Ian Woodward's Investing Blog

Ticket for Staying on the Right Side of the Market

October 4th, 2014

Finally the Market Indexes took a drubbing, first on 9/25 and again four trading days later on 10/01, which then produced a reading of “90” for the % of Stocks in the S&P 1500 with %B <0.5.  We have not experienced such an oversold reading since June of 2012, 28 months ago.  The last straw of an excuse to slam the Stock Market was the Ebola Breakout potential only to be saved  by the decent Jobs Report on Friday which once again produced ~ 250,000 Jobs in September.

I hope this Blog Note is timely for you as I have broken new ground on the 15 Year History of when the S&P 1500 gets slammed hard, where Grandma’s Pies and “Bucketology” are the key tickets for staying on the right side of the Market.   Of course we will cover all of this at the HGSI Seminar in Sunny Palos Verdes in two weeks time, where Ron and I look forward to seeing old and new attendees for three days of intense learning.

Grandma Picture

The Market Indexes peaked ten days ago, sold off with the Ebola scare and bounced back up from an oversold situation with the decent jobs report on Friday, which frankly saved the day for now for the Bulls.

Grandma Indexes

The Canaries are marking time and waiting for the Markets to show the direction rather than leading them upwards:

Grandma Canaries

As expected, the VIX behaved counter to the Market Indexes, rose for ~10 days and then fell back to the comfort zone of around 14:

Grandma VIX

Note how %B for the S&P 1500 has meandered down these past ten days with a decent bounce on Friday.  We are by no means out of the woods:

Grandma Pat

Bulls and Bears have had a good fight trying to get control…the Bears have it for now, but a further couple of up days are needed before the Bulls can have confidence that they are back in the saddle.  However, Oversold can also become more oversold should panic set in, so be very careful:

Grandma Indexes2

Here is Grandma’s Pies in all its glory showing you the split for the S&P 1500 stocks where 90% of them are below the middle Bollinger Band of 0.50, and only 10% are above.  My good friend Chris White has done a great job for me to show us at a glance the behavior from day to day:

Grandma Pie 90

So you might ask, “What has happened since then?”, and here is that picture.  A reasonable Bounce Play, but hardly enough to feel comfortable:

Grandma Pies

The Ball is currently in the Bear’s court.  To feel comfortable that the Bulls are back in control requires %B to have risen to where the arrow is, and then head higher:

Grandma Pat2

Those who have followed me for all these years will see that I have given you Manna from Heaven.  Newbies will have to fathom this out for themselves, but I will cover this for those who attend the Seminar in two weeks time.  Net-net, don’t expect recovery in less than a week!

Grandma Stats

I’m no Soothsayer, but here are two possible scenarios for the immediate future based on the Fear of the potential Ebola Breakout on the one hand and the decent Jobs Report on the other:

Grandma Scenarios

The next two slides show the latest results in the Jobs Report that came out this past Friday, with close to 250,000 for September:

Grandma Jobs1

Grandma Jobs2

Well, there you have it, the whole nine yards.  Enjoy and keep your powder dry.

Best Regards,

Ian.

The Rickety-Rackety Bridge to Nowhere

September 23rd, 2014

Yes, I am back and thank you for your patience.  As most of you know and been through it, I have had a harrowing time getting my Computer working again sufficient for me to give you most of the charts we like to analyze in these blog notes.

The last two days have established that the Small Caps are on the brink of giving up the ghost or are so oversold we should see a bounce play, and the Large Caps have at least given up substantial gains to cause the Markets to be in Oversold Territory.  Hence we have a Rickety-Rackety Market:

Rickety Picture

Here is the Chart of the Indexes that proves this market is all over the place, and just had a False Breakout:

Rickety indexes

We are nip and tuck as to whether we are oversold and will find support here or there is more downside to come.  If you compare the two charts in the next picture you will quickly see that inside two days we are now at a critical point, especially with the Small Caps:

Rickety Readings

Just look at the action in the last two days and it says it all.  6.2 Buckets down is not to be brushed aside with 9.0 buckets in all in two days:

Rickety Pat

Yes, we are Oversold, but I have seen numbers far worse than this so there is still room on the downside.  However a Bounce Play is on soon:

Rickety Pie

The Market Indexes have taken a turn for the worse, and are getting oversold as shown by the red on the chart:

Rickety Indexes 2

And Finally here is an overall Plan that sums up what the Market is telling us.  Watch that 4380 level carefully:

Rickety Plan

Best Regards,

Ian.

 

Stock Market: Hanging on by a Thread

August 10th, 2014

Friday’s Bounce Back saved the Market from heading down further while the Market Indexes are hanging on by a thread at the crossroads.  The Market Indexes are trying to hold here at Support, but as those who have followed my blog notes for years will immediately recognize that with %B at the ~ 0.2-0.3 area we are hoping for a further move up, and yet can trundle down very quickly:

Thread Picture

It is touch and go, but as we see all the Market Indexes are trying to find support this past week:

Thread Indexes

Likewise, the Canaries are showing some renewed strength, and is a good sign to counter some of the gloom:

Thread Canaries

The VIX has been bouncing around just below going into oscillation.  Watch carefully for moves above 18:

Thread VIX

Past History shows we have reached the Depths of Distribution, and we need a quick reversal to the upside:

Thread abcde

The 6.4 Buckets down killed the momentum of the Rally, and we are now 11 days down, so should see a reversal soon, which may have already started with this past Friday’s decent move up:

Thread Pat

As we will see %B for the Major Market Indexes is between 0.2 to 0.3, and this is no man’s land where either the recovery continues to force %B above 0.5, the mid point, or we fall back again and the Market moves down:

Thread Pat2

The next two charts show the cliff edge that %B is on and confirms that Type 3 & 4 Investors need to be patient:

Thread Nasdaq

Thread S&P1500a

We all know that the Small Cap stocks have fared the worst of late, so I have used the Russell 2000 (RUT) as the Guinea Pig for showing what to look for before longer term Type 3 & 4 Investors should engage in this market.  The Index must get above the resistance of the moving averages before there is any hope that there is a longer term move up…we need an Eureka & Kahuna to appear as shown:

Thread RUT

Well folks, there you have it.  I couldn’t take my eyes off the TV watching Golf today, but I am sure you will still enjoy this.

