DecisionPoint

DP Weekly Wrap: Impervious Rally

I awoke Monday morning to news of the outrage that had taken place in Las Vegas the night before, and I experienced the now all-to-familiar feelings of weariness at the state of the world. There has been enough rehash of this terrible event, and my purpose of mentioning it was not further intrude on your peace of mind. There is a lesson to be learned here about how the market reacts to catastrophic events. Many of the financial commentators were truly amazed that the market didn't seem to be fazed by the horror that had transpired. In fact, the market rallied every day except Friday. The reason is simple: The market is a sociopath and has no empathy whatsoever regarding anything that does not directly affect it. An extreme example of this is the Bhola Cyclone that struck East Pakistan on November 12, 1970, eventually causing the death of about 500,000 people. It doesn't get much more horrific than that, but the chart below shows that the S&P 500 lost only -2.6% in a week, then it rallied into the year's end. Obviously, markets in Pakistan would have reacted negatively.

I could go much more deeply into this subject, but my purpose is just to get you thinking about the kinds of news events that are important to the market, and those that are not. How we personally feel about news is irrelevant, because the market probably has an entirely different point of view.

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PMO BUY Signal on NDX Confirms Breakout - Commodities LT BUY - TLT IT Neutral Signal

It took the NDX two weeks to a month more to update its Short-Term PMO to a BUY signal in comparison to its peers. The dates underneath the signals on the Scoreboard tell the story of a difficult decline and then rally run for the NDX and technology in general. Two more interesting signals came in today. GSG, the Commodities iShares ETF logged a new Long-Term Trend Model BUY signal. Additionally, TLT triggered a new IT Trend Model Neutral signal.

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DP Indicator Spotlight: McClellan Summation Index Overbought and Rising on Major Indexes

Developed by Sherman and Marian McClellan, the McClellan Summation Index is a breadth indicator derived the McClellan Oscillator, which is a breadth indicator based on Net Advances (advancing issues less declining issues). The Summation Index is simply a running total of the McClellan Oscillator values. Even though it is called a Summation Index, the indicator is really an oscillator that fluctuates above and below the zero line. The DecisionPoint Market Indicator ChartPack includes a ChartList of the McClellan Oscillator/Summation Index for the major indexes (NYSE, NASDAQ, NDX, SPX, OEX, DJIA, SP400 and SP600). I was reviewing these charts and found that the Summation Index is very overbought and rising on all of these indexes.

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DP Alert: Island Formations and Gaps - More All-Time Highs - RYU Signal Change

No new changes on the DecisionPoint Scoreboards at this time, but we should see the IT PMO signals change on Friday. I was notified by my Technical Alert that weekly PMO crossovers occurred on all but the NDX. These signals will need to stay intact at the end of trading on Friday for them to become documented signals.

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DP Weekly/Monthly Wrap: Market Still Overbought

Last week I thought that a market correction was beginning, but all we got was a one-day, downside blip that ended at the low on Monday. From there the market edged higher, closing at new, all-time highs on Thursday and Friday. Nevertheless, the gain for the week was less than one percent, the market is overbought, and my outlook has not changed. That is to say, I think a small correction is likely.

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DP Alert: "Missed it By 'That' Much"

It's clear looking at the NDX Scoreboard that technology has been taking it on the chin. Today, tech titans like Micron (MU), Apple (AAPL) and Advanced Micro Devices (AMD) had a great day and consequently pushed the NDX upward. It wasn't enough to clear the ST Trend Model Neutral signal nor the PMO SELL signal. A look at the chart shows us that the ST Trend Model signal isn't likely to hang on if the tech rally continues as the 5-EMA is leaping skyward toward the 20-EMA. The PMO SELL signal, on the other hand, looks fairly intact with enough margin between it and its signal line to keep the SELL signal in place at least another week or so. It is quite encouraging to see price recapture support above 5900 and rising bottoms trendline support.

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DP Weekly Wrap: AAPL Leads Market Top

We usually feature a SPY chart in this space, but Apple (AAPL) has really grabbed my attention recently. I have been watching it for a few weeks as it formed a rounded top, and finally broke down through horizontal support on Thursday. AAPL is important to the broad market because it is so heavily weighted in the major market indexes. If it tanks, it will certainly affect the rest of the market. On the positive side, after three day's of selling, it appears to have made a short-term bottom.

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