MrJohnRoss' Account Talk

[MrJohnRoss]

Gap down, gap down, gap up, gap up. That leaves us about where we were before the 20th, when the market rallied all week because the "experts" were forecasting a "no" vote on Brexit.




I would think that there is much more market risk today than there was two weeks ago, now that the EU is just beginning to crumble. This is a little like skating out further on the ice lake, even though you just heard a big crack. Nothing to worry about... yet.

We're slightly overbought at this point on the short term chart, but certainly could go higher without starting the engine on fire. Another few days of float up sounds about right, with end of quarter window dressing, and 4th of July holiday upcoming.

I now have two of my systems with bullish crossovers, so the composite system is reading +1, a mild buy signal. I will have to think about jumping back in, possibly for just the next few days to take us into the first part of the month.

 

[airlift]

Gap down, gap down, gap up, gap up. That leaves us about where we were before the 20th, when the market rallied all week because the "experts" were forecasting a "no" vote on Brexit.


View attachment 38719

I would think that there is much more market risk today than there was two weeks ago, now that the EU is just beginning to crumble. This is a little like skating out further on the ice lake, even though you just heard a big crack. Nothing to worry about... yet.

We're slightly overbought at this point on the short term chart, but certainly could go higher without starting the engine on fire. Another few days of float up sounds about right, with end of quarter window dressing, and 4th of July holiday upcoming.

I now have two of my systems with bullish crossovers, so the composite system is reading +1, a mild buy signal. I will have to think about jumping back in, possibly for just the next few days to take us into the first part of the month.

MJR, have you decided whether to buy-in today, to take advantage of your buy signal, and the July 4th rally? Tia

 

[MrJohnRoss]

Airlift, I've decided to hold my cash position for now. Three reasons:

1) A July 4th rally would most likely only mean a one day rally (tomorrow)
2) Composite system is not on a full buy signal
3) Short term RSI is currently near 70, so a pullback or consolidation is most likely before any meaningful advance

Of course, these are only my opinions. Everyone has their own reasons for being in or out of the market, but if you decide to go in, I hope you make boat loads of money.

 

[MrJohnRoss]

Very glad I did not go in today.




Looks to me like we are topping out on the 60 minute chart. That's a hell of a V shaped dip and recovery. Do you think we'll keep going up on the same trajectory to exceed 2120? That looks to be the next target.

With an RSI now at 74, the "hot engine" light is flashing, and the engine is starting to knock. Who knows, maybe the Central Bankers will keep the throttle floored for another day, possibly two. Eventually the engine is going to have to cool off, IMHO. If I was in, I'd be very tempted to protect my profits over the long holiday weekend, but that's just me. Call me chicken, but I think getting in now is high risk, low reward.

 

[MrJohnRoss]

Short term chart is still overbought, though not as overbought as yesterday.




Let's call the RSI at 71. Yep, that's overbought. Could we go higher on Tuesday? Sure, that's a possibility, and maybe a strong one, as the first trading day of the month is usually positive as monthly money goes to work. Yesterday I was glad I didn't buy in, now I'm thinking I should have gone in just for the (possible) two day bump.

The other item I will have to consider over the weekend is this: My composite system has now gone +3, a full on bullish signal. So the question is; do I buy in on Tuesday, when we could be at a short term high, or wait for a pullback? It's at the core of every trader's dilemma... should you follow your system to the letter, or modify it based on temporary conditions.

Right now I'm leaning towards waiting for a short term pullback, as Tuesday could run the markets higher. The thing I need to be careful of is waiting for a pullback that doesn't materialize. That is exactly what happened to me during the Feb-Mar run-up. Kept waiting for a pullback, and it never came, and it's why I'm negative YTD.

Right now with the S&P at 2103, we're only 1.5% from the all time high near 2135. Logically, it makes no sense to be charging higher. This market is so frothy and overbought, but it may not matter. Sky high P/E ratio's don't matter. EU falling apart doesn't matter. Bond yields tanking world wide don't matter. Maybe RSI's above 70 don't matter either?

Meanwhile, I hope everyone has a safe and relaxing holiday weekend.

 

[pmaloney]

Have a Happy Independence Day!

 

[MrJohnRoss]

Hard to believe that logic prevailed in the markets today.




