Ian Woodward's Investing Blog

I’m busy writing the Newsletter for August which will be out tomorrow, and I thought you would like a preview of the Overview:

Overview:

 This Month’s Picture suggests that the Bulls are enjoying a little breeze to the upside despite the Market Indexes see-sawing every five days or so, on the Middle Road Scenario.  The respectable Jobs Report which met expectations kept the Markets up, though the RUT and S&P 600 Small Cap Stocks are lagging with Death Crosses looming. The ordinary investor has toddled off into the sunset to enjoy Graduations, Weddings and Vacations as overall volume has been dismal.  Hence the Low Volume has played right into the hands of the HFTs and they are having fun at our expense.

Besides discussing the High and Low Road Scenarios, my theme for this month is to respond to a set of stocks selected by a supporter to show points of view as to stock selection and timing entry.  Ron has focused on how we can combine multiple indicators to screen for stocks, ETFs or indexes.  These indicators include the Bongo Daily and Weekly, the DI+/DI- and ADX directional movement indicators, and the Force Indexes. The Round Table discussion is on Thursday, 16^thAugust at 4.30pm EST, where we will as usual expand on the ideas in the newsletter.

We look forward to seeing our faithful supporters at the Seminar on October 27 to 29 at the Palos Verdes Library and as always we will have fresh material to cover as we again raise the bar.  The Block Rate at the Courtyard Marriott has been raised $10 by them to $89/night, plus the usual Tax which in essence takes us to around $100/night.  Details are in the Newsletter.

Best Regards,

Ian.

Can you believe the two-day turn up for the books on Thursday and Friday of last week to raise the hopes of the Bulls that there is enough momentum to lift this Stock Market out of the doldrums. Make no mistake about it this was a strong rebound as I will demonstrate in the ensuing charts. However, we are still suffering from a chop-chop market:

Prior to the last two days we were in danger of heading down to break the 50-dma on all the Market Indexes, and although we have two Indexes with Death Crosses where the 50-dma comes down through the 200-dma, we now have a whiff of all Markets with their 50-dma turned slightly up:

This See-Saw Market now has a pattern to it which is five days up and down (between friends) for the past five weeks with little progress to the upside:

However, with two explosive moves upwards on Thursday and more especially on Friday where we had a Strong Eureka, the Bulls can now hope that they can once again get the Nasdaq above 3000 and close the gap as shown by August 2nd.  Don’t tell me you have forgotten the significance of August 2nd?…Be Prepared for the Jobs Report on August 3rd.  At least the European Central Bank president, Mario Draghi, turned the market upwards with his assurances to preserve the Euro.

This two day upward thrust of 2 Buckets and then 3 Buckets up has put a whole new compexion on the momentum of the market.  We must now wait and see if it was yet another flash in the pan of supposedly good news or whether we fall back once again into the doldrums:

Reviewing past history shows that the move on Friday to jump from 6% on Thursday in Bucket >1.0 to 17% was no mean feat and was similar in momentum to back in March of 2003!  We must also note that the %B for the S&P 1500 is now at 0.98, whereas the % of Stocks above 0.5 is only 0.59, a difference of 0.39.  This suggests that we are truly overbought in the Leaders, and we either amble around here for the rest of the pack to catch up or we slide down into the doldrums once again.  I have my dear friend Pat Turner to thank for the concepts displayed above and below:

Note also the 1-day change in the Pie Chart and especially the one day jump from ~6% to 17% in Bucket >1.0, which is not to be sneezed at:

Now here is a New Chart to get your arms around.  It shows the DIFFERENCE between %B for the S&P 1500 Market Index and the % of S&P 1500 Stocks >0.5.  You will note that it jumped from 15.95% to 38.73% in one day.  Note that we are now in nosebleed territory and it is most likely there will be a correction and then hope that the Index itself will go higher.

Three Cheers for my good friend Dr. Robert Minkowsky who has turned up trumps once again to give us a more rounded feel for what is transpiring in the Internals of the Market Indexes and specifically the Small Cap Russell 2000 (RUT) within itself and then compared to the Large Cap Nasdaq 100 (NDX).  The pictures are for Acc/Dist, %B ><0.5, %>< 20-dma and %>< 200-dma.  Note the Dump, Pump, Dump cycle we have been in since last May:

My good friend Maynard is holding his Monthly Group Meeting this coming Wednesday and I hope they will chew the fat on all of the above and especially my sense of the projected High and Low Road Scenarios to come.  This anticipates two conditions I gave you in my last blog note on the Jobs Report due this Friday, which I hope you have pinned to your desktop:

In a nutshell, the Jobs Report had better be good at >150,000 or so and not <80,000 for the gurus to get excited to the upside!

I hope you are all enjoying the London Olympics.

Best Regards,

Ian.

The six-month meeting between the Fed Chairman and Congress ended in Finger Pointing both ways while Helicopter Ben indicated concern that we risk going over a massive financial cliff.  If it is that massive then there is no prettier cliff than the White Cliffs of Dover, so I couldn’t resist thinking back to my youth and singing the song which I am sure you all know:

So What you ask?  Given what we have put up with these past few months and especially this last few weeks, I offer you a suggestion which it seems that most of you have already done and that is stay away from this “Cut you to Ribbons” Market.

