Market as of Last week (12/16-12-19)

Market’s uptrend has resumed, but the distribution days (high volume selling in major indexes) is still valid but has reduced to 5-6. A distribution day is defined as the loss of more than 0.2% by a major index — the Nasdaq, the NYSE composite or the S&P 500 — as volume ticks higher than the prior session’s total. Tracking the accumulated damage is crucial to gauging a market’s health.

There are three ways a distribution day can fall off the count. The first is by the calendar. After 25 sessions, a distribution day expires. The count falls by one. I will later explain the other two.

Delta Market sentiment indicator is still bullish, based on Last week’s readings.

 

Current Sentiment Last Week 2 Weeks Ago 3 Weeks Ago
BULLISH 59.2% 62.3% 68.2%

Current Market Exposure: 100% Equities, 0% Bonds, 0% Cash

As you can see, it is dropping. But this this last Wednesday on Dec 18th after the Federal Reserve meeting, the market went up. It was high volume rally, volume increase across the board.

Now it is not good or bad for us. Because we just react to the market – we don’t predict it or hope things change. We let the market do what it wants and we just act accordingly. The market remains irrational as long as we are solvent. So in order to avoid our insolvency we don’t act in reaction to the market, with it and not against it. We bet with the market – if it’s going up we buy financial instruments the would correlate with that (like buying call options), if its going down we buy financial instruments the would correlate with that (like put options).

We are just focused on one and only one indicator and that is price – It is the true north star. We do not bother or concern about the news, federal reserve, analysts opinions etc. etc.

All we see is the price, for example the price of QQQ, and the volume associated with that – If the price of QQQ reduces in high volume for 6-8 times in last 25 trading sessions we covert into cash or buy put options.

At present – the market is back on the upswing. So we buy call options on stocks or ETFs like QQQ or just buy QQQ and wait. Its as simple as that

I will post shortly – the sectors that are also in the upswing, the industry groups that are in the upswing, and also the stocks that are making new highs.

Happy Trading

 

 

Market as it was last week

As already stated in the previous post – market uptrend is under pressure.

1/4 of advances today have been given up today (Nasdaq has given up 20 points since the market open).

the number 1 ranked stock in the market right now is QIWI. It Operates electronic online payment systems in Russia and the CIS.

QIWI DEC 16TH 2013

Key characteristics : Number 1 on the top 50 stocks of the entire market. 99 Composite Rating (top 1% of all stocks), EPS rating of 99, Relative Strength Line rating of 99, accumulation by market (people are buying it) is A+. QIWI PLC CL B ADS ranks best in the group within the finance-credit card/payment group (25 stocks). Out of 197 industry groups  this groups rank is number 8 (we want to invest only in the top 40 industry groups in the entire market and in the top 6 broad sectors out of 33 sectors based on price performance). The Sector is finance and is ranked number 5 of all the sectors. QIWI just cleared a buy point.

Always, always, without fail cut your losses (5%-8% of your purchase price : Remember it is easier to make up for the loss with a gain of 100% or more for winners, and it is easy. Preserve your capital at all costs, so when those winning stocks come along the way you are ready to play. Opportunities are like train stations in Tokyo, one goes and the other comes. Have the cash to buy the ticket and be on the platform and ride any train that you are comfortable with. Let the chart speak to you: trade what you see and not what you think)

Market at present

Market’s uptrend is under pressure. The distribution days (high volume selling in major indexes) have reached 7.

Reducing exposure to 50% is good at this time. Delta Market sentiment indicator is still bullish, based on Last week’s readings.

Current Sentiment Last Week 2 Weeks Ago 3 Weeks Ago
BULLISH 62.3% 68.2% 69.2%

RSP AS ON DEC 13TH 2013

As you can see in the above graph – RSP (Guggenheim S&P 500 Equal Weight) has hit triple top of around 66 USD. But is still above the 75 SMA (75 day Simple Moving Average).

Also the investor intelligence Bulls vs Bears is reaching its all time high (contrarian indicator). It is just above 58.0. Last time it went up to 60.0 was at end of October 2009. Just at the end of the long bull market.

So RSP has triple topped, market is under pressure, Bulls vs Bears is reaching the all time high – all negatives indicating market top is at hand.

Keep an eye open for CELG

The market marched up today. the distribution days are 7 for s&p and 5 for NASDAQ (a distribution day is when there is high volume selling, higher the count greater the chance that the market would get into correction).

The Delta MSI is also bullish. It measures the position of ~3,600 stocks relative to an intermediate-term moving average crossover (MAC) point. When greater than 50% of the stocks followed are above this MAC point, the market is bullish and equities are attractive. When the indicator is below 50%, risk is elevated and stock exposures should be reduced.

Current Sentiment Last Week 2 Weeks Ago 3 Weeks Ago
BULLISH 68.2% 69.2% 66.3%

Now Lets look at Celgene Corporation (CELG)

Key characteristics : This is NOT the top 50 stock (it was in June of 2013). But it is has just yesterday popped from a base, and has made a new high.

Any financial entity making new highs continue to make new highs, like wise a financial entity making new lows will continue to make new lows.

Its Earnings per Share rating is 98 (top 2%). It is in medical sector – Sector rank 6. and Industry group rank of 39.

celg

happy trading

 

 

 

Stocks to keep an eye on: Valeant Pharmaceuticals (VRX)

Market is in confirmed uptrend, but the days of high volume selling has gone down by 1 to 5. (once it reaches 6-8, the market has hit the top for now)

Market sentiment indicators are also approaching great bullish optimism

The Delta MSI (DMSI)measures the position of ~3,600 stocks relative to an intermediate-term moving average crossover (MAC) point. When greater than 50% of the stocks followed are above this MAC point, the market is bullish and equities are attractive. When the indicator is below 50%, risk is elevated and stock exposures should be reduced

Current Sentiment          Last Week          2 Weeks Ago     3 Weeks Ago

BULLISH              61.6%   67.0%   73.9%

Now Lets look at Valeant Pharmaceuticals (VRX)

Key characteristics : Number 28 on the top 50 stocks of the entire market. 99 Composite Rating (top 1% of all stocks), EPS rating of 96, Relative Strength Line rating of 88, accumulation by market (people are buying it) is B- . It is also a sector leader ((sector leaders are the greatest performers often having 1-2 years of heavy stock price growth)) in Medical Stocks – which is very good (top horse)  Out of 197 industry groups  (we want to invest only in the top 40 industry groups in the entire market and in the top 6 broad sectors out of 33 sectors based on price performance). VRX belongs to the industry group of the medical-ethical drugs group (42 stocks) , this industry group is ranked at number 8. VRX is the sector leader in Medical . Medical Sector is the currently at 10 rank.

Always, always, without fail cut your losses (5%-8% of your purchase price : Remember it is easier to make up for the loss with a gain of 100% or more for winners, and it is easy. Preserve your capital at all costs, so when those winning stocks come along the way you are ready to play. Opportunities are like train stations in Tokyo, one goes and the other comes. Have the cash to buy the ticket and be on the platform and ride any train that you are comfortable with. Let the chart speak to you: trade what you see and not what you think)