April 25th, 2012
in Gary's blogging
Yea, right and the Devil is going to install air-conditioning. Today's exceptional market action is to be taken in stride as the market will always have its up and downs, surprises and sorrows. That is a given, but unfortunately too many of the 'sheeples' blindly go where the sharks of the market want them to go and then fleece them without remorse.
In the book and movie** we hear the phrase “May the odds always be in your favor” as an attempt to bolster those souls that are about to become unfortunate statistics. This market right now is just like that theme in that you are not going to get out alive if you decide to get in and play. NOW IS NOT THE TIME to dip your toes into the market waters. The trend is DOWN and it is best not to ignore the many signs of bearishness in plain view. That is why I am here; to help you wade through the Market Jungle.
New York Summation Index Not Confirming This Upmove by Jaimini Desai
Watching breadth to assess market conditions is a useful tool for traders. . . I think of breadth as an important piece of evidence that traders should consider.
Market breadth is simply a measure of the number of stocks Advancing vs. Declining.
When they are not in sync, then caution is warranted especially for traders with longer time frames and choppy market conditions should be expected.
I would advise caution towards swing traders looking at longs due to weak breadth. However, when the New York Summation Index turns, it will be an excellent opportunity to "buy and hold" in the early stages of the second leg of this upmove that began in mid December.
Sentiment indicator the New York Hi Low is sometime a risk aversion indicator.
My thoughts revolve around the end of October as the second leg up.
Lastly an very informative article by The Inflation Trader and a must read. I have included only a portion of this great article's informative collection of thoughts that any trader, investor or financial adviser should be acutely aware of.
Taking The Market's Temperature by The Inflation Trader
“Forget for a moment, if you can, the European drama - the falling of the Dutch government, the possible imminent failure of the French one, and the ongoing heated argument about whether Europe can stand austerity . . . If you want to take the temperature of the U.S. market, we have other tests worth considering.
The company [Wal-Mart] had already announced an internal investigation [allegations of bribery in its Mexican unit Wal-Mart de Mexico], but a criminal inquiry is another matter. This is potentially a good test for the equity market. A bull market tends to shrug these things off; a bear market tends to accentuate them. On Friday, Wal-Mart fell $2.91 (4.7%); on Monday it dropped another $1.77 (3%). The early returns are that the market isn't taking it well.
The other proximate test is the earnings report for Apple (AAPL). Apple reported great second-quarter numbers, handily beating estimates, but harshly revised its forward outlook lower.
In bull markets, investors will focus on the current beat and speculate easy it will be to beat the lowered estimates. In a bear market, investors conclude that the beat represented sales pulled forward into the current quarter, don't therefore give the company credit for the beat, and push the price lower since the future earnings are expected to be weaker.
. . . if Apple, already 13% off its highs over the last couple of weeks, cannot quickly stage a convincing rally (for more than one day!), it is a bad sign for the market as a whole. Whatever investor confidence is doing, consumer confidence isn't exactly buoyant.
. . . some thinkers inside the fed have begun to question the usefulness of a permanently-low rate regime and the risk of the steady rise in money, which has pushed core inflation higher in 16 of the last 17 months.”
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