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Good morning Traders,

In this fractal market, where individual time frames break down
into disparate signals, we find ourselves in the vortex
of the mid and short term.  As we’ve been discussing, this wall of
worry has been developing.  There’s a question as to whether the worry was
real (North Korea) or just the dominant strategy of the day (to buy stocks
concurrently with options as protection).  And throwing in options
expiration into the mix, which is a non emotional, calendar driven event, we’re
playing the waiting game.

From a chart perspective, resistance is coming in as it should:

qqq

And the bearish projection is for something much akin to the March 2000
‘crack’ that set in stage the bear market which initiated that September
1st.  These gaps will get filled – and much more.

But in the short term:

dsb st

We have conflict with the mid term barometer (which was designed to get us
out of the short term noise and reduce trading activity, but maintain
profitability as the mid term moves are the most profitable):

dsb

But what’s driving this wall of worry?

equity options

So it’s hard not to see the market trying real hard to lift here – unless the
move is very inefficient – whereas the indicator moves higher but prices do
not.

And timing is the key – and what we’re all about.   To help us
with this, here are our forecast and our cycle update:

forecast

cycles

So we have some confluence of indicators aligning for a move lower this
September.  But for that to happen, we’ll need to see more complacency
or more selling.  Otherwise, the wall of worry will dominate.  The
mechanics of the market, i.e. put buying to an extreme puts a floor on stock
prices and can cause prices to rise as these positions are lifted.  And
liquidity is a double edged sword – which cuts equally as hard when selling
programs dominate the action.  And we’re beginning to see some evidence of
that.

So maybe I should have titled this article “hurry up and wait” instead of
“this is where the rubber meets the road” but the two are approaching a point in
time where we’ll either have to change our position or be rewarded for our
perseverance.

Have a great Thursday.  Expiration is tomorrow (though VIX options
turned over yesterday) and I expect the effect of expiration to carry over into
mid next week.

Regards,

www.stockbarometer.com

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Good morning Traders,

As we’ve been detailing, the markets have been correcting internally as index
pricing has remained stable.  When we get moves like Thursday’s, we ask the
question if this is initiating, or terminal (is it the beginning of a large move
lower, or the end of downside).

The wall of worry is being built.

Let’s run through some charts and I’ll show you what I mean:

qqq put call ratio

equity put call ratio

daily stock barometer - old

cumulative tick index

equity money flow

equity money flow 2

naaim

oil timer

So putting this together, yes, the markets are over bought, but with the
crowd predicting a significant move lower, prices are likely to remain higher –
until that fear turns to complacency and better yet, greed.

So instead of recommending PUTS, I believe we’re closer to recommending CALLS
for another advance into the end of August that will set up the next move lower
into the end of September.  Over the past 17 years of collecting and
interpreting this type of sentiment data, I feel I have a pretty good
perspective on markets.  But there are always wild cards.  A few
corrections have initiated in August, so we could see the same thing here.
Expiration is 8/18.  If anything, I’d expect prices to bounce into that
point and a top the week after.

Regards,

www.stockbarometer.com

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Good morning Traders,

Friday’s bounce on very light volume is setting up the potential next weak
day.  The challenge with it being Monday is it’s month end.  Last
Thursday’s action showed just how much damage can be caused by one of the FANG
member stocks having a bad day.  Looking through those stocks, if selling
picks up, they’ll likely drive the Qs down to the 128 level – and that’s just
for starters.

Here’s a view of our seasonal charts to gain perspective on the action in the
month ahead – following our standard priority of stocks, bonds, dollar, gold,
oil, and nat gas.

qqq seasonality

bond

US Dollar Seasonality

gold seasonality

oil seasonality

nat gas seasonality

Conditions are right for a correction – stocks are in a seasonal sideways to
weak period through 10/1 and bonds are also in a window where they show seasonal
strength.  One caveat there is the Fed reducing it’s QE bloated balance
sheet.  They technically have t sell enough but not manufacture a
crash.  We could even see bonds go down, with stocks, driving rates
up.  Do you think the economy is ready for that?  Someone always
has to ruin the party.  And this time it’s the Fed.

Add in that gold is in a seasonal strong period and showing strength and that
further supports weak markets.  Oil is a wild card as inventories dry
up.  Oil prices could melt up for a while as the weak dollar makes oil
cheaper around the globe.  Thus the push into international markets over US
markets.

Nat Gas remains difficult to trade.  I’ll do a full review of our
indicators on Nat Gas (it isn’t called the widow maker for nothing) to see if we
can gain some leverage on what’s driving the trade there.  Still looks to
be forming some sort of double bottom and retest of the Feb 2016 lows, which
could make a good trade.

To access all the DSB newsletters, including all our research charts, click
here:  http://www.stockbarometer.com/cb_dsb.aspx

Regards,

www.stockbarometer.com

 

 

Good morning Traders,

Friday’s price pattern was a bearish evening star, but we have earnings from
a FANG stock so anything goes today.  Let’s take a look at a 1-3 month
expectations for the Nyse and Nasdaq and then analyze the Nh/Nl data:

Nadsaq 1 month

nyse one month

Nasdaq 3 month

Nyse 3 month

As they say, life is like a box of chocolate and you never know what you’re
going to get.  No one can predict the future, but we use the past to keep
our expectations in check.  When indicators get to these levels, markets
are expected to be flat or lower and more so on a one month basis.  If we
remain in a bull market (as evidenced below) on a 3 month basis, there is rarely
a bad time to buy!

Nasdaq Net New Highs New Lows

Nyse New Highs New Lows

We moved the above two indicators back to 2011, to capture the two most
bearish moves from 2011 and August 2015, January 2016.  These make some of
the best long term buy points – but they’re far and few between.  I do
expect something similar this year as the 2009 Bull Market turns over.

With the Net New Highs/lows at a peak, as the line moves lower, it’s
important to understand that we’re still seeing break outs – just fewer and
these are more likely to collapse and retreat back into the base (from a stock
basis).  In a normal / neutral market, the lines should move on both sides
of the scale.  And in a bear market, for the most part, these lines will
remain below zero.  It takes moves like that to make me more bullish – as
I’m currently bearish and can only see minimal upside and maximum potential
downside for the future.  We remain Short on this retest of the previous
highs on the Qs and are looking for a 3-11% move lower from here.

That means we’ll be out with our top 500 covered calls and top stock PUT
options soon as we get more confirmation of a bearish move.

Regards,

www.stockbarometer.com

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QQQ Seasonality

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QQQ Seasonality

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The below chart represents Cumulative ETF money flow.

We’ve been monitoring money flow into this group, causing a narrowing or market breadth, leaving the stock market vulnerable.  Visit our site www.stockbarometer.com to learn how to profit from the coming market move.

This is significantly strong, but on a contrarian basis, it can be bearish. Visit our Facebook page below to see our Roc view. Access all this data on our website below.

ETF Money Flow

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The below chart represents ETF money flow. A significant change that is taking place in the financial markets is the shift of money into ETFs and the money leaving equity funds. This is significantly strong, but on a contrarian basis, it can be bearish. Visit our Facebook page below to see our Roc view. Access all this data on our website below.

etf money flow

This is one of our 300 market timing indicators to help traders and investors identify potential buy and sell points.

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