The Long-Term Trader

Each weekend, I study market behavior using sentiment and technical indicators. My goal is to use clues, observation, and indicators to analyze underlying market conditions. If you can determine the current market environment, it may help you to create profitable trading strategies.

RELEASED: Understanding Options (McGraw-Hill, 2E), Understanding Stocks (McGraw-Hill, 2E), Start Day Trading Now (Adams Media), and Predict the Next Bull or Bear Market and Win (Adams Media): http://bit.ly/1bl0ZNk

My latest book (eBook) has been released: Prepare Now and Survive the Coming Bear Market. Amazon: http://goo.gl/2wWC8X Nook: http://goo.gl/VQstmr  Smashwords: http://goo.gl/eBpYBT 

 

AAII survey (4/15/2015)

32.1% Bullish. 45.1% Neutral. 22.8% Bearish. 

Bearish: If sentiment is over 50% bullish.

Bullish: If sentiment is over 50% bearish.

 

Investors Intelligence (4/14/2015)

50.5% Bullish.  13.9% Bearish.

Bearish: If sentiment is over 60% bullish. ( Note: Percent of bears is still at historic lows. 13.3 % is the 1987 low.)

Bullish: If sentiment is over 60% bearish.

 

VIX: 13.89 (on 4/17/2015)

Bearish: Less than or near 12.

Bullish: Greater than or near 40.

 

RSI (S&P 500): RSI is at 48.88 (on 4/17/2015)

Overbought (i.e. Bearish): When RSI rises to 70 or above.

Oversold (i.e. Bullish): When RSI falls to 30 or below.

Note: RSI can remain overbought or oversold for extended time periods.

 

Moving Averages (daily): The S&P is below its 50-day moving averages and pointing down

Bearish (Short-term Downtrend): Index crosses under 50-day, 100-day, or 200-day MA.

Bullish (Short-term Uptrend): Index crosses over 50-day, 100-day, and 200-day MA.

 

MACD (S&P 500): MACD is above its zero line and slightly above its red 9-day signal line. (Note: I’m using the settings, 19,39,9, recommended by Gerald Appel, MACD’s creator.)

Bearish: MACD line crosses below 9-day (red or gray) signal line. MACD line (black line) crosses below zero line.

Bullish: MACD line crosses above zero line. MACD line crosses above 9-day signal line. 

 

Bonds: U.S. 10-year yield is at 1.85% (on 4/17/2015).

Note: 3.0% or higher is significant (consider selling bond funds as yield rises). 3.5% or higher and risk increases (for bondholders). Note: Bonds keep rallying. 

 

Analysis and Opinion will be posted on Sunday night after 9:00 p.m. ET. 

Each weekend, I study market behavior using sentiment and technical indicators. My goal is to use clues, observation, and indicators to analyze underlying market conditions. If you can determine the current market environment, it may help you to create profitable trading strategies.

RELEASED: Understanding Options (McGraw-Hill, 2E), Understanding Stocks (McGraw-Hill, 2E), Start Day Trading Now (Adams Media), and Predict the Next Bull or Bear Market and Win (Adams Media): http://bit.ly/1bl0ZNk

My latest book (eBook) has been released: Prepare Now and Survive the Coming Bear Market. Amazon: http://goo.gl/2wWC8X Nook: http://goo.gl/VQstmr  Smashwords: http://goo.gl/eBpYBT 

My latest MarketWatch column (4/6/2015): http://goo.gl/85ErSa

 

AAII survey (4/8/2015)

28.7% Bullish. 47.2% Neutral. 32.0% Bearish. 

Bearish: If sentiment is over 50% bullish.

Bullish: If sentiment is over 50% bearish.

 

Investors Intelligence (4/7/2015)

50.4% Bullish.  14.2% Bearish.

Bearish: If sentiment is over 60% bullish. ( Note: Percent of bears is still at historic lows. 13.3 % is the 1987 low.)

Bullish: If sentiment is over 60% bearish.

 

VIX: 12.58 (on 4/10/2015)

Bearish: Less than or near 12.

Bullish: Greater than or near 40.

 

RSI (S&P 500): RSI is at 57.20 (on 4/10/2015)

Overbought (i.e. Bearish): When RSI rises to 70 or above.

