DecisionPoint

Is that PMO Overbought or Oversold?

First, thank you to all of the live MarketWatchers LIVE webinar viewers! You've been making writing my blog articles easy by posing excellent questions in the chat room during the live show. Today's question was how I determine if a Price Momentum Oscillator (PMO) is overbought or oversold. There can be some confusion because I do point out "near-term" overbought and oversold conditions which can be confused with the overall PMO range in the longer term which will have different thresholds. Properly confused? Great! Let me explain.

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DP Weekly Wrap: Smaller-Cap Stocks Lagging

While we usually focus on the large-cap market indexes, they often disguise what is happening with smaller-cap stocks. Recently I decided to delve into this question with a chart showing the relative strength of smaller-cap indexes. The first relative strength panel examines all S&P 500 stocks on an equal-weighted basis. (The S&P 500 is a cap-weighted index, and its fifty largest stocks comprise about 70% of the index weighting.) To get the relative strength line, we divided the Guggenheim S&P 500 Equal Weight ETF (RSP) by the benchmark index, SPY. Granted, RSP isn't a smaller-cap index, but it gives the smaller-cap stocks in the SPX more weight. The other two relative strength panes are for the S&P 400 Mid-Cap ETF (MDY) and the S&P 600 Small-Cap ETF (IJR). As you can see, relative strength has been falling on all three indexes since the end of 2016.

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Determining the Health of the Market in the Intermediate and Long Terms

Today was my first day back on the MarketWatchers LIVE show (you'll find the recording under the "Webinars" tab) and it was so much fun to reconnect with all the fans in the chat room and on Twitter. During our "Mailbag" segment, I was asked what I used to determine the overall health of the market in the intermediate and long terms. The answer was actually quite simple: I use the weekly and monthly PMOs. The signals tend to be very timely and very accurate.

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DP Alert: SPY Bounces Off Rising Bottoms Support - IT Indicators Reaching Near-Term Oversold Territory

After a wonderful wedding and honeymoon, I have finally returned! It took some time to review and update my annotations and I see that we've had quite a few signal changes while I was gone. The market has been meandering lower this month since I left and consequently the DP indicators have seen some bearish changes. Let's get started with a fresh review.

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DP Weekly Wrap: Failed Retest

Last week I wrote: "I would like for the correction to continue for a while, but honestly, we may have just hit bottom." Well, the market did make a bottom, but it was just for a short bounce prior to this week's failed retest of last week's low. It was not the enduring intermediate-term bottom I had imagined, and it may be a while before we see that. As I watched decelerating price movement on Tuesday and Wednesday, it became apparent that a retest was more likely than an upside breakout. Similar to last week, this Friday was a day of rest to digest Thursday's collapse and to process options expiration.

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DP Bulletin: S&P 100 and Nasdaq 100 ST Trend Models Switch Back to NEUTRAL

Today both the S&P 100 ($OEX) and Nasdaq 100 ($NDX) Indexes switched from Short-Term Trend Model BUY signals to NEUTRAL, when their 5EMAs crossed back down through their 20EMAs. With only two days since the last signal changes, this is more annoying whipsaw, but I think these signals will hold for a while. I'll be making a full assessment in tomorrow's DP Weekly Wrap.

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Erin's Hits: Another PMO Scan for MarketWatchers

** While Erin is away, we will be posting some of her "greatest hits" educational blogs. Some information may be dated **

During the MarketWatchers LIVE program (airs 12:00p - 1:30p EST M/W/F), Tom Bowley and I have started a segment called "Anatomy of a Trade" where we go through our process for identifying investment prospects. I use Price Momentum Oscillator (PMO) scans to start every mining exercise. One of the scans I have been using regularly identifies stocks that have PMOs rising for three days and have a bullish IT and LT Trend Model set-up (meaning the 20-EMA > 50-EMA > 200-EMA). I did adjust this scan slightly (for the better I think) from the one I ran today by screening for only US stocks that are trading above $10. Today's favorite (you can see it in the MarketWatchers LIVE blog for today) was UMC, but it trades in the $1 - $2 range and really isn't for beginning traders or those with a low risk tolerance due to its volatility.

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Erin's Hits: Bear Market PMO Scan Screens a Few "Dogs"

** While Erin is away, we will be posting some of her "greatest hits" educational blogs. Some information may be dated **

With the market overbought and ready for at least a pullback, I decided to run one of my bear market Price Momentum Oscillator (PMO) scans to see if I could find a few "dogs" out there. The scan produced a handful for review but the two below stood out to me. They are in the Healthcare/Pharm industries which is the last sector on the DecisionPoint Market/Sector Summary with Neutral signals.

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