It's similar a shot been precisely 8 weeks since the marketplace position topped out, dorsum inwards the tertiary calendar week of September...
The marketplace position has been rather tricky to merchandise lately but it's becoming increasingly clear to me why that's been the case. The markets are commonly most volatile in addition to challenging to merchandise at major turning points every bit the residuum of ability tardily shifts from the "old guard" to the "new guard" .....
Picture a gigantic cargo tanker ship doing a 180 grade plough inwards the middle of the ocean....
These "major marketplace position turning points" takes fourth dimension in addition to crusade to attain in addition to along the path, there's going to live a lot of savage battles ardently fought out betwixt the bulls in addition to bears, each side fighting it out for every twist in addition to turn, back upward in addition to resistance levels on the charts....
but later a petty while, you lot accept a pace dorsum in addition to expect at the nautical chart action, a to a greater extent than clear moving-picture demo starts to emerge of what's happening....
I shout upward nosotros are at major crossroads hither in addition to i discovery this extremely fascinating since it's been over ix years since the "FED induced" bull marketplace position was born inwards March 2009.... in addition to similar a shot the FED seems intent on reversing their course.
H5N1 famous hedge fund legend from the 1980s, Marty Zweig was famous for saying: "follow the fed".
In my humblest of opinions, I believe we're inwards the early on phases of a send marketplace position here...
Now, send markets come upward inwards all sorts of shapes in addition to sizes, approximately are swift in addition to dramatic in addition to approximately are of the irksome motion downwards grinding, "Chinese H2O torture" types.
Will this 1 live approximately other 2008?! I lead maintain NO IDEA!... nobody knows! Nobody tin tell you lot alongside absolute certainty how far downwards nosotros go? or how long it lasts?
All this volition live known inwards hindsight in 1 lawsuit nosotros expect dorsum on it!
Having said that, every bit traders, nosotros practise non tending almost terminology... The actual terms "bear market" or "bull market" isn't of import since nosotros alone tending almost trading toll action, upward or down... all nosotros desire is a tendency to trade. In an up-trending market, most of your trades in addition to gains volition most probable live focused on the LONG side in addition to inwards down-trending markets, most of your trades in addition to gains volition live focused on the SHORT side.
**Expect to run into to a greater extent than in addition to to a greater extent than AOT merchandise alerts beingness made inwards ETFs(such every bit that XLE brusque nosotros made before this calendar week for example).
At whatever rate, these are just approximately quick thoughts on the electrical flow marketplace position atmospheric condition I've seen upward to similar a shot in addition to if proven incorrect downwards the route that this recent big pullback ends upward simply beingness a bull marketplace position correction in addition to the bull marketplace position resumes downwards the road, sure the charts volition Pb us downwards that path in addition to we'll shuffle our feet to readjust!
Trade the charts, non opinions!
So the primary exercise behind this weekend postal service was to hash out how come upward despite the big pullback inwards the final calendar week or two, why is it that the NYMO(NYSE McClellan Oscillator) is nowhere close oversold?! The Dow Jones fell almost 1,200 points this week, the Nasdaq fell almost 4.5%!!
So how is it that the NYMO in addition to NAMO are yet stuck inwards "neutral" in addition to non closer to "oversold levels"?!
Now, that's a GREAT QUESTION! Does the NYMO function inwards bearish markets?!
The response is YES!! NYMO does function in addition to plant good actually!
However, since the record has turned decisively to a greater extent than bearish, nosotros postulate to expect at the NYMO(or NAMO) inwards a slightly unlike angle.
As far every bit I'm concerned, the to a greater extent than meaningful signals we're going to teach from the the McClellan Oscillators isn't necessarily from looking for "oversold" readings to overstep away long, similar nosotros did during the final 8 to ix twelvemonth bull market..... inwards bearish tapes, the to a greater extent than meaningful signals volition most probable come upward when the NYMO overshoots into "over-bought" territory in addition to thence starting fourth dimension looking to growth SHORT positions. That's when this tool is going to overstep away quite useful. Just similar what nosotros saw inwards belatedly Nov during that rattling potent marketplace position bounce in addition to the NYMO went into "extreme overbought" territory in addition to nosotros started to expect for brusque positions accordingly.
As you lot tin clearly run into inwards the inwards a higher house NYMO/NAMO charts, the marketplace position has pulled dorsum quite aggressively e'er since early on Nov every bit the bears reasserted their say-so since that "extreme over-bought" signal.
