Ian Woodward's Investing Blog

Forewarned is Forearmed…don’t say I don’t keep you advised well ahead of potential tricky spots in the market.  I’m busy, but I felt I should put together five charts to keep you abreast of events for the next week:

The next four charts give you the events and expectations which are self explanatory.  My Three Scenarios turned out to be right, and the one that is favored by the pundits is the Low Road Scenario.

Types 1 & 2 Get Ready to Rumble;  Types 3 & 4 Keep your Powder Dry.

Best Regards,

Ian

As we enjoy a long Labor Day Weekend with the Markets closed tomorrow, the buzz on Friday evening out of Jackson Hole was that the “Odds Tilt to a Quick QE Move” according to a headline in MarketWatch:

With the Tom-toms beating, I felt it would be of value to you to take a deeper look at the Jobs Report due this next Friday on the 7th of September and so I resurrect the chart I used a month ago.  Recall we had just come through the August report which delivered 163,000 new jobs, and having now studied the numbers in a lot more depth, this turned out to be a very commendable report, and the market promptly recovered coupled with the Braghi Comments a few days earlier.  My off the cuff suggestion was in order for this momentum to continue the Market would be looking for a further boost in the September Report to the tune of around 220,000 Increase in jobs.

You know me well enough by now that I invariably will divide complex problems into three with the High, Middle and Low Road Scenarios which was my objective with all the hub-bub about QE-3 being almost a certainty.  It may well be a boost for the Market in the Short Term, but we all know by now that if and when this economy finally turn around this indiscriminate printing of Money will eventually catch up with us, as Inflation eventually kicks in with raising Interest rates to keep things in check.  I was fortunate to come across the Untied States Bureau of Labor Statistics for the past 10+ years.  From that I plucked the month by month Jobs numbers in the next chart, so that you can see the basis for my analysis, and that the Average Increase per Month is ~133,000 new jobs, based on the last 30 months:

So it would seem this tallies with the 4.5 Million New Jobs that the Administration quotes as a statistic of its overall performance based on a low 30 months ago when the Increase/Month bottomed…looking forward for an additional five months.

Now let’s look forward for at least the next couple of months as they will certainly be an influencing factor with regard to any new Quantitative Easing that may be essential to boost the Economy and Jobs.  In the following two charts I show the pertinent data for this year, with the Statistics through July already behind us.  For August through Year-end I show the highest number increase for each month based on the past ten years of statistics, and  those for 2004 when the recovery from the Technology Bubble was well on its way by way of two stakes in the ground.  Note the very disappointing statistics for the four months prior to July, as we trotted down to just a 64,000 increase in June.  As I state on the Chart, and it is important to repeat myself in the assessment, my conclusions were startling looking  ahead:

When the number of hits on my blog are less in the United States than the rest of the world I can tell that investors are taking vacations and given up on this market until there is some exciting news one way or another to wake them up.  I say be patient as you have only ten more days to wait for fresh NEWS to jolt this market one way or another:

Still, my friends in Singapore, United Kingdom, Switzerland and Canada top the list from abroad this morning, so here is a mid week assessment of where we stand:

Here is an updated picture for the last week on %B for the S&P 1500 which shows that we are dwadling around waiting for news from Draghi, Jackson Hole and the Jobs Report:

…And here is the picture for the Accumulation and Distribution statistics, which shows more of the same:

So there you have it…can’t make a silk purse out of a sow’s ear as the saying goes, but an update is always worthwhile.

Best Regards,

Ian.

It’s Thursday afternoon, the Markets are closed and there was a mild shot across the bow, so I see my followers in Australia, Canada, Belgium and Egypt to name a few along with the US Contingent who signed in today are looking for more fodder.

