Much of the post-US election rally in the stock market has been attributed to President Donald Trump’s promises for tax cuts and deregulation. But long before the election, Elliott wave price patterns already told our subscribers to prepare for a market rally.
Only Three Other Occurrences Since 2002
The True Strength Index (TSI) is a momentum oscillator based on a double smoothing of price changes. As shown in the monthly S&P 500 graph below, a positive momentum crossover (black moves above red) has only occurred four times since 2002. In the three previous cases, the S&P 500 rallied for a long period of time after the crossover; the average gain was 52%.
According to Investopedia – the Moving Average Convergence Divergence (aka. MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of prices. The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA.
The Dow Jones Transportation Average has failed to print a new high above the previous high made in 2015. Given the Dow has made a new high, a Dow Theory non-confirmation remains in effect.
How does the current 50 day and 200 day moving average on the S&P 500 compare from previous crashes with the current market situation?
Recently I read the following comment on a post about investing in Gold:
Isn’t buying Gold today just like buying a horse ?
It being a purely romantic move for an object with no current use.
Sure it looks pretty and it will still get you there, though slowly,
but why would anyone have it as their primary source of investment travel ?
And I got to thinking that maybe comments like that are the “Bell” that rings indicating a new buying opportunity is at hand. In response I wrote an article entitled, Where’s Gold Headed Today? At the time of the comment, Gold had just finished trading at $1050 and by the time I wrote the article, gold was trading at $1100. As of this writing gold is trading at $1220. So it appears that the commentor made it statement at the precise bottom. But then gold tends to be an “emotional” investment with crazy statements at both the bottom and top. Personally, I think these outlandish comments are more reliable if they come from the general public rather than from seasoned investors.
I remember attending a seminar for computer network professionals in early 2000 and during every break all they could talk about was how they were going to retire on their 401k stock gains which exceeded their salaries. There’s an old saying that “It’s time to sell when the bag boy at the grocery store is giving you stock tips”. Although these guys weren’t “bag boys” they certainly weren’t investing pros either.
In the following article Chris Ciovacco gives us a different perspective about market sentiment… and gives us this excellent reminder… “Sentiment, like many pieces of evidence can be helpful, but like anything else it should not be used in isolation.” ~Tim McMahon, editor
Technical versus fundamental analysis: Which approach yields better investment results? A new study by three finance professors offers an answer.
The focus of their study were a thousand pairs of recommendations made between November 2011 and December 2014 on the TV show “Talking Numbers” … The first half of each pair was a recommendation from a top technician about a stock in the news; the second half was a recommendation about that same stock from a leading fundamental analyst.
The “personality” of a third wave shows itself in recent market action. Third waves are wonders to behold. They are strong and broad, and the trend at this point is unmistakable. … Third waves usually generate the greatest volume and price movement … .
The stochastic oscillator is a popular tool for analyzing a market. Watch the video to learn how you can use this indicator in your trading. Another way to use Stochastic is as a trend analysis tool. In the following video Jeffrey gives a good explanation of the terms “overbought” and “oversold”. He says these two terms are responsible for more lost money among rookie traders than anything else. So watch the video and get some great tips on using stochastics in your trading.