On The Lookout For A Bear Market

There’s a lot of doomsday prognostications in stuff I’m reading about the markets tonight but the bottom line is you have to ignore what pretty much everyone says about the markets, and just follow price.  Especially when a bear market starts because downtrends fuel all kinds of crazy speculation on where markets might go, and whether you should “buy the dip” or panic and run for the hills.  Nobody knows the future so the best course of action is to have a plan and execute it as the market action unfolds.

The major market averages are all in Stage 3 now with the Dow Jones rolling into a Stage 4 according to my Stage Analysis screening tool.


Less than 30% of stocks in the NYSE are in Stage 2 now.  That’s how weak the markets have become after last weeks’ carnage.  Notice that the Biotech sector has barely 50% of stocks now in a Stage 2, and Biotech was one of the leading sectors in the market.


The U.S. dollar is in Stage 3 now which is potentially bullish for gold which has rallied hard off of its recent bottom.  Gold is getting closer to testing it’s 30 week moving average now, even though commodities as a whole are still very weak and are in Stage 4 bear markets.


New Interview – The Real Money Show

I had a great opportunity to interview with The Real Money Show yesterday and you can find the interview on their website at therealmoneyshow.com or on iTunes.  I discussed the state of the gold and silver markets with Jeremy Wiseman, along with other topics such as the U.S. stock market, U.S. dollar, dumb money corporate buybacks in the U.S., and weakening U.S. economic data and its implications.

Weak Markets

So far this year the markets can be characterized as pretty weak across the board with few breakouts that actually do anything.  Using my Stage Analysis Screening Tool at screener.nextbigtrade.com I like to get a feel for the health of the markets by first looking at my Health page to see what sectors are strengthening and weakening.  For the last few months the number of weakening sectors continues to outweigh the strengthening sectors.


Next I like to go over to the Markets page and sort the different groupings by Stage 2.  This tells me what groupings are the strongest and what are the weakest.  In particular I like to pay attention to the % of stocks in Stage 2 of the S&P 500, NASDAQ, and NYSE groupings.  Needless to say breadth is pