Ian Woodward's Investing Blog

On the heels of my morning blog note, here is a follow up since the Market closed down today.  The game plan is simple as I see it in this S&P 1500 Chart.  Strong Support is at 325 at the 50-dma, and if it reaches that the irrational exuberance of the Draghi Plan and Q-E 3 will both have been short lived.  If there is any Bull Muscle, expect at least a Bounce from there.  If not then we trot down to eat up the other half of the 8% Cushion down to the 200-dma, when the floodgates of Fear will be in full motion.  Note how %B and %BxBW are both under water even at this stage.

Best Regards,

Ian.

In my last two blog notes I explained the unusual overbought status of the Market Indexes and particularly pinpointed the 42% of the S&P 1500 stocks sitting above the Upper Bollinger Band, i.e., Bucket >1.0, as being very rare.  I also showed you the two other recent occasions when such a blow out had occured in 2011 and warned of the pending downdraft that inevitably happens at such times.  Seven days later we will review where we stand.  Said in a word we are at “Stalemate”, and given today’s action the bias is that we are probably headed down:

Let’s first look at the eight Market Indexes I regularly feature and the double Flag caused by the Draghi Plan in Europe and the announcement of Q-E 3 by the Fed which put the Markets into Overbought territory.  Whether this transfusion of optimism will last and the markets move higher after a pause to refresh remains to be seen, but for now we had an orderly move down for a week until yesterday when a Phoenix coupled with a Down Kahuna suggested a meaningful Shot across the Bow:

We see that three Indexes finished at their lows yesterday and all gave up the Q-E 3 “Kick” of eight days ago.  Now the question is “Do we wander on down to support levels before the Draghi Effect or do we hold here abouts and trot on up for the Bulls to gain leadership again with GOOG leading the charge and AAPL regaining its composure with a move up from the usual 35 to 40 point correction we have seen of late before it moves up again?”  As of yesterday we were at Stalemate as shown by who has Control using the 2x and 3x Bear ETFs picture:

…And here’s the “Something’s Gotta Give” picture which is acting true to form.  If today’s action takes the S&P 1500 %B to an Oversold state in Bucket <0, then we could expect a Bounce.  That Bounce could be short-lived as in the previous cases shown, or we trundle up with a continuation of the Rally.  Let me remind you that the first Election Debate is next Wednesday, and who knows what the effect will be on the Stock Market?  Then on Friday of that week, October 5th we are back to focusing on the Jobs Report, so Traders and Investors be forewarned to be very much on your toes!

Here is the twin picture, which we have come to enjoy, with the latest drop showing a one bucket skip, but actually was a Kahuna down for the Nasdaq:

Grandma’s Pies show we are at Stalemate with the Bears having a slight advantage.  Note the ~ 10% in Bucket <0:

I am sure by now you can see that my efforts in all of this is to keep us on the right side of the Market by Managing Fear and Greed through an understanding of the underlying components of the Market indexes.  Here are three further pictures I share with you from time to time, but is very important to understand at this time:

Here is the picture for Greed, concentrating on Stocks with %B in Bucket >1.0.  Note the recent 632 which is 42%:

…And here is the one for Fear.  We had 147 stocks for the S&P 1500 yesterday in Bucket <0.   Fear sets in at ~400:

Now not only do you have the Game Plan which I gave you in my last Blog, but also the underlying principles of what to look for.  We have just four weeks to our Seminar and we have plenty of seats available.  Please sign up soon so that we can take care of logistics at this end.

Best Regards,

Ian.

Well of course we should expect the Market to go up with vigor when the FED announced QE-3, and as before they are scratching each other’s back:

Here is the Double Flag up due to Draghi and Helicopter Ben two weeks ago that catapulted the Markets Up:

In the last Blog, I gave you a hint of what to expect based on recent past history, and so far it is working out.  Here is the updated chart which shows we have been trotting down in %B strength in the last six days:

…And this next chart will show you how Grandma’s Pies have weakened over the same period.  The Bulls are still in control but it won’t take much to move to stalemate of around 55:45 or so.  Since the trot down has been orderly, expect another small bounce from those who feel they should hop in and catch the next move up before the %B trots all the way down to seek a bottom as shown above:

Here is another view to confirm the gradual trot down in %B for the S&P 1500, since it was overbought:

…And this next chart caps it off for you that the Bulls are still in control using the 2x and 3x Bears ETFs:

By now you are asking “So What and Then What, Ian?  What does your Crystal Ball tell you?”  Stick to the discipline and be ready for any eventuality.  When the Market Rally has got a trifle long in the tooth and you see breakaways from the 200-dma, your mind MUST turn to the High Jump!!  Don’t ever forget it.  So to show you what I mean, I took the time and patience to produce the following chart, which reveals some interesting pieces of information.