Oversold (i.e. Bullish): When RSI falls to 30 or below.

Note: RSI can remain overbought or oversold for extended time periods.

 

Moving Averages (daily): The S&P is above its 50-, 100-, and 200-day moving averages and pointing up

Bearish (Short-term Downtrend): Index crosses under 50-day, 100-day, or 200-day MA.

Bullish (Short-term Uptrend): Index crosses over 50-day, 100-day, and 200-day MA.

 

MACD (S&P 500): MACD is above its zero line but even with its red 9-day signal line. (Note: I’m using the settings, 19,39,9, recommended by Gerald Appel, MACD’s creator.)

Bearish: MACD line crosses below 9-day (red or gray) signal line. MACD line (black line) crosses below zero line.

Bullish: MACD line crosses above zero line. MACD line crosses above 9-day signal line. 

 

Bonds: U.S. 10-year yield is at 1.95% (on 4/10/2015).

Note: 3.0% or higher is significant (consider selling bond funds as yield rises). 3.5% or higher and risk increases (for bondholders). 

 

Analysis: The VIX got frothier but sentiment surveys pulled back a little. The trend is up based on moving averages, and although the market showed topping behavior, it rallied to 2100 on the S&P and over 18,000 on the Dow. We’ve been here before. Perhaps we’ll soon see what this market is really made of. If it’s a strong bull market, it should climb higher. If it’s in the danger zone, it will retreat once again. It’s impossible to predict which way the market will go this week.

Opinion: Although I still believe the market is in the danger zone and that it will end badly, I cannot predict when this will happen. It was interesting to read that many influential and successful investors and traders have been warning of a market correction or crash. I might have been early but it’s good to know that others see many of the same red flags. 

A few who have given recent warnings include legendary hedge fund manager Julian Robertson, former CEO of Pimco Mohamed El-Erian, hedge fund billionaire Paul Tudor Jones, hedge fund manager Andy Redleaf, billionaire investor Carl Icahn, billionaire investor Sam Zell, hedge fund manager Cripsin Odey, and famed money manager Stan Druckenmiller (who has been warning of a financial catastrophe for a while).

Thanks to the Zero Hedge website, we have the fascinating transcript of Druckenmiller’s speech to the Lone Tree Club in North Palm Beach, Florida. Below is the shortened version, but the full transcript appears at the end of the webpage. Druckenmiller is warning of a huge correction, although he is not shorting (in January). Why not? Because he can’t predict when the wheels are going to fall off, but he knows they will.

Here is the shortened transcript (1/18/2015):

http://goo.gl/m8MYgO

It could be two months, a year, or even longer when the markets unravel, and when they do, it will catch most investors by surprise. I personally believe we are closer to a correction than not, but it’s best to watch and wait for stronger signals. Right now, the market is vulnerable to selling pressure but it will take an unknown catalyst to cause most investors to pull the sell lever. At the moment, investors are blissfully making money without a care in the world. As you know from studying market history, that is exactly when you should be most on guard.

I personally sleep very well at night knowing I am not buying into this market at all-time highs. Nevertheless, it’s not easy being on the sidelines while others are making money (especially if you are managing money for impatient clients). 

Bottom line: Let’s see how the indexes perform this week, and if they can surpass their all-time highs. I am looking to see if 2100 holds on the S&P 500. 

Each weekend, I study market behavior using sentiment and technical indicators. My goal is to use clues, observation, and indicators to analyze underlying market conditions. If you can determine the current market environment, it may help you to create profitable trading strategies.

RELEASED: Understanding Options (McGraw-Hill, 2E), Understanding Stocks (McGraw-Hill, 2E), Start Day Trading Now (Adams Media), and Predict the Next Bull or Bear Market and Win (Adams Media): http://bit.ly/1bl0ZNk

My latest book (eBook) has been released: Prepare Now and Survive the Coming Bear Market. Amazon: http://goo.gl/2wWC8X Nook: http://goo.gl/VQstmr  Smashwords: http://goo.gl/eBpYBT 

My latest MarketWatch column (4/6/2015): http://goo.gl/85ErSa

 

AAII survey (4/1/2015)

35.4% Bullish. 32.0% Bearish. 

