longest in recorded history, so it’s coming.

According to the 2014 book Excess Returns, in Rogers’ years as a professional investor, he beat the market by an average of around 30% per year.

Jim Rogers Doom Predictions Are Nothing New

The mainstream media and even alternative news sites like to hype Jim Rogers’ predictions as something alarming but one graphic really destroys that logic:

Being early is the same thing as being wrong. Had you listened to Jim back in 2011, you would have gotten killed shorting the market and you would have missed out on one of the greatest bull-market runs in stock market history. As Rogers has aged, he’s really destroyed his reputation as a market forecaster with his perma-bear view that the world is going to hell in a hand-basket.

Bear Market Coming If Trump Agenda Does Not Move Forward

A bear market is coming if President Trump’s agenda does not move forward quickly. I have been saying for months now that the Federal Reserve is hiking rates not because we are in a strong economy that needs cooling off but instead to save pension fund holders and others who depend on the income generated from bond yields.

The Trump rally ended back in March. That was the turning point when the markets started pricing in the reality that President Trump was being blocked even on a common-sense travel ban from radical Muslim countries that support terrorists and that generally dislike America. If a common-sense travel ban can’t even get put in place, how does Trump’s economic agenda have any hope?

Bear Market Coming As Economy Slows

We are six months into Trump’s presidency and we have no clear plan for raising the debt ceiling when the government runs out of money in August. We have no big comprehensive corporate tax reform yet. We have no tax cuts for working Americans yet. We have no repatriation of trillions of overseas dollars yet. We have no massive infrastructure plan to boost the economy yet. Meanwhile, the Federal Reserve continues to hike rates.

The chart below shows the effects of rate hikes on commercial and industrial loans.

The arrows mark the three rate hikes since the end of the Great Recession. When the Fed hikes rates next week, we could have commercial and industrial loans drop below the zero line and signal a contraction for the first time since the Great Recession.

Today, there’s a greater chance that a bear market will happen than not happen because of trend logic. Trend logic is the idea that a trend will continue until it actually ends. Assume continuation of the previous trend until proven otherwise. The Federal Reserve is on a rate hike up-trend. Commercial and industrial loans are in a downtrend. Assuming these trends continue, the yield curve will go flat or inverted within the next few months. The only thing that will stop this gloomy scenario from taking place is if one of those trends change.

The only thing capable of preventing the next bear market is if Trump’s economic agenda moves forward on tax cuts and infrastructure spending, or if the Federal Reserve does not raise rates in June. Since I see neither of these outcomes happening right now, rather than assume a magical trend change appearing from out of nowhere, it’s better to assume continuation of the previous trends until proven otherwise.

Peter Schiff gave an excellent speech at Cambridge House recently about the deteriorating US economy, check it out:

Stock Market News Update For Week of June 12 2017

In this week’s stock market news update Lance talks about the Comey testimony, the huge 40% win in bitcoin in less than a week, and the Federal Reserve’s likely hike of interest rates next week.

Stock Market News Update – All Eyes On Fed Meeting Next Week

The Twiggs Money Flow looks weak on all the major indices but it’s not something to be too concerned about yet. We could see the money flow drop and volatility fall heading into next Wednesday’s Federal Reserve meeting where it is expected that rates will be hiked by a quarter point.

Looking at the Dow Jones Transportation weekly chart we see that its headed for a test of resistance at 9500. Transports still look very bullish which is a good sign for the US economy and stock market.