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 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 (2/25/2015)

45.4% Bullish. 20.3% Bearish.

Bearish: If sentiment is over 50% bullish.

Bullish: If sentiment is over 50% bearish.

 

Investors Intelligence (2/24/2015)

59.5% Bullish.  14.1% Bearish

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

Bullish: If sentiment is over 60% bearish.

 

VIX: 13.34 (on 2/27/2015)

Bearish: Less than or near 12.

Bullish: Greater than or near 40.

 

RSI (S&P 500): RSI is at 60.27 (on 2/27/2015)

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 above its 50-, 100, and 200-day moving averages and is pointing sideways. 

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 and 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 2.00% (on 2/27/2015)

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

 

Analysis 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 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 (2/18/2015)

47.0% Bullish. 17.9% Bearish.

Bearish: If sentiment is over 50% bullish.

Bullish: If sentiment is over 50% bearish.

 

Investors Intelligence (2/17/2015)

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: 14.30 (on 2/20/2015)

Bearish: Less than or near 12.

Bullish: Greater than or near 40.

 

RSI (S&P 500): RSI is at 64.07 (on 2/20/2015)

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-, 100, and 200-day moving averages and is pointing up

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 and 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 2.13% (on 2/20/2015)

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

 

Analysis: The signals are almost identical to last week except sentiment surveys are close to generating a sell signal. The VIX is in the basement again (bearish signal), and RSI is nearly overbought. On the other hand, the trend is up as the indexes make all-time highs. If you are strictly a trend-follower, more than likely, you are still long. The wild card is Janet Yellen, who is speaking this week. Based on past performances, the market will attempt to rally on her words. More than likely, she will attempt to let the market know that raising interest rates is not a high priority at this time. Bottom line: There are many mixed signals.

Opinion: As mentioned above, there are many conflicting forces at hand (both bullish and bearish) so its impossible to predict which way the market will go.

This should be a volatile week as Janet Yellen testifies on Tues. and Wed. and the market attempts to keep the bull party going. I still believe the major indexes are topping out, which is why I’m primarily on the sidelines watching to see if the current rally fails.

Because of the Fed’s power, few people believe the market will retreat this week. In the past, the Fed has managed to rally the market on little or no news. We’ll be watching if the same pattern plays out. If it does, the rally continues. If it doesn’t, traders will take notice. Speaking of trading, volatility should return to the indexes this week, so be prepared.

Bottom line: There are a lot of conflicting news events and earnings reports intersecting with Yellen’s testimony. It is anyone’s guess which way the market will go. The technical indicators are primarily leaning to the bull side but with a number of danger signs: For example, we have a sideways market that hasn’t yet broken out of its narrow range. Oil is plunging again, which may affect the market. Volume continues to be anemic, and Greece and Ukraine are still in the news. Patience will be needed this week as we see what Mr. Market has in store for us.

 

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 

Here is my latest MarketWatch columnhttp://goo.gl/eFQq3J

 

AAII survey (2/11/2015)

40.0% Bullish. 20.3% Bearish.

Bearish: If sentiment is over 50% bullish.

Bullish: If sentiment is over 50% bearish.

 

Investors Intelligence (2/10/2015)

52.5% Bullish.  15.2% 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: 14.59 (on 2/13/2015)

Bearish: Less than or near 12.

Bullish: Greater than or near 40.

 

RSI (S&P 500): RSI is at 61.70 (on 2/13/2015)

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 is pointing up. 

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 and 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 2.02% (on 2/13/2015)

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

 

Analysis: If you look strictly at the market indicators, the trend is up. However, if you look a little deeper at not just at basic indicators but market breadth, valuations, and money flow, you see conflicting signals. Sentiment is not at extremes but that will change if the market gets extreme. Bottom line: The indicators are telling us the market could go either way this week, although the trend is positive.

Opinion: Last week surprised me as I thought the market was close to topping out and running out of gas. Although the indexes weren’t moving on huge strength, they also didn’t plunge. So here we are again at Dow 18,000 and S&P 2,000. If this is a true rally, then the indexes will climb higher on strong volume. Let’s see if that happens.

It is impossible to predict what the market will do during this shortened week. The futures are down Monday night, perhaps leading to an early retreat. The Greek talks didn’t work out so well, and they are still fighting in Ukraine. On the plus side, the market keeps going up, ignoring bad news.

Bottom line: Be prepared for anything. It’s possible that international conflicts will negatively affect the market this week. However, the market might surprise to the upside. Sit back and watch because it could go either way. Don’t forget that Janet Yellen speaks next week. 

 

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 (2/4/2015)

35.5% Bullish. 32.4% Bearish.

Bearish: If sentiment is over 50% bullish.

Bullish: If sentiment is over 50% bearish.

 

Investors Intelligence (2/3/2015)

49.0% Bullish.  16.3% 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: 17.29 (on 2/6/2015)

Bearish: Less than or near 12.

Bullish: Greater than or near 40.

