October 26, 2012
Stock Market Crash Course: Danger in the Near-Term
Written By Chloe Lutts Jensen
In today’s Stock Market Crash Course, we hear from Institutional Investor’s John Gray, Momentum Strategies Report’s Clif Droke, Christopher Mistal of Stock Trader’s Almanac and Richard Rhodes of The Rhodes Report. The consensus is to beware of further downside in the near-term, although there are still some signs of hope going into the end of the year. Click below to watch the video!
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Chloe Lutts, Editor of Dick Davis Investment Digest and Dick Davis Dividend Digest
Chloe Lutts is the editor of Dick Davis Investment Digest and Dick Davis Dividend Digest, and the third generation of the Lutts family to join the family business. For each Digest, Chloe reads hundreds of investment newsletters to select the strongest ideas for her readers. Prior to joining the Dick Davis Digests, Chloe was a financial reporter for Debtwire, a division of the Financial Times, covering fixed income, and before that, she reported on global debt markets for Institutional Investor. She also has previous experience at Cabot, writing about growing momentum stocks for Cabot Top Ten Trader and high-potential small companies for Cabot Small-Cap Confidential. She holds a B.A. in International Relations from Brown University, and also studied in Beijing and Paris.
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[Transcript]
John Gray, Investors Intelligence, Thursday AM:
“It will be negative if yesterday’s selling into strength repeats. … Consolidation efforts are the best to hope for and it is not clear the lows for the move have been achieved. …
“Only a few of the oscillating indicator charts are oversold, so it is still unlikely that a market bottom has been achieved. That doesn’t mean the decline will occur without interruption. If sellers again jump in on a rally it will point to a new round of selling and further index declines.”
Clif Droke, Momentum Strategies Report, Wednesday night:
“The immediate-term path of least resistance for stocks is still down according to the NYSE internal momentum indicators (HILMO). The dominant short-term index is in decline as reflected in the momentum bias (blue line) and internal trend indicators (red line) shown below. As I mentioned in the previous report, we need to see a reversal of the decline in these indicators to let us know the short-term outlook has improved. Right now the advantage belongs to the sellers.
Christopher Mistal, Stock Traders Almanac, Tuesday:
“After beginning the fourth quarter on an upbeat note, the market has fallen victim to Octoberphobia. This term has been rightfully earned by October because of its frightful history of significant declines in the month. … But, October also has another less frequently remembered tendency. October has also been a turnaround month with twelve post-WWII bear markets coming to an end in the month: 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998, 2001, 2002 and 2011. In short, volatility and October trading go hand–in-hand and this October is playing out in typical fashion. …
“There is a light at the end of the tunnel as the likelihood of a major decline remains small. Recent market weakness is tempering expectations and reducing somewhat frothy investor sentiment which is setting up a much better entry point to trade the Best Six Months and improves the odds of a respectable year-end rally. Barring a disastrous exogenous event, we still expect a decent yearend rally, but it is not likely to be as substantial as last year, nor is it likely to begin until after the election has been decided. Our Seasonal MACD Buy Signal is still negative.”
Richard Rhodes, The Rhodes Report, Thursday AM:
“We are coming to fear not October’s wrath for the markets – but perhaps November’s and December’s. The fact of the matter is that from a technical perspective, a broadening top is forming, and while this may take up to a year to form – the process has begun. Further, let us note that we are currently in month 43 of the expansion off the March-2009 lows, and the average – note “average” – bull market length is 39-months. So, it seems a bit long in the tooth.
“That said, we find a conundrum currently exists between the market and market sentiment. With the S&P 500 several percentage points off its highs, the American Association of Individual Investors or AAII is telling us that 29% of its members are “bullish”; while another 43% are bearish. In the middle are 28% “neutralites.” We find all of this rather confusing given that bull market highs are generally made with sentiment quite bullish.”
Tags: stock market video