So here we have the latest pulse of the Market hot off the press:

If you use Think or Swim (TOS), make yourself a Template for the ten 3x and 2x Bears I use to keep me a step ahead of the game and the whole world will be your oyster.  Note that on a three month chart you will see the recent Highs back in June and they all bottomed on 8/21/2012 and have started to head up.  It’s too early to call, but at least be aware that the sell off in the Market Indexes these last couple of days and especially today have given some hope to the Bears that we have put in a Double Top.  For those of you who are NIMBLE Type 1 or 2 Traders and can sit and watch your computer all day you know how to play the game, but for those who are Type 3 & 4 Longer Term Traders and Investors this tells us when the wind is at your back or in your face.  Just look at the Whallop the Bears theoretically had in these past three months playing this game.  However, when the numbers get so high, the Bears are just itching to nibble and that is precisely what they have started to do in the hope that they have caught the bottom.  Not for the feint of heart, but these give you a feel for the way the windsock is blowing to understand fear and greed and stay on the right side of the Market:

Now let’s look at the action of these ten in Real Time today with two snapshots in time, one at 11.00am PCT and the next at the close.  All these ten bears were positive and had a respectable day.  The Tables are in Rank order, so the two charts are not aligned…anyway you get the idea:

So now we are closing in on “Crunch Time”, with the Jobs Report only two weeks away.  The buzz in this neck of the woods is that Helicopter Ben is ready to drop leaflets again if need be, but I am sure the FED will wait to see if the report is good or dismal:

I hope you enjoyed this update hot off the press.

Best Regards,

Ian

We were spoiled with two solid weeks of the London Olympics, while the stock market has been slowly but surely inching up to the point that Double Tops are now in sight:

We now have all eight market Indexes in a tight channel, with even the Small Caps showing a burst of speed:

…And here are the High, Middle and Low Road Scenarios for the Nasdaq.  There is strong support at 2875 so if there is any untoward problem and the markets trundle down, that area should provide the stability, and if not run for the hills:

I haven’t used this chart for sometime, but there is a tremendous amount of information relating to Fear and Greed and I will always be indebted to my good friend Pat Turner for her thinking in depicting the ebb and flow of the Market, and in this case the S&P 1500.  Given that we have 12 years of history for this particular view, the colors of light, medium and dark green or rose represent 1, 2, and 3 standard deviations from the average.  In addition she painted the two extreme buckets with Pink to emphasize when the markets are either oversold or overbought.  I have been able to milk this view further by noting the statistics for the peaks and troughs. I am sure some of you remember that once a Peak is reached and expecially one as significant as 37% in Bucket >1.0 on 07/12/2012, it pays to start a count of “Twelve drummers drumming” and invariably within 12 to 15 Days the market will have drifted into a correction.  You can take that Rule of Thumb to the Bank!

Here is another one of Pat Turner’s Priceless Charts, which opened up a whole new vista for my work on which I continue to build.  As a result, I have recently been recognized for my work by the Market Technicians Association (MTA) in their August Newsletter.  I am indebted to Chris Wilson, who is a member of this group and a strong supporter of HGSI, and who won an auction and gave me the opportunity to have a luncheon with John Bollinger all of 5 Years ago. My sincere thanks to Michael Carr for spending countless hours developing the story of my contribution to you.  Through Chris’ generosity I have built a friendship with John who pays me the tribute of revitalizing his work with several new BB Indicators.  What goes around, comes around.

At times like these when there is a noticeable shift in the Market from Bearish to Bullish, I find that one of the clues is to examine the Bollinger Bands %B and Bandwidth using a composite Index of 2x and 3x Bear ETFs.  It stands to reason those who use these instruments are quick on the trigger to either pounce in with both feet or run for the hills when they smell trouble as is apparent in the following chart.  That should give us a clue as to which way the wind is blowing:

Now let’s turn our attention to the Accumulation and Distribution of the over 6620 stocks in the Database with a price over $5.  As I will show in the next three charts that Ratio of those stocks under Accumulation to Distribution is not as strong as we would like.  I have set another Rule of Thumb for you in that the ratio should be 3:1 or better.  Judge for yourself:

…And here is how you can get the same result using the Pie Chart Tool in HGSI:

Here are some more Internals of the Market with the % of Stocks for the Nasdaq above the 200-dma:

…And here is a chart of the McClellan  Osc. and Summation Index which shows we have a reprieve:

Finally, make sure to have a copy of this chart by your side in two plus weeks time, as we will be staring at the Jobs Report and you know how that goes when it is good or bad.  I have done my usual trick of taking a snippet from the past to show what would seem to be reasonable for the next three months:

Thanks to all of you who give me feedback and encouragement in putting these Blog Notes out…it does wonders to keep me going as I am sure you can see the work that goes into one of these.  Thanks also to the worldwide audience which is growing all over the world…let’s hear from you in the comments section at the bottom of this note.

Best Regards,

Ian