Bearish: If sentiment is over 50% bullish.

Bullish: If sentiment is over 50% bearish.

 

Investors Intelligence (3/31/2015)

54.5% Bullish.  14.2% Bearish.

Bearish: If sentiment is over 60% bullish. ( Note: Percent of bears is still at historic lows. 13.3 % is the 1987 low.)

Bullish: If sentiment is over 60% bearish.

 

VIX: 14.67 (on 4/3/2015)

Bearish: Less than or near 12.

Bullish: Greater than or near 40.

 

RSI (S&P 500): RSI is at 47.48 (on 4/3/2015)

Overbought (i.e. Bearish): When RSI rises to 70 or above.

Oversold (i.e. Bullish): When RSI falls to 30 or below.

Note: RSI can remain overbought or oversold for extended time periods.

 

Moving Averages (daily): The S&P is slightly below its 50-day moving average and slightly above its 100-day moving average. 

Bearish (Short-term Downtrend): Index crosses under 50-day, 100-day, or 200-day MA.

Bullish (Short-term Uptrend): Index crosses over 50-day, 100-day, and 200-day MA.

 

MACD (S&P 500): MACD is above its zero line but below its red 9-day signal line and pointing down. (Note: I’m using the settings, 19,39,9, recommended by Gerald Appel, MACD’s creator.)

Bearish: MACD line crosses below 9-day (red or gray) signal line. MACD line (black line) crosses below zero line.

Bullish: MACD line crosses above zero line. MACD line crosses above 9-day signal line. 

 

Bonds: U.S. 10-year yield is at 1.90% (on 4/3/2015). Note: Bonds continue to party. 

Note: 3.0% or higher is significant (consider selling bond funds as yield rises). 3.5% or higher and risk increases (for bondholders). 

 

Analysis: At first glance, the clues and indicators appear to be neutral. On the other hand, because of the poor jobs numbers on Friday, the futures are pointing down, which could lead to an ugly week. In addition, a Bankrate survey came out last week, and 85% of professional Wall Street investors believe the market will be higher next year than this year. These are the type of numbers you see at market tops. In addition, according to the latest ICI numbers, investors have been panic buying equity ETFs. There was an increase of 58 billion dollars in domestic equity ETF purchases for a total of 1.28 trillion dollars. All of this tells me that professional investors are afraid of missing out of this bull market, and are pouring money into the stock market. Conclusion: Red Alert.

Opinion: I just finished a column for MarketWatch (see link above). In the column, I laid out the facts, and they are not pretty. The ugly job numbers, the high sentiment from Wall Street pros, the blowoff top on March 20, and the weak rallies all point to a rocky April.

Of course, beginning on Monday morning, a rush of buyers will enter the market and try to limit the damage. Look for how the market closes at the end of the day, and if it is on higher volume. If the market plunges on higher volume, that is a bearish sign. If not, the week might be saved. 

The longer it takes for the market to top out, the more severe the downturn. If the pros are right and the bull market still has legs, then the S&P must climb above 2100, which it hasn’t done in a while. In addition, the indexes must climb above their moving averages and stay above. We’re not seeing that right now, which is why this week is so important.

As I’ve said for months, this is the time to move some money to cash, to protect your profits, and not participate at these all-time highs (my opinion only). If the indexes could surpass the all-time highs on strong volume (and a strong NYSE Tick), I’d be impressed. So far, this hasn’t happened. No matter how much spin you hear (i.e. any pullback is a buying opportunity), be very careful this month. If I’m right, April Fool’s Day will last longer than a day.

Each weekend, I study market behavior using sentiment and technical indicators. My goal is to use clues, observation, and indicators to analyze underlying market conditions. If you can determine the current market environment, it may help you to create profitable trading strategies.

RELEASED: Understanding Options (McGraw-Hill, 2E), Understanding Stocks (McGraw-Hill, 2E), Start Day Trading Now (Adams Media), and Predict the Next Bull or Bear Market and Win (Adams Media): http://bit.ly/1bl0ZNk

My latest book (eBook) has just been released: Prepare Now and Survive the Coming Bear Market. Amazon: http://goo.gl/2wWC8X Nook: http://goo.gl/VQstmr  Smashwords: http://goo.gl/eBpYBT 

 

AAII survey (3/25/2015)

38.4% Bullish. 24.4% Bearish. 

