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September 27, 2014 – Weekend Market Comment

September 27, 2014 – U.S. stocks plummeted Thursday over 1% in a day due to hawkish talk from the Fed's Fisher and rumors Russia may enact laws to seize foreign assets.  Thursday the S&P 500 stocks dived 1.3 per cent to 5313 points. At the forefront is the US Federal Reserve, which flagged it would next year begin raising interest rates — after six year of being near zero — as the economy picks up steam, driving bond yields and the greenback higher.

This was followed by Friday when stocks rose sharply, cutting losses for the week, after the government raised its estimate of economic growth in the second quarter and consumer sentiment rose in September.

After a 202-point jump Friday morning, the Dow Jones Industrial Average pulled back a bit and gained 167.35 points, or 1 percent, to 17,113.15 to mark a fifth day in a row of triple-digit moves, its longest such stretch since June 2013. Nike led blue-chip gains that cut the Dow's weekly drop to 1 percent. The S&P 500 added 16.86 points, or 0.9 percent, to 1,982.85, reducing its weekly decline to 1.4 percent. Energy and technology performed the best and all 10 of the S&P's main industry groups finished in the green for the day, and in the red for the week. The Nasdaq gained 45.45 points, or 1 percent, to 4,512.19, off 1.5 percent from last week's close. The Russell 2000 also gained, denting a weekly drop of 2.4 percent. The index of smaller companies had led the broad market declines in play three out of five sessions this week.

Of course this all shows up in the charts.

Primary Sell
And down we go. I look at this graph and I see a room full of nervous traders who are moving to the exit. Cover!!!


Long Term Bull Bear Lines:
Short term bounce complete clearly we have sold off. As you can see  we probably will dip below the 50 day moving average. You should be positioned in cash and low beta investments to weather this summer rainy day. Keep you powder dry a time to buy may be soon.

VIX:

Well the story here is clear, as we also saw in the primary sell, The pros are hiding and trying to cover their portfolios by hedging. As you can see if this goes the way the last pull backs went it is a ways to go until the bounce.


NYSE High Low:
Looks really bad, the big board is rolling over like it did in February, this could be more than a short pull back. Notice the red areas on the lower panel they are pullbacks and this one is looking uglier than the last one in August.

On Balance Volume:
Unfavorable -- Pros might be getting nervous! Don't panic yet. Not as bad as last week, but only has one day of improvement. Mmmm -- could still get worse -- watch it carefully.


S&P500 Percent Stocks Above 50 day MA:

Still looks really weak. Sit on your hands and wait for a better entry point.



Nasdaq Summation Index:
Yeach!, danger! danger! smart money moves to safety. Raise cash. You will note how effective this chart was as a canary-in-the-coal-mine warning of us of impending weakness long before the big pull back.


Aggressive Defensive:

Slow Stochastic is stalling at the bottom. This either means everything is falling apart or we have oversold small caps and we bounce up.... mehh who knows?? Wait for a better day.


Green Arrow Graph:
Slope still is falling. Move from aggressive high beta to more conservative low beta investments. This is no time to invest NEW money.

Some More to Ponder
Here is the renko chart of the US market, but I am using the small cap ETF -- IWM as the index, because small caps lead big caps. Renko charts are not based on time, you note the dates below have odd ball spacing, the chart draws a new brick when the market breaks into a new level. They often give clarity where the market is going. Right now its a pull back.


Now let do another Renko chart. This chart goes up when the US market is doing well and down when the Canadian market is out performing it. This chart make it obvious, Canada was not where you wana be lately. The reason is the end of the commodity bubble, an unproductive work force, a draconian double tax the middle class system and total route of the once thriving technology and manufacturing sectors. We are now ending an era of low volatility and a smoothly rising stock-market. Global markets are readjust to a new phase of dramatic policy change in the US and lower commodity prices from a slower China.  I warn you about this in the spring of 2013 in Pop Goes the Commodity Bubble. If you followed my advise you sold your "Northern Pesos" and bought US stocks.


Hmm Canada sucks . . . .



What Works Now
OK, so you are not listening to me and you really want to run with he big dogs, your just ichen to take a flier, well think about this one... Yahoo! has been sold short by many investors as a hedge against their long position in Alibaba. Once options become available next Monday, these hedges will be taken off and shares of Yahoo! should spike higher. If you do this keep your stops tight and run the moment you make some good coin. If you do this silly thing, don't linger!

If fuel prices keep low and things calm down in the Ukraine it could be good times for one time super stock Ryan Air. Now me I am not in this because I hate airlines, but the graph looks like it might turn around at about $54.


Summary
You will recall that last week, I warned that the sell off will gain speed this past week and this is not a good time to put new money to work. But is the action on Friday a sign the worst is over? In short - probably not, we bounced on Friday because we're oversold on the week and because we're wrapping up a quarter and a month, so there's a lot of position squaring, One good day does not a rally make. I feel, and yes its a guess, we probably have not competed the retracement, but we may be close. The last three pull backs were all about 4.5% but so far we are only down 3%. Also many of the markets worst crashes were in October, so that is not a time to take a big flyer.

Also for Canada I am particularly cautious as I am almost 100% in cash right now and when I return to the  market it will be conservative.  So wait for the market weather to clear, this is no time to come out and play now.






You can learn more about my indicators by visiting the CME4PIF school by clicking here.


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Yet another parabolic up week for the markets. Honestly folks valuations are really stretched here. The air is so thin at this altitude. Then again the markets can and do (on a short term basis) anything they want. Still I would expect a little pull-back in the next two weeks.


Lets see what is in the charts this week:

CLICK HERE: To see the 100 and 200 series charts



101 Bull Bear Bull market (dark green over red) and now the short term (light green) is up sharply. Also note the dark green 50 day average is in a firm uptrend. NOTICE THE SLOPE (second window), this could be part of a new long term uptrend.Bull market -- expect bullish outcomes…