Get your Beady Eyes on the Arrows called CUSHION and the two to the right for % Up for Higher and Highest Road Scenarios.  We see we have a safe cushion of 6% to 9% for all the Market Indexes shown.  We also note that GOOG which is heading straight up is only 2% from its historic Higher Perch, so GOOG is the one to watch to see if it stutters or carries on to up at $743.  Also if this market continues up expect 2% to 5% on the upside for the Major Market Indexes, before we either stutter or continue on up:

To simplify all of that down to one chart to keep next to your elbow, here are the key factors for the Nasdaq:

Now you are armed for the next few days to weeks at least with the above scenarios.  Never fall in love with any scenario, but let the Market tell you which one it is on against this plan.

Our Seminar is just five weeks away and we have plenty of seats available for those who feel they would like to come and learn how Ron and I keep you challenged to cope with Fear and Greed and make the most of the Rallies in between!

Best Regards,

Ian.

At times like these when the market soars like this from the Draghi and QE-3 stimulus, I think back to happy times with Sinatra in his prime, but sooner or later “Something’s Gotta Give!”

The Market Indexes are flying high and all but one, the NYSE though also strong, has hit New High Territory:

…And here are the Nasdaq High, Middle and Low Road Scenarios…3000 is strong support now, so watch that to the downside:

As you would expect Accumulation: Distribution Ratio is strong and is back up to 5:1 as shown in the next two slides:

It goes without saying that the Bulls are in Total Control with the Composite 2x & 3x Bears Index the lowest on record:

Now’s the time to sit up and listen…we have reached OVERBOUGHT personified with this chart…three times in 12 years!

So What say all of you?  I am no soothsayer, but at least I can take a stab at what History tells us.  I know, I know, history doesn’t always repeat itself but at least it is worth a look.  There have been only three times in 12 years of this type of history where the number in Bucket >1.0 has exceeded 40, the other two were in July/August and October/November, 2011.  One glance at the chart tells me this one now is similar to that in July/August of 2011 when we had the Euro Jitters and Crisis.  Note that the down arrows I show in the next chart are all parallel, so I am suggesting that within 15 days we should be at a hard bottom, and in between that we should see a move towards Bucket <0 within a week…between friends.

Then What?  Who knows, but for sure we will all  be on the look out for the Jobs Report a week later on October 5.  You know this is the 4th year of a Presidential Cycle, and the Market NEVER Tanks before the Election so the odds are as I show on the chart “Up, Up and Away” unless there is some extraordinary upheavel by way of worldwide chaos.  At least I have stepped up to the plate as “Fools Rush in where Angels Fear to Tread”…another of my favorite Sinatra songs.

My worldwide audience gets stronger by the week, and we have one coming to the Seminar from London and another trying to arrange his busy schedule from Australia.  See you all in five weeks time.  Let’s hear from some of you folks or are you just lookie-loos like ships that pass in the night doing whatever they fancy by scraping the latest news from their favorite blogs:

The Best of Luck to all of you in these difficult times.

Ian.

It goes without saying that the miserable Jobs Report yesterday may have spurted Helicopter Ben to pop in again, but heaven help us if he has engine trouble in not getting a consensus on doing Q-E 3 after all the hype and expectations that the press has set up for next week:

We have the so called “Draghi Plan” to thank for a supercharged boost in the Market Indexes on Thursday and for then staying up the following day, yesterday, despite the poor Jobs Report.  Now that we have all the changes in, here is the updated picture, together with my assessment of what to expect all on the chart:

It is very evident that the dire straits worldwide with all eyes on the Euro and the expected actions for the Draghi Plan gave such a strong action all around the world and certainly here in the USA with huge breakouts in two days:

Here is the five Bucket rise from a couple of days ago, which quickly drove the S&P 1500 into Overbought status:

With the %B for the S&P 1500 up at 1.30, it is no wonder that we shot up to a difference between it and the % of Stocks above 0.5 to be as high as 48.25 to drop back to 37.33 yesterday, still very strong:

The 2x & 3x Bear ETFs always give insight quickly of who is in control and it is obvious that the Bulls have it:

…And here is the ugly picture as the Bears ran for cover quickly when the Draghi Plan seemed golden:

The next two slides give you my assessment of the events of the past few days and then a third one which repeats what I said in the last blog for your convenience of the events to look out for next week:

“No Body knows the Trouble I see”, but enjoy POMO while you can if it comes next week…this chart by Fred Richards is worth remembering with his TOMO on POMO of  more than a year ago:

Enjoying the Golf while I write this…have a great weekend and many thanks to all of you for my Birthday Wishes and appreciations for my work to keep you on the right side of the market.  Understanding Fear and Greed are Key to Buy Rockets and Sell Rocks as I coined over 20 Years ago!

Best Regards,

Ian.