Ian Woodward's Investing Blog

We have Reversal Days and Distribution Days, but the Stock Market Indexes keep climbing up a Wall of Fear:

So let’s see if we can disect which way the wind is blowing by using John Bollinger’s %B and also the excellent insight we can get using HGSI and Edgerater for the Internals of the Market with the % Ratio of Stocks in the S&P 1500 above and below %B of 0.5, the Middle Bollinger Band:

The Simple Steps in the Process are:

1.  When the Ratio falls below 70:30 “Get Ready” and

2.  When it goes to 65:35 “Get Set” and if

3.  It skips buckets with a Phoenix and a Kahuna to the Downside with a 45:55 ratio “you’re outta here, but too late!” 

However, %B for the Indexes themselves have a big cushion now, ranging from .82 to .94.  Watch out as they lose strength to 0.7, and then below 0.5.

You have seen past examples of the following chart, which show a “scrunched view” for the %B Buckets for the Nasdaq 100, the S&P 100 and the S&P 1500:

Back on 11/04, the ones to watch were the S&P 100 & S&P 1500;  Note that on 11/11/2007 the S&P 100 gave the early warning sign and had reversed the next day…eight days from Top.  Note how 11/12 saw the tide turn and you had at least two days to be “outta here”!

Now it is the Nasdaq 100’s turn. We are in Day 4.  Note the readings of 82, 76 and 83 on 12/7 says the Market Indexes are in the Safe Zone.  Begin to worry when they come down to 70:30, and for sure when you see it at 65:35.

The Nasdaq 100 Index is the current leader and naturally fat with profits:

Start Counting “Twelve Drummer’s Drumming” from the day after 12/2/2010.  We are currently in day 4, and have eight more days of cloth.

One of two Scenarios will tell us what’s happening:

1.   Column M rises again to solid “green numbers” of 12 or higher…All’s well, or

2.   Column “I” moves up to >17 and “O” and “P” move down to < 65:35 and we are about to cave in, or will have done so already.  It’s not difficult to follow.

With the first Scenario, if we get above 30 again, the rally is confirmed as still very strong and we start a fresh count as explained above.

With the second Scenario, here is a template of what one might expect and still have time for a Santa Claus Rally, though the Moose Dropping will be very apparent:

There you have it.  Best Regards, Ian.

We have had two weeks of Stalemate as I mentioned in my blog of November 21st, but the last three days Rudolf has led Santa out of the Fog…for now!

Here is the Stalemate I showed you as we “Paused to Refresh” these last two weeks:

However, we have broken out of the Fog these last three days and are cranking up:

The new lesson is to understand “Ebb-Tide” for the to and fro of the Market:

Here is the usual chart which shows the progress in the last 14 Weeks:

This next slide should stiffen up your backbone that two Eurekas this week always help to drive the momentum with 393 stocks in the top bucket >1.0 for the S&P 1500:

…And this should confirm that you should sharpen your pencil for the upside:

Here are the Market Index Stats for %B in buckets as of yesterday, December 3rd:

For you lucky people who have Edgerater, here is my Santa Claus Present for you:

Let’s try again outside the picture: http://www.edgerater.com     When you are done here…you won’t regret it.

And Finally, here is a snippet from Ron Brown’s musings which sums up the whole picture for why we are at where we are.  Please get his weekly movie at the highgrowthstock.com website for a detailed review using HGSI software:

You can tell the holiday spirit is already at this house.  Have fun, Ian.

The Stock Market had a great day before Thanksgiving, but then the expected follow through fizzled badly on the day after, so we are still stuck in no man’s land with a slight bias in favor of the Bears.  The Grinch hit hard on Friday and hammered the OEX, the S&P 100, as I will show you later.

We have tracked this strong rally ever since the Hindenburg Omen scare back in mid and late August, and now that all of the kerfuffle is behind us I showed you three possible scanarios last week.  We sit 50 trading days up from the low with a couple of weeks “Pause to Refresh”:

When we had that extraordinary jump in %B >1.0 for the S&P 1500 where we clocked up 1.25 with 570 stocks, I suggested that we had within 12 Days to see a turn down and I am glad to say that yardstick seems to work quite well:

Grandma’s Pies are sitting at almost equilibrium and we really need a strong push this coming week to drive the market into a strong rally.  The Bulls are hoping that the Black Friday results for Retail Shopping will give the market the thrust it needs, but the dark clouds from the North and South Korea skirmish is hanging over the market’s head:

…And the Inverse ETFs also show that the Bears have the upper hand at the moment:

The S&P 100 (OEX) was hammered last week and is the weakest of all the Major Market Indexes except for the Dow Industrials as you will see below:

Here is the overall performance for the ten Market Indexes shown and one can immediately see that the Small Caps led the way:

So there you have it.  We should soon see if we have a Santa Rally or continue down before we have a move to the upside.

Best Regards, Ian.

It is our tradition to Wish You and Yours a Happy Thanksgiving from the HGS Investor’s Team, and we hope you have a joyous time with your family and friends around you this coming week.

This next chart reminds you that we are at a Stalemate with a slight positive bias in favor of the Bulls:

I have taken a shot at three possible outcomes for the High, Middle and Low Road Scenarios and we shall see which one the Market actually takes next week and a few weeks after, going into the Santa Claus Rally.  I remind you that on past occasions Santa has suffered from Moose Droppings, so don’t count your chickens before they are hatched:

The High Road Scenario:  Having had a couple of shakey weeks, the Bulls come roaring back and drives for a strong rally right into the end of the year using this time last year as a Template!

The Middle Road Scenario:  This suggests that we have a good week next week, but the Bears take another pot shot at driving the market down into early December, before the Market picks up again going into the New Year:

The Low Road Scenario:  The Grinch visits us early and not only spoils the traditional rise during Thanksgiving week, but also dampens most of the Santa Claus Rally, before giving some relief going into the New Year:

…And here is a reminder from an old chart I have that suggests that both Thanksgiving and New Year’s are the strongest weeks of the holidays as shown below:

Let’s keep our finger’s crossed and hope we can go out the year with a renewal of this long rally which we have enjoyed for the past twelve weeks. 

Best Regards, Ian.

Given today’s statistics, you may be able to ride this Market both ways.  We are at a stalemate, but the Bulls can thank the four leaf clover gift from GM’s IPO and the Bailout of Ireland.  So we are back to Snakes and Ladders:

The strong Bounce today gave the Bulls some breathing room with many Market Indexes showing Kahunas to the upside, which translated says that they had a 1-Day Change in %B of >=0.24.  It now puts the S&P 1500 in the balance at a %B of 0.52:

The  S&P 1500 %B stocks above 0.5 was as low as 33.9% yesterday and potentially heading down to below 20%, but snapped back to 52.2%:

…And here’s the picture that shows both sides of the coin.  We are stuck in Limbo, but the Bulls are grateful to have that going into tomorrow:

As you would expect Grandma’s Pies offer a balanced taste between Sweet and Tart, but markedly improved from yesterday:

Likewise, the Inverted ETFs which were going full bore yesterday are now back to just holding the upper hand:

Tomorrow we have Options Expiration, so expect Volatility.  The action tomorrow will be key to whether this Rally can recover or flop.

Best Regards, Ian.