A "minor" pullback of 14 S&P points was enough to cool down the engine to an RSI of 56 - about normal operating temperature. I decided to hold off going back into the markets, even though my composite system is at +3. It sure appeared today that markets world-wide were pulling back rather strongly, so it made sense to see how far a pull back we're going to get.

Meanwhile, the VIX is starting to ramp back up, and it may not take much for it to flip to a bearish signal. My guess is we're going to go down to test the 2050 area, and if that fails, possibly the 2025 area.

Composite system remains at +3, but just barely.

 

[jkenjohnson]

Hard to believe that logic prevailed in the markets today.


View attachment 38774

A "minor" pullback of 14 S&P points was enough to cool down the engine to an RSI of 56 - about normal operating temperature. I decided to hold off going back into the markets, even though my composite system is at +3. It sure appeared today that markets world-wide were pulling back rather strongly, so it made sense to see how far a pull back we're going to get.

Meanwhile, the VIX is starting to ramp back up, and it may not take much for it to flip to a bearish signal. My guess is we're going to go down to test the 2050 area, and if that fails, possibly the 2025 area.

Composite system remains at +3, but just barely.

Will you buy back in if today is down? Futures are down quite a bit. I can never find the bottom.

 

[MrJohnRoss]

Will you buy back in if today is down? Futures are down quite a bit. I can never find the bottom.

I would like to see an oversold condition before getting back in.

 

[MrJohnRoss]

Does today's turnaround signal that the downtrend is over?




Everything was in the red early this morning, then a number of big buy orders came in repeatedly throughout the day to lift the market higher. At this point, I'm going to guess that we may float higher tomorrow, as there seems to be more positive signs than negative. All three of my systems remain in the bullish camp, but all of them are right on the cusp of easily crossing the fence to the downside.

AGG now has an RSI of 79.94. Must be some kind of record, I've never seen it that high.



Where's the fire extinguisher when you need one? That chart needs a cool down.

Mr. Tran sure look like he's slumping over badly. Not a good sign for a healthy market. Even the Nasdaq doesn't look that well. Financials sure look weak too. This market just doesn't get me real excited about jumping back in.

 

[MrJohnRoss]

Mr Market sure is skittish. Started the day with a pop higher, then sold off for the rest of the day, until the final hour brought more buyers in.




So far, the market has been unable to take out the July 1 high of 2108 in convincing fashion. As soon as we hit that area today, the rally fell apart. The market really needs to take that out and then bust through 2120 to give the bulls fuel for their fire. If it fails that test, look out below for a test of 2025.

Technically, my VIX system had a bearish crossover, but just barely. That puts my composite system at +1, a mild bull signal. Tomorrow may bring resolution one way or the other with the jobs report. Once again, will good news be bad news for stocks, or vice versa? With this insane market, it's hard to tell what will happen.

 

[MrJohnRoss]

Big gap higher at the open, and continuous buying throughout the day. So now we sit at 2130, just a hair away from the all time high of 2135 that was printed last May.




So where does this leave us? Is there enough strength left in the market to rocket right through the all time highs? Does the historically high P/E ratio matter anymore? Does it matter that earnings peaked in 1Q 2015, and have been declining ever since? Does the EU falling apart put a damper on world finance? (Or Italian banks, or slowing Chinese economy, or Japan, or... fill in the blank). To me, the market rocketing higher seems absolutely insane. The market leaders, Mr Tran, and Nasdaq, are both a long way away from their respective all time highs.

We're once again short term overbought with an RSI over 72, which suggests a pullback is due.

Meanwhile, the daily RSI is at 60, so not too dramatic there. Today's daily volume was not impressive - below it's 50 DMA. Mr VIX collapsed to 13.20, a sign of complacency.

Composite system now reads +3, a full-on bullish signal. I'm thinking a pullback is in the cards next week, at least on a short term basis.

Finally, with all the crap that's gone on throughout the country this past week, if you see someone with a scowl, and in need of a smile, give 'em one of yours.

 

[MrJohnRoss]

It's the weekend, so let's take a look at the longer term picture of the markets. First the weekly S&P:




The massive dome has been breached, and in rather convincing fashion. The question is... is this a breakout, or a fake-out?