Now, that doesn't hateful that we're non going to teach approximately useful signals when the NYMO teach into "oversold" but since the record has turned decisively bearish, the improve signals volition lead maintain to come upward on the rare occasions when the NYMO in addition to NAMO teach into "extreme oversold" in addition to so starting fourth dimension looking for hints of a snap dorsum bounce(short crush rally)....
The NYMO mightiness non teach into extreme oversold often, fifty-fifty though, the marketplace position tin in addition to and has gone downwards big for multiple days inwards a row.
H5N1 peachy representative of this phenomenon took house this calendar week actually!! The markets took a BIG hitting this week, Dow Jones fell almost 1200 points, Nasdaq fell almost 4.5% yet the NYMO in addition to NAMO remained inwards neutral in addition to barely budged?! Weird huh?
This happens for TWO reasons, inwards my humble opinion...
1: This bearish tendency is taking house via ROTATION. So basically the exact contrary of the phenomena nosotros witnessed that kept the bull marketplace position going potent for ix years, sector ROTATION! So for example, Energy sector tanks yet the Semis bounce. The Financials accept a hitting 1 twenty-four hours piece Retail sector rallies.... it is this type of activeness that makes the marketplace position overstep away downwards without affecting the NYMO much. The NYMO volition commonly brand a fabric displace 1 means or the other when nosotros starting fourth dimension seeing BROAD BASED moves inwards 1 direction but manifestly when the selloffs are happening inwards a ROTATIONAL manner, the wide based aren't taking place... it is this rattling phenomenon that kept the bull marketplace position running, STRAIGHT UP for many years in addition to that's what's made the marketplace position so impossible to brusque inwards whatever consistent fashion inwards the final few years!
We are similar a shot witnessing ROTATION type selling, organized, controlled selling(distribution basically) without seeing much panic inwards terms of big mega spikes inwards the VIX(fear gauge).... it is this type of "controlled selling" that makes me shout upward that nosotros are for a prolonged pullback inwards the stock markets.
2: And this minute point, just comes from years in addition to years of watching the record in addition to seeing multiple bull in addition to send markets through out the years... I lead maintain been telling AOT members inwards the somebody twitter that "in potent downtrends, the bulls command the opened upward but the bears command the close" .... in addition to this calendar week was a perfect illustration of this!
Notice inwards the inwards a higher house chart, the five day, intra-day charts of the SPY... notice how the marketplace position does NOT overstep away direct DOWN.... (if it did overstep away STRAIGHT DOWN, that's when the NYMO is most probable to teach into "oversold" territory)... instead what nosotros run into is the marketplace position makes early on morn or mid-day bounces, the marketplace position makes these almost misfortunate attempts at rallies/bounces, commonly at the opened upward via a big gap upward or early on morn bounces but most of the time, these weak bounces halt upward dumping difficult into the close..... these weak bounces inwards downtrends, alone assist to salve oversold atmospheric condition from the previous bout of selling which alone helps the bears sink their teeth inwards deeper just a petty to a greater extent than each time...
It is these weak bounces that allows for the "controlled selling" to accept place... these bounces volition frequently brand traders believe that the marketplace position is bottoming which sucks inwards longs alone to clit the carpet from underneath them in addition to leaves them sitting on failed long positions.
All that small-scale these small-scale intra-day bounces halt upward doing is assist salve "oversold" atmospheric condition just plenty from the previous bout of selling before stock prices curl over to the downside again... it is literally the EXACT OPPOSITE of what nosotros witnessed during the +9 twelvemonth mega bull market. We are similar a shot seeing this hap on downside. If you lot literally flip your charts upside down, it volition live every bit clear every bit twenty-four hours light!
This "controlled selling" phenomenon was introduce during the 2007 marketplace position top in addition to thru out the 2008 vicious send marketplace position every bit well... the NYMO alone got into "extreme oversold" alone 2 or three times inwards 2008!!
Important to emphasize, that this does NOT hateful we're inwards for approximately other 2008!! I'm non claiming this at all! But nosotros appear to live inwards approximately form of a deeper and/or perchance fifty-fifty longer stock marketplace position correction stage than we've come upward to teach used to inwards recent years. Trading opportunities, on long side in addition to brusque side volition live abundant in addition to many opportunities volition live created for traders in addition to investors of all sorts inwards due time!
I promise you lot constitute this postal service helpful!
Happy trading!
