Ian Woodward's Investing Blog

We are at a point where its time to bite your finger nails, as this Market can go either way:

The NASDAQ and NDX are already showing signs of Fatigue, and the others are running out of steam:

The RUT is still the strongest and now provides plenty of cushion:

What helps the Bulls is the complacency on the VIX at the moment:

Accumulation vs. Distribution Ratio has improved significantly over the last month and reaching the point to turn around:

We cannot complain about the strength of the Rally over the last month, which shows that we have recovered:

…And to prove this was no ordinary rally, it went from oversold to overbought in just 13 Days:

The natural next question is how often has this happened before over the past five years since the start of the Rally in 2009? The answer is that the range is 13 to 18 Days for the best Rallies over five years.  Once past %B of 0.7, expect the move to continue up:

Then inquiring minds would like to know what are the odds for up or down of %B over the next ten trading days?  Down.  However, the Market Indexes can usually hold up for at least five days, and then trot down or sideways:

Stay on your toes, and watch the signs I have taught you of 4% down at a time with -8% from the high to think about vacating.

Best Regards,

Ian.

Ten Days ago the Bears were dancing that at long last the floodgates were opening and now we are in a Strong Bounce Play where it appears the Bulls have the upper hand.  The Champions of both sides are full of chatter, but in essence it comes down to the Blind Leading the Blind!

I am happy to say that of the two Market Scenarios I gave you, Scenario #1: Quick Recovery is winning:

Ten Days later here is where we stand with an impressive cushion of 100 points as we expect no more than a -3% Drop to complete the Inverse Head and Shoulders I predicted.

Here is the standard picture of the eight Market Indexes which shows the progress to a Double Top with the Small Cap Russell 2000 (RUT) leading the way:

Fakey’s usually occur for %B <0.7 and the S&P 1500 is right at that reading, so it is a toss up.

This next picture using Buckets is the most encouraging as the Market seldom dies with 20% in Bucket >1.0:

We see a big improvement in %A-E for Accumulation vs. Distribution, but there is still work to do:

And last but not least, here is the most encouraging news in six weeks since the top in all the Market Indexes:

Have a Happy!

Ian.

Today’s Bounce Play is strong…However with the Indexes at resistance it is too soon to judge if the Bulls can maintain the Rally.  Bears are still in control for now:

So let’s review the bidding for Past, Present and Future, starting with two days ago which looked very ugly:

Present: With half an hour to go, this is a Strong Bounce Play, but as we can see the Indexes are now at Critical Resistance:

Future:  Scenario #1:  Quick Recovery…the expected plan is shown below as a follow up to my previous note to Paul Reiche in the Comments Section of “Scary Ride to Come or Up, Up, and Away?”

Future:  Scenario #2:  Correction & Slow Recovery…Bears maintain control until October or later with more to the downside.  Key Support will be at -8% down from the high…if broken we will have a Major Correction on our hands:

Caution:  Never fall in love with one Scenario.  Let the Market guide you, but it is always worthwhile to have “What If Scenarios” so that you can judge and recognize what the Market is telling you.  Then let your stomach be your guide as to whether you play or not.  News is always an overriding factor in all of this and you need to be on your toes, and don’t forget the big one hanging over our heads is the delayed action on Sequestration due now in September!

Best Regards,

Ian.

The Market Indexes have dropped on average 5.6% from their Highs posted on 5/22/2013, and the $64 question is “Are we in for a Scary Ride downwards or is this just a Minor Correction before we move up again?”

As we would expect, the Floodgates have opened to the downside and recent support has been broken on all Indexes:

The Russell 2000 (RUT) took a hit but is still holding above 4% from its High:

As previously mentioned, the Island Gap was filled and now we have a gap above to fill or we trot down to challenge -8% @ 3240:

Here is a Longer term view for the Nasdaq showing the trend-lines, so there is still cushion before real damage is done:

You remember this chart…Below -8% and the Market Indexes can land anywhere, but there is a 71% chance to find support above it:

This next chart shows that the # of New Lows fired recently to fulfill the Hindenburg Omen requirements of 2.2% Highs and Lows:

The Internals are awful with A+B now less than D+E by a factor of 2:1:

Worse yet, the “E’s” are swamping the “A’s”, and it will take a strong comeback by the Bulls to right this ship:

The Spreadsheet shows that the Market Indexes are now down -5.6% on Average from their Highs:

The Bounce Play has been miniscule so far, so we see what transpires this coming week:

As expected, we got the “Fakey” I warned you about, and now we are back in the doldrums:

…And last but not least, a (9) shows weakness and it will be a while to gain support to the upside again:

Good luck and Keep your Powder Dry!

Ian.

Late Breaking News!  Another Hindenburg Omen fired yesterday, and floodgates opened today:

Mid-Afternoon on Thursday Snapshot shows Floodgates have opened to the downside for now:

…And here is the Nasdaq at the Close with the obvious Objective the Big Boys have to fill the Gap to 3345.  It’s Triple Witching Options Expiration tomorrow so anything can happen.  There is potential support at a nice round number of 3300, but then the fun starts if they break that to the downside.

…And here is the toll taken today…the worst I have seen in Dropped Buckets!  Everything is Blood Red:

With Triple Witching Options Expiration tomorrow anything can happen, but the Optimists must be shaking their heads.  At least this gives us the clean out we needed so badly.  Now wait for the dust to settle, but watch for “Fakey’s” as the Bulls try to regain control.

Good luck.

Ian.