Bearish: If sentiment is over 50% bullish.

Bullish: If sentiment is over 50% bearish.

 

Investors Intelligence (3/24/2015)

56.6% Bullish.  14.1% Bearish

Bearish: If sentiment is over 60% bullish. ( Note: Percent of bears is still at historic lows. 13.3 % is the 1987 low.)

Bullish: If sentiment is over 60% bearish.

 

VIX: 15.07 (on 3/27/2015)

Bearish: Less than or near 12.

Bullish: Greater than or near 40.

 

RSI (S&P 500): RSI is at 45.12 (on 3/27/2015)

Overbought (i.e. Bearish): When RSI rises to 70 or above.

Oversold (i.e. Bullish): When RSI falls to 30 or below.

Note: RSI can remain overbought or oversold for extended time periods.

 

Moving Averages (daily): The S&P is slightly below its 50-day moving average and slightly above its 100-day moving average. 

Bearish (Short-term Downtrend): Index crosses under 50-day, 100-day, or 200-day MA.

Bullish (Short-term Uptrend): Index crosses over 50-day, 100-day, and 200-day MA.

 

MACD (S&P 500): MACD is above its zero line but below its red 9-day signal line and pointing down. (Note: I’m using the settings, 19,39,9, recommended by Gerald Appel, MACD’s creator.)

Bearish: MACD line crosses below 9-day (red or gray) signal line. MACD line (black line) crosses below zero line.

Bullish: MACD line crosses above zero line. MACD line crosses above 9-day signal line. 

 

Bonds: U.S. 10-year yield is at 1.95% (on 3/27/2015)

Note: 3.0% or higher is significant (consider selling bond funds as yield rises). 3.5% or higher and risk increases (for bondholders). 

 

Analysis: Last week the market gave back all of the gains it had made after the Fed meeting. The indicators are not telling us much right now, so the market could go in either direction. Sentiment is not extreme although the pros seem more bullish than the retail investor. Financial articles are still leaning bullish, so any severe pullback would surprise the media. Technical indicators appear to show a stalled market, but it’s too early to know for sure. If indexes stay below their 50-day moving averages, the next target is the 100-day MA. This could be a pivotal week…and month.

Opinion: After Janet Yellen spoke last week, the bulls were ready to party. The market sliced through Dow 18,000 like butter and 19,000 was within reach. Overly confident bulls appeared on TV to assure investors that the market was bullet proof.

As I (and others) have warned for months, although the market kept climbing higher, it was not based on true, broad-based strength. Not surprisingly, the Fed-induced rally stalled out once again.

According to the indicators, the market could go in either direction this week. In my opinion, the market is topping out. If I’m right, volatility will increase and the market will continue to struggle. Trend changes do not happen overnight, and in fact often occur slowly.

Few believe or want to believe that the bull market is nearing an end. Perhaps they are right, but there are enough red flags to suggest that trouble is coming. As traders and investors, all we can do is observe and react accordingly. In my opinion, it’s too dangerous to be long, but it’s still too early to be heavily short. We need more evidence and clues to determine which direction the market is going. Hopefully, the market will tell us soon.

If the market plunges this week, that would be significant. Bull markets do not end quietly so be prepared for a lot of red herrings. This is the time to focus, to keep your eye on the facts, and to be alert to a trend change. As I’ve said repeatedly in this blog, this is the time to play it safe by moving some money into cash (the amount, if any, is your decision).

Many investors are complacent right now and don’t believe that anything can go wrong. Often, it’s when you let down your guard that something comes out of left field and smacks you in the face. Right now, do not let down your guard.

Each weekend, I study market behavior using sentiment and technical indicators. My goal is to use clues, observation, and indicators to analyze underlying market conditions. If you can determine the current market environment, it may help you to create profitable trading strategies.