 

RSI (S&P 500): RSI is at 54.04 (on 2/6/2015)

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 above its 50-day moving average and is pointing down

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 on its zero line and 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 1.94% (on 2/6/2015)

Note: 3.0% or higher is significant (consider selling bond funds as yield rises). 3.5% or higher and risk increases (for bondholders). Big spike in yield this week (largest weekly gain since 2013). Is this the beginning of a new trend? We shall soon know. 

 

Analysis: When I look at the indicators I follow, I don’t see a lot of extremes, which means the market could go either way. I also follow the NYSE Cumulative Tick, which is flashing a warning signal. It’s interesting that retail investors have lost some of their exuberance, while a majority of professionals are still bullish. Last week, the indexes recovered from the abyss and rallied near their old highs. We will see if the latest rally is the real deal or another dead cat bounce.

Opinion: I have noticed that in the past when the indicators I follow don’t give a clear signal, it’s a danger sign. The market rallied strongly from a terrible January. If the rally was accompanied by stronger volume, I might be more impressed. Based on the indicators and market internals, however, this rally seems about as real as a three dollar bill. I could be wrong, but if I’m not, then be very careful this week.

Last week I expected a rally, but I was surprised that it continued for longer than a few days. Based on past history and the indicators, I would not be surprised to see a strong pullback this week. This is not a prediction but the odds favor a retreat.

No matter what the market does, we’re still in dangerous territory and have been for a long time. Investors remain complacent, and few see any danger signs (thanks to the Fed’s policies). That in itself is a danger sign. 

If you’ve been following my blog for the last few months, you know how suspicious I’ve become of this rally. From Dec. 29 to Feb. 6, the market has gone nowhere. A churning market is not a healthy market, so beware. A market going in circles needs to break out of its sideways trend or it will go down. 

What to look for: Look to see if the indexes fall below their moving averages again. 

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 (1/28/2015)

44.2% Bullish. 22.4% Bearish.

Bearish: If sentiment is over 50% bullish.

Bullish: If sentiment is over 50% bearish.

 

Investors Intelligence (1/27/2015)

53.1% Bullish.  16.3% 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: 20.97 (on 1/30/2015)

Bearish: Less than or near 12.

Bullish: Greater than or near 40.

 

RSI (S&P 500): RSI is at 41.78 (on 1/30/2015)

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 dropped below its 50-day and 100-day moving averages and is pointing down. 

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 below its zero line and below 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 1.68% (on 1/30/2015)

Note: 3.0% or higher is significant (consider selling bond funds as yield rises). 3.5% or higher and risk increases (for bondholders). How low can the yield go? It sure seems like a bubble. 

 

Analysis: It was a rocky week for the indexes. On the technical side, the indexes fell below their 50-day and 100-day moving averages, and this was after the European Central Bank (ECB) initiated QE and after the Fed minutes. It is too early to proclaim that the uptrend is over, but the odds have increased. For a confirmed downtrend, we need more technical weakness. Even with the increased volatility, sentiment only fell by a little. Most investors still do not believe this market is vulnerable, which means there is a lot of room left to go on the downside.

Opinion: Last week was important because the usual pattern had changed. Typically, after a central bank announces QE or if the Fed is “patient” about raising interest rates (i.e. they will not raise rates until they are forced to), the market rallies. But something different happened last week: the market plunged. To me, that was significant, which is why I began buying put options on SPY, and then sold most of them by Friday. I already own inverse ETFs and if they are profitable, I will add to my positions (if not, I will cut my losses).

As you know from reading my latest eBook, Prepare Now and Survive the Coming Bear Market, we are getting closer to a bear market. It was only a month ago that Dow 20,000 seemed like a slam-dunk. Even with encouragement from the central banks, the market went south. It didn’t help that GDP was less than spectacular. 

Right now, because we are going through a topping out process, there will be rallies and reversals. It will not be an easy environment until the trend is confirmed. For a downtrend, we need to break below the 200-day moving average, and stay there. (Remember: In the past, when the indexes fell below their 200-day moving averages, the Fed appeared out of nowhere with a new program or talking point to rally the market.)

On some television programs, perpetually bullish guests reminded nervous investors that in 2014, January started off poorly, but we ended up the year positive. Judging by the sentiment numbers, investors are still hopeful this will be a positive year. It’s possible, but never rely on hope to make investment decisions. 

This week, the market will attempt to rally. If the bull market is still intact, you will see a strong rally on higher volume. However, if the bull market is coming to an end, those rallies will fail. If the indexes fall below specific technical levels, sell programs will be initiated and the market will fall fast and hard. (Eventually, there will also be a short-term bounce. Watch the technical indicator, RSI, for a bullish signal. RSI will drop below 30 if the indexes are oversold.)

Bottom line: This is a very difficult market environment. Because last year turned out better than expected, many investors believe this year will end with a satisfying gain. We’ll soon find out if they’re right, but judging by the action so far, I don’t think they’ll get their wish.