…And yet, in all this turmoil, the only signs of volatility is intra-day as the VIX is very quiet…so that confirms that the High Frequency Traders (HFTs) are making hay while the sun shines:

You are well familiar with this picture and the only good thing is that the Market is going up through all the see-saw we have put up with:

The only ray of Hope that this market will climb a wall of fear is the folklore of the 4th year of the Presidential Cycle:

Keep an eye out for August 3rd…the Next Jobs Report must be golden or we hit the skids one more time:

I mentioned on the recent Blog Notes that the best early clue for knowing for sure which way the wind is blowing is to track the %B for 2x & 3x Bear ETFs, and this has proved to be a valuable tool.  We can see that the Bears have been losing ground for the last month.  The other value is to understand very near term volatility and whether we have a calm and stable market or one in oscillation.  The over exaggerated moves in %B give us that clue!  We want to see %B below the Bandwidth (red line) and relatively quiet as seen in the middle of the chart and not a yin-yang up and down as on the right hand side, which is a nightmare.

So What is the Near Term Bias based on %B with the S&P 1500 and then with Accumulation/Distribution?  Both are very positive, but play it close to your vest:

Well there you have it…Keep your powder dry and pick your spots, but be nimble.

Best Regards,

Ian.

I can tell that my good friend Kevin sitting in Qatar is biting his finger nails along with his friends wondering what the latest pulse of the Market is?  I am feverishly working on the Monthly Newsletter but felt I would give you the Overview to ponder over until this next few days are behind us.  The Bottom Line is “This Market has Nasal Catarrh!”

Overview: 

This Month’s Picture not only implies that we are marking time and in Stalemate, with the Market Indexes moving sideways on the Middle Road Scenario, but also the only ones making money are the High Frequency Traders (HFTs).  The rotten Jobs Report only exacerbated the tepid Yo-Yo Rally we have had this past month and two of the Market Indexes, the NYA and RUT are flirting with Death Crosses, while five of the six are sitting around the 50-dma.  Add to this the latest scandals with the Libor mumbo jumbo, it is no wonder that the ordinary investor has toddled off into the sunset to enjoy Graduations, Weddings and Vacations.  Hence the Low Volume has played right into the hands of the HFTs and they are having major fun at our expense.

Besides discussing the High and Low Road Scenarios, the theme for this month is to take stock of the recent statistics for Gains and Losses in Rallies and Corrections since March of 2009 and to confirm Rules of Thumb.  Ron continues to squeeze the most out of the HGS Investor Software by evaluating Major Industry Groups that are out-performing the Major Market Indexes and then shows how to ferret down into the Leading Stocks in those Leading Groups.

The Round Table discussion is on Monday, 16^thJuly at 4.30pm EST.   If you like what you see on this Blog, sign up for the Newsletter now when you will also have access to the Round table for Free.

http://www.highgrowthstock.com/Newsletter/newsletter.htm

We look forward to seeing our faithful supporters on October 27 to 29 at the Palos Verdes Library and as always we will have fresh material to cover as we again raise the bar.

Best Regards,

Ian

Stocks plunged on Wall Street Friday after the U.S. Gov’t reported that only 80,000 jobs were created in June, the third straight month of weak hiring.  In my Blog Note of June 10th I warned that the market swooned on the day of the Jobs Report and to watch out for this one which went true to form with yet another see-saw:

We had four strong up days to blunt the Low Road Scenario of a possible Death Cross, but then ran into a buzz saw with the rotten jobs report, having hit the Overhead Resistance I had cautioned you all about:

As a consequence, the Small Cap Russell 2000 (RUT) stocks are leading the way and the Large Caps got whacked as shown by the Accumulation/Distribution Charts my good friend Dr. Robert Minkowsky shared with me:

Here are the ups and downs we have tolerated these last three and a half months for the S&P 1500, and as usual a worthwhile nugget to remember is that when the Market Corrects more than 10% you can certainly expect three Fakeys before the Market will attemp a decent Bounce Play, if not a full new Rally:

We are now out of an Overbought situation and lost a bucket to the downside in one day on Friday, which frankly is far less damage done than I would have expected given the big drop in all the Indexes:

As I reminded you back on June 10th that you should expect another knee jerk for the July Jobs Report and true to form we had another rotten day.  I have plucked that chart along with my new comments in red on the chart below followed by the results since then on the following chart:

As I mentioned we did not have as severe a move down and the Bears have had the wind taken out of their sails.  Compare the action in Kahunas on the left hand side of the next chart on previous Jobs Reports to see why I say that:

So What?  At least the internals are not anywhere near as bad as previous Jobs Reports and the Bulls still have control to arrest the rotten day on Friday and attempt to push up through all that overhead supply I showed you earlier.  It is such a tricky market that Day Traders can have a feast if they are nimble.

Best Regards,

Ian.