Ian Woodward's Investing Blog

Gloom and Doom have set in as Consumer Confidence declined -14% this month and we are hanging on by our finger nails for a solution to the Fiscal Cliff, which at this stage seems inevitable:

The Tell-Tale sign two days ago that the Big Guns were trying desperately to prop this market up was the complete reversal from a sharp drop on all Market Indexes to finish with what I call Spidery-Leg Syndrome where there is a long tail on all the candles for that day:

Then reality set in yesterday, when the rumors persisted that the powers that be were deadlocked and the Markets all took a dive of around three Buckets down for most Indexes on %B, though on light volume.  This indicates that we await Monday’s News before we see the floodgates open or there is a sudden burst of energy to the upside during the half day of trading, when most have already packed up their troubles in their old kit bag and left to celebrate the New Year.  The odds favor  a continued decline at this late stage of the game:

Even the brightest of optimist’s will admit that nine buckets down in five days suggests more pain to come:

Likewise, Grandma’s Pies suggest the Bears have the upper hand as we switch to 60:40 red over green in one day:

The lagging Indicator of the Accumulation vs. Distribution Ratio is also drooping down to 1.65:

But of all of these Indicators we sit up and take real notice when %B x BW has an Upside Breakout on the VIX:

To confirm the predicament the market is in as we toddle into the uncertainty of the new year, we always look for a push up in the Small Caps as defined by the Russell 2000 (RUT) with the so-called January Effect and it is drooping:

…And last but not least we have the new work of Dr. Robert Minkowsky which shows promise when we look at the Normalized Average %B Oscillator for seven different Market Indexes in that we must wait for a potential last gasp bounce at 0.75 before the Markets tank.  With the current reading of (0.55), we should expect to trundle down to at least (1.375) before there is hope of a Bounce Play.  Note also that when there is exhaustion to the downside signified by a reading of (<2.00) for an oversold condition, we should expect a new rally to commence with two Eurekas within a few days of each other.  Meanwhile we practice “Fiscal Cliff Diving”!

So, let me wind up this story for the old year as the HGSI Team wish you all a Happy New Year as we sing “Hi-Ho, Hi-Ho as off the Cliff we may go” to bring in the New Year…2013:

Best Regards to You and Yours,

Ian

Most people have given up investing until this Fiscal Cliff nonsense is behind us.  The Clowns are Back:

I’ll make this short and sweet:

Friday was a 2+ bucket down day:

Seasons Greetings, thanks for your continued support and all Best Wishes for 2013 from the HGSI Team…George, Matt, Ron and Ian.

Enjoy this wonderful video of the Drifters…just click on the link below;  then, when the video is finished, hit the return arrow at the top of your browser.

http://www.youtube.com/watch?v=ddVZOK_9UUI

Best Wishes to you all,

Ian.

I see my supporters over the years are all waiting for the Santa in his Red Car (Morgan or MG?) picture to appear on the front of the Blog Note.  I can’t disappoint them, but hope the Grinch doesn’t have other ideas to pull us in and then lower the boom!

Who would have thought that two days ago we were looking at yet another correction, and inside two days we have two Kahunas and an Eureka which is the sign that this Market is off to the races feeding on the rumor that the Fiscal Cliff Kerfuffle will be resolved…is this a case of buy the rumor and sell the news when it eventually comes out:

…And here are the High and Low Road Targets…thank heavens we have a cushion once more:

The internals are also looking stronger with a 2.5:1 Ratio between Stocks under Accumulation vs Distribution:

Now here is what we look for when we confirm a strong rally in the making.  We need 400 stocks overbought out of the 1500 for the S&P 1500:

Naturally, Grandma’s Pies also show strength:

…And, to round out the picture, here is the one we love to see…big move in two days, make no mistake:

Net-Net…Kahunas and Eureka volleyed and thundered, but play with more care this time.

Best Regards,

Ian.

We are now into the Santa Claus Rally, and it is that time of the year for the HGSI Team to wish you Season’s Greetings and to thank you all for your support throughout the year.  It has been a “mushy” month, but through all the Wall of Fear, the Stock Market has bounced back from the doldrums of three weeks ago and is challenging the High Road Scenario.

I sense we are all fed up to the hind teeth with this Fiscal Cliff mumbo jumbo, but we now have just a couple of weeks to go before we have this uncertainty behind us, one way or another.

Besides discussing the High and Low Road Scenarios, my theme for this month is to give you an update with three signs for when the Jobs Report numbers in 2013 will determine whether the economy has at last turned around.    This month Ron did a quick review of the process he covered last month, the One Step Scorecard view, and then he moves on to show you how you can use the Group Inclusion Report to prospect.

The Roundtable discussion is on Tuesday, 18th December at 4.30pm EST, where we will as usual expand on the ideas in the newsletter.  You must be a Newsletter subscriber to sign up to attend the Roundtable.

Thanks to all of you for responding to the poll of which 35 said they were interested in coming to the Seminar on March 23 to 25, 2013 at the Palos Verdes Library and as always we will have fresh material to cover as we again raise the bar.  We look forward to seeing you.

Best Regards,

Ian.

I’m sure some of you are itching to buy the Santa Claus Rally now that the Market Indexes are showing signs of life. On the heels of the Blog Note I put up on Saturday, my good friend Dr. Robert Minkowsky noted that I had shown the Mid Cap S&P 400 Market Index leading the charge. He gave me some ideas that will at least give a perspective of what are the challenges for both the S&P 400 and the Russell 2000 to take the High Road from here:

Let’s start where I left off on Saturday, and you will accept that the first Hurdle is for the S&P 400 to get above 1030.

Since the intention is to buy into this Rally at this stage with the 17-dma about to break through the 50-dma to the upside, the question is where does %B stand relative to past history and how much cushion do we have?  Robert has used an approach where he has “Normalized %B” using its Standard Deviation with about 23 Years of past history.  He calls it the %B Oscillator, which is shown below for the S&P400:

2 Std. Devs. is the Yardstick so we see that we still have some cushion with the reading in green at 1.36, and we can compare it to recent past history.  The second picture shows the statistics for the “Oscillator Count” over the 23 Years of History, and as I highlight in Green, 1.36 has occurred about 300 times:

However, if we look at the next yardstick of 1.64 Std. Dev. it has occurred only 129 times, so although the Mid Cap Index has surpassed that twice before this year, it suggests that is about as far as we can expect it to go on this Rally.

I’m sure you are asking “What about the Russell 2000 (RUT), since small caps get a boost at this time of the year with the so called “January Effect”?  No sooner said than done:

The results are very similar, but the RUT has a bit more cushion since it shows 156 readings at 1.64 Std. Devs. compared to 129.  The net bottom line is to be on your toes with tight stops if you are entering the Market at this stage where you are certain there are big things to come when the Fiscal Cliff kerfuffle is behind us before the New Year.  Thank you Robert for a new perspective of how to use “Normalized” %B with Std. Deviations and Historical Count.

Best Regards,

Ian