RELEASED: Understanding Options (McGraw-Hill, 2E), Understanding Stocks (McGraw-Hill, 2E), Start Day Trading Now (Adams Media), and Predict the Next Bull or Bear Market and Win (Adams Media): http://bit.ly/1bl0ZNk

My latest book (eBook) has just been released: Prepare Now and Survive the Coming Bear Market. Amazon: http://goo.gl/2wWC8X Nook: http://goo.gl/VQstmr  Smashwords: http://goo.gl/eBpYBT 

 

AAII survey (3/18/2015)

27.2% Bullish. 31.5% Bearish. Neutral: 41.4%. 

Bearish: If sentiment is over 50% bullish.

Bullish: If sentiment is over 50% bearish.

 

Investors Intelligence (3/17/2015)

52.0% Bullish.  14.3% Bearish

Bearish: If sentiment is over 60% bullish. ( Note: Percent of bears is still at historic lows. 13.3 % is the 1987 low.)

Bullish: If sentiment is over 60% bearish.

 

VIX: 13.02 (on 3/20/2015)

Bearish: Less than or near 12.

Bullish: Greater than or near 40.

 

RSI (S&P 500): RSI is at 57.44 (on 3/20/2015)

Overbought (i.e. Bearish): When RSI rises to 70 or above.

Oversold (i.e. Bullish): When RSI falls to 30 or below.

Note: RSI can remain overbought or oversold for extended time periods.

 

Moving Averages (daily): The S&P is above its 50-day moving average and is pointing up. It’s also above its 100-day and 200-day moving average. 

Bearish (Short-term Downtrend): crosses under 50-day, 100-day, or 200-day MA.

Bullish (Short-term Uptrend): Index crosses over 50-day, 100-day, and 200-day MA.

 

MACD (S&P 500): MACD is above its zero line but is even with its red 9-day signal line and pointing up. (Note: I’m using the settings, 19,39,9, recommended by Gerald Appel, MACD’s creator.)

Bearish: MACD line crosses below 9-day (red or gray) signal line. MACD line (black line) crosses below zero line.

Bullish: MACD line crosses above zero line. MACD line crosses above 9-day signal line. 

 

Bonds: U.S. 10-year yield is at 1.93% (on 3/20/2015)

Note: 3.0% or higher is significant (consider selling bond funds as yield rises). 3.5% or higher and risk increases (for bondholders). Comment: Bonds rallied big time last week.

 

Analysis: Not surprisingly, we’re getting mixed signals. The increased volatility has spooked some retail investors, who are more neutral than anything else. Even though the bulls won the week, even some well-known pros are taking a more cautious approach. Although the market was rocky, it had some good days (primarily on the day that Janet spoke). It ended the week with an uptrend, but there are so many conflicting forces looming no one can say with certainty what will happen this week. Bottom line: It’s an unpredictable, dangerous market with extreme amounts of complacency (i.e. VIX at all-time lows again).

Opinion: As expected, Janet removed the word, “patient,” but was so dovish in her press conference that the market got another buy signal. With millions of dollars trading hands, some people made a ton of money buying on the dip. As I wrote last week, based on previous Fed meetings, the market rallies because the Fed almost never disappoints. (The last time the market was surprised was when Bernanke hinted at tapering QE in May 2013; the market plunged. Bernanke backtracked for a week until he lit the market on fire again.)

While the U.S. and many world markets are making all-time highs, there are many danger signs. In fact, if you are reading this, you should be alarmed. This is the time to take money off the table. If the Dow climbs to 19,000, at worst you missed out on some upside. If I’m right, the money you moved to cash will be like an insurance policy.

Based on my analysis and opinion of the market, it’s rare that the market moves up this fast and this high based on nothingness. 1999 comes to mind, and 2007. This week is important because we’re going to see if the market can keep climbing without the Fed’s help. I am looking for earnings reports, and more importantly, the housing numbers. If this market is the real deal, then it better be going higher based on reality, and not on what the Fed does or does not do.

We’re not at the scary zone yet but we’re getting closer. My theory is that the market is topping out (and that can take time). When you add in the extreme complacency, world turmoil, a bubbly bond market, plunging commodities, you have got to be careful.

Bottom line: If you are all in the market and still buying, you are in danger of being greedy. Unless the Fed has changed reality (and many would argue they have), then this is forming a bubble of huge proportions. No one can say when it will pop, because it can go on for weeks or months, but the prudent choice is moving to the sidelines.