Before you answer that question, take a look at the next chart. Updated version of the S&P P/E ratio (S&P earnings in lower window):




The P/E ratio has now reached a rather lofty 24.61, something not seen in quite some time. That puts the stock market in the "extremely expensive" category.

Can the CB keep pumping the market even higher? Maybe, but earnings season reporting starts next week, and if there are too many disappointments, we could see a significant market pullback. We're also entering the seasonal "summer doldrums", where the market typically pulls back this time of year. My guess is we get even lower earnings from last quarter, which would cause the P/E ratio to go even higher, even if the market goes nowhere. If the market goes higher, the P/E ratio chart will look like a hockey stick.

Keep these charts in mind over the course of the next few weeks to see which way the Composite Operator is going to move the markets.

Good luck next week!

 

[MrJohnRoss]

Congratulations Mr Market, you've made a new high by a couple of points. Now everyone wants to see what you're going to do for an encore...




The average man on the street is going to hear the news stories say, "The stock market hit a new high today", and think, "gosh, I'd better get in!" And that, ladies and gents, is how the big money distributes shares to the unsuspecting masses.

We're now overbought on a short term basis, with the RSI going over 70 today, before a slight pullback late in the day. There seems to be higher odds of a pullback (or consolidation) before any further meaningful advance, IMHO.

I would be careful about chasing the market here. If I was long, today might have been a good day to take some chips off the table.

F Fund (AGG) is looking very toppy here, and I think a pullback is just beginning. Of course, I've been saying "overbought" for at least a week now. Ridiculous.

Chart of Oil (USO):



USO has really been tanking, making a series of lower highs and lower lows. Note that as it hit it's high of 12.45 early last month, the RSI also hit 70, which was a warning bell. It tried a couple of times to rally, but to no avail. Perhaps we'll get a bounce at the 50% retracement level (around 10.00), or when the RSI hits the 30 area. Keep your eyes peeled.

 

[MrJohnRoss]

Mr Market is overbought, but still climbing.




RSI is at 74. This trajectory higher can't last much longer. Or can it?

I'm searching for some good news as to why the markets are higher. Here are some recent headlines:

"Energy Failures Push US High Yield Default Rate to 6 Year High" - Bloomberg

"Junk Bond Defaults Keep Climbing" - WSJ

"Negative Rates Leading to 'Day of Reckoning' Fear on Wall Street" - CNBC

"IMF Says Italy Faces 'Monumental Challenges', Cuts Growth Outlook" - Reuters

And finally:

"Buybacks Pump Up Stock Rally" - WSJ

There you go folks. Companies are cannibalizing themselves in order to give their executives fat stock option payouts, that's why the market is rallying.

Composite system remains at +3, fully bullish. How long this lasts before the music stops is the big question.

 

[Scout333]

"I would be careful about chasing the market here. If I was long, today might have been a good day to take some chips off the table.

F Fund (AGG) is looking very toppy here, and I think a pullback is just beginning. Of course, I've been saying "overbought" for at least a week now. Ridiculous."

I agree JR! I was listening to one of the financial talking heads yesterday who commented that he could think of at least 100 reasons why the market should be declining yet it just keeps on going up! Then he stated that you can't argue with success! Now that's ridiculous!

 

[Dutchy]

Thanks MJR for the great charts analysis. I've read this rally was prompted by Bernanke's visit to Japan last week and probability of Q.E. by Japanese P.M. Abe..
This causes yen to devalue increasing liquidity in the markets enabling big banks and corps., to leverage their buying 3 or 4 times.. it is all about inflating the market, bad news
be damned. Markets are manipulated. Watch yen values. Yen down, markets up and vice versa..

 

[clester]

What time frame are your charts?

 

[clester]

What time frame are your charts?

Sorry, just saw it. Looks like 60 min

 

[airlift]

Thanks MJR for the great charts analysis. I've read this rally was prompted by Bernanke's visit to Japan last week and probability of Q.E. by Japanese P.M. Abe..
This causes yen to devalue increasing liquidity in the markets enabling big banks and corps., to leverage their buying 3 or 4 times.. it is all about inflating the market, bad news
be damned. Markets are manipulated. Watch yen values. Yen down, markets up and vice versa..

Dutchy, can you please post the link you use to follow the value of the yen? Is it USD/YEN? Tia.