Ian Woodward's Investing Blog

After a strong move yesterday which took the Market Indexes into New Highs, would you believe that wonder lasted just one day as we had a Five Bucket Down day on average for the Market Indexes?  The $64 question is whether it is a knee jerk or the real thing by way of the much anticipated correction?  The Bad news was there was consternation in the FED Minutes on their Monetary Policy:

If I may say so, it seems that the Market is on the Three Road Scenario I had postulated…the first one was a complete surprise with the Miracle Bounce Up, and now we see if this 5 Bucket Down Day produces a Knee Jerk Fakey or we head on down for a Correction of the Rally which has gone all of four months, and certainly with the big breakout right out of the barrel at News Year’s time.

You will recall that we had the first shot across the bow on 02/04/13, and two weeks later we had the big Knee Jerk down:

We have followed the Russell 2000 (RUT) as it has been one of the leaders, but today we got the dreaded hit of 5 Buckets Down:

The VIX had a Field Day today shooting up 8 Buckets after being dormant and now we wait to see if it spikes up further or falls back:

The Leaders took a big hit today with A+B losing over 300 stocks from that group and the lot continues down:

I have updated this next chart to show the High Road Bounce Play is behind us and we are now on the way down between ending  with a Knee Jerk which could turn out to be a Fakey or it is the real thing in a further correction which has long been expected:

…And here is the twin picture which shows the deterioration today in the %B and the percentages in the Buckets:

I feel the next two days are critical, so watch carefully and make your call of Bull or Bear depending on how they play out.  If there is no let up tomorrow to the downside with heavy volume then it would seem the call is to the downside, but understand that the Game Playing has begun and you call it as you see it.

Best regards,

Ian

I have been very busy this past week, but felt I must raise a Flag after all the Blog Notes that got us to this point. We are at a critical juncture and this is probably the start of a Climax Run:

You folks know the go to charts at a time like this.  So, let’s not waste any time and you judge for yourself:

Notice that when %B hits the top bucket, i.e., >1.0, it doesn’t stay up there for more than a few days.  The next chart shows we have had a long run above 0.5 for nearly a month, and that the Index is now Overbought:

Do Not anticipate the potential correction, but time is running out after today’s strong move up.

Best Regards,

Ian

It goes without saying that all of us are on our toes watching with our favorite methods of reading the tea leafs for any major sign of a rollover in the Market, but except for a wiggle here and a waggle there, the Market Indexes continue to make new highs albiet at a snail’s pace as I will show you.  We need a pogo stick big jump to the upside…hopeful thinking!

Still, the beat goes on and although the next slide of the Market Indexes shows the Yo-Yo we tolerated this past week , many of these Indexes finished into New High Territory over the past ten days (say).  With a glimmer of sunshine on the AAPL front, maybe the worst is behind on the NDX Big Caps Index which stands out as hopping around on a pogo stick:

Earl reminded me a couple of weeks ago that the Financial Sector was moving very well, so I felt it was time to show off another powerful feature of the HGSI Software, which shows the % Price Change for the various Sectors below.  The picture shows the performance in the last three months, and true to form the Financials are the best.  If we want to be real picky, there are the first signs of turning down this past week, but that is not enough to call the top, especially as at least three of the Sectors are still turning upwards,  Information Technology, Health Care and Consumer Discretionary.

I am still rooting for a move on the Nasdaq to 3333 as I featured in the last two blog notes, and update this information again for your perusal a couple of slides later.  Meanwhile the NASDAQ inches up slowly as shown below thanks to my good friend Mike Scott, who has faitfully kept me up to date on his findings for the past 20 Years:

We avidly follow Tom McClellan’s good work, and recently he had a snippet that caught my eye…”Before late 2007, the “9-month cycle had an average period of about 185 trading days.  Since then, it has been between 156 and 168 trading days (8 months).”  By the way, 185 Trading Days (9 months) equates to Feb 27, and that is mightly close to the next Big Cliff we are headed for relating to Sequestration on March 1, so if the Big Guns decide to prop this Market up until then, that is something to bear in mind.