Best Regards,

Ian.

Stock Market: Let’s Get Ready to Rumble

August 3rd, 2014

With three Major Shots across the bow in the last month and the last big one only a few days ago on Thursday 07/31/20114, we are probably in for some big fights between the Bulls and the Bears as they get ready to rumble!

Rumble Picture

The Market Indexes sold off this past week and we are now at the Caution level with the NASDAQ & NDX holding up best of all with only 3% down from their highs.  The RUT and S&P600  are worst at ~-8% down:

Rumble Indexes

With Earnings out for the Canaries, they are looking respectable though they have given up some ground:

Rumble ICanaries

But now comes the bad news…the Market Indexes are all below -3% from their highs with the RUT and S&P600 as the laggards.

Rumble Indexes2

The VIX has run out of cushion and is now on the borders of going into Oscillation, so watch this carefully:

Rumble VIX

Internals are rotten with Distribution well underway.  Not far from extreme capitulation so look for a bounce:

Rumble abcde

This last big red day on Thursday killed the Rally for now and it will take time to repair:

Rumble indexes3

…And here is the -6.4 Buckets down in %B to prove the Market is in deep doo-doo!

Rumble Pat

4350 was key Support for the NASDAQ and it held, which was a good sign.  However the last call is 4300 otherwise we head down with a vengeance:

Rumble Nasdaq2

…And here is the picture for the S&P 1500.  My guess is it will take a while to right itself:

Rumble 1500

The latest vogue is “Seasonality” so here is the picture from 2009 forward for the S&P 500, which shows that August is the poorest month for these last six years:

Rumble Seasonality

We are due for a double digit correction, since we haven’t had one these past 18 months:

Rumble Seasonality2

We continue to have good news on the Jobs Report scene with yet another month of >200,000 Jobs posted:

Rumble Jobs

…And here is the long term picture which is very encouraging:

Rumble Jobs2

Well, there you have it with a long blog note this time while watching Rory McIlroy take the lead in the golf.  Keep your powder dry and next week should give us a clue if we are in for more trouble or get out of being Oversold.

Best Regards,

Ian

Stock Market: Bubble Continues Upwards with Hiccups

July 22nd, 2014

The big guns are playing games with usuns yanking the Market Indexes around.  Most have decided to stay this round out unless they are very adept at very short term plays both upwards and downwards.  Look what just happened a few days ago when the S&P 1500 dropped 6.3 buckets down in one day only to go up 5.5 the very next day…net result is game playing.

Hiccups Picture

The RUT, Midcap, and Small Cap stocks have taken the brunt of the hit and are the laggards, but the DJIA, S&P 500 and NASDAQ are still near new highs, i.e., we continue to have a biforcated market:

Hiccups Indexes

However, the tell-tale news is that the Accumulation : Distribution Ratio A+B:D+E has deteriorated to Stalemate:

Hiccups abcde

Our Favorite picture shows the Bubble Hiccup very well and it has been two months since we had a similar fracas:

Hiccups Pat

…And the twin picture to the above also shows the long rally of close to two months before the Knee-Jerk occured:

Hiccups Pat2

Now for some “New Good Stuff” relating to the Mid Term Presidential Cycle.  Here is a neat picture of the Largest Corrections from 1930 onwards for the Mid-Term Election Years…the 4 Year Cycle, which my good friend Bob Meagher unearthed for me.  It shows that the Median Correction is -17.12% and no wonder the pundits make a song and dance everytime this rolls around.  There have been nine times when the number has been less and 12 times where it has been greater, with the heaviest damage in 2002 of -34.69% after the bubble:

Hiccups Presidentialpng

Now let’s look at the last 24 years for both Largest Ups and Downs of more than 4% in each of those years:

Hiccups Presidential2

…And here is a plot of that same picture to give you a feel for what the chart looks like:

Hiccups Presidential3

I’m sure you are scratching your heads and saying “So What, Ian, is there a pony in here?”  Well, you know me in that my first answer is that the result is in the lap of the gods.  But I never shy away from a challenge so my next answer is that we should certainly see a -8% correction for all of the reasons I have given you in the past.  Then what?  Unfortunately, that answer depends on the state of the world in the next 3 months or so…Wars, Mexican Border, Economy and Jobs, Healthcare…the usual stuff on our plate these days.  My short response is that if it is worse than -12% who cares, as for sure most of us would have prudently hunkered down and protected our nest eggs long before then.

Chew on this fodder and if you have any bright ideas let me know what you think.

Best Regards,

Ian.

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Disclaimer: Commentaries on this Blog are not to be construed as recommendations to buy or sell the market and/or specific securites. The consumer of the information is responsible for their own investment decisions.