Now we come to the Targets I set on 1/25/2013, and the updated results since then.  We have inched up on the Targets to the tune of 1% over two weeks, with 0.8% up the previous week and only 0.2% this past week.   We are now only 3.4% away from the Targets for the Higher Jump, but we will need a pogo stick jump up in the Markets if we are to make them within the next three weeks.  I call this the High Road Scenario, and sometimes wonders never cease in these tricky times:

Let’s take a look at the Buckets and as we would expect, the Market is stuck in second gear and has been well propped up for the past 24 trading days which is now getting long in the tooth compared with previous big jumps as posted back at the start of this year as shown on the chart below.  So we wait patiently for one of the three main scenarios to evolve in the fullness of time as I show in this next chart:

I hope that refines the basic concepts I have given you this past month to watch carefully for any signs of a disaster, which is not evident as yet, so keep playing and let the Market tell you which Road it is on!

Best Regards…only 6 weeks to the March Seminar so get cracking and sign up.

Ian.

The See-Saw in the Market Indexes the last few days after a month of Price gains to New Highs suggests that unless we see another major push upwards, the path of least resistance is downwards.  However, the Big Guns are still propping this Market up, as witnessed by today’s action where AAPL shot up in the last 25 minutes of the day and pulled all Market Indexes up to a ho-hum day and just a few points down, when it could have been much worse.

The Russell 2000 (RUT) has been one of the leading Market Indexes, and seems to be stalling at the 911 level.

As you well know, the market has run up for the past month of trading days, but as you can see this past week or so we see the jittery nature and at this point we are at that vulnerable stage of getting a knee jerk down:

As I warned you to look for, we had our first shot across the bow with a small Kahuna+ down (-0.27), while the Market is still being propped up:

For the record the next two slides show the updated Jobs Report Numbers revised for the whole year.

Today’s news on Jobs indicate that “Jobless claims point to healing in labor market”…

(Reuters) – The number of Americans filing new claims for jobless benefits fell last week and a trend reading hit a near five-year low, signs a grinding recovery in the labor market remains on track.

Best Regards,

Ian.

Thanks to those who gave me comments, including Charlie who is looking for a Winky Winky handed to him on a Platter.  Charlie Wrote:

Charlie Willey Says: January 27th, 2013 at 6:43 am   edit

Ian – Thanks for the multiple scenarios you send along with your discussions.  You provide much stimulus for thought on this end.  Still, you stay ahead of me.  But I know to look for the little ‘winky-winkies’ along the way and sooner or later I say, “There’s one, oh, and there’s another.”

– Charlie Willey

Charlie, I gave it right there for you to decipher, but the question for you is “Do you have the stomach to watch the Markets all trot down five buckets and you are prepared to sit and wait one more day?”  Now it’s a case of your stomach, and only you can know that.  Sad to say that you must wait one more day to know whether History Repeats itself for the 3rd. Year in a row or this time on the day after the Indexes all head down 5 buckets (say), it goes down further.  Don’t curse at me and say “Coulda, shoulda, woulda” old buddy.  So the choices are simple:

1.  If you have a weak stomach and want to preserve capital even if it is a Fakey, you take it OFF during that very bad day or

2. You say, no I will give it only one more morning to see if the markets bounce back that next day:

a. If they bounce up one bucket, you stay to watch the next day and with luck you breathe a sigh of relief and the market hops back up one bucket and then four buckets as it did in both 2011 and 2012 and you have not been faked out, or

b.  It continues to trot on down and you know this is no Fakey, and you better run for the hills or turn to shorting.

Now you are saying “Come on Ian, where on earth did you conjure up that Winky-Winky?” and I say sometimes I want you do some homework, because in this case we are talking about stomachs and NOT MARKETS and I have drummed it into your heads “Every stomach is different”…and that is what the Big Guns prey on!  Just stare at this chart and you will see the tea leaves tell you what I have just told you:

I’m sorry I didn’t paint the upper bounce green for the next day after the big 5 bucket drop in 2011, but you can see that in both cases they bounced UP one bucket and then a hefty 4 Buckets the following day.  Coincidence you say,  I say fine, but that is all I need for a clue.   It’s called Reading the Tea Leafs as well as enjoying the tea…the bigger picture related to Fear and Greed.

Now Charlie, I am still waiting for that 3rd. Million, and sad to say no one has sent me that yet!  They all say they are still working on that 2nd Million for their wife!

Best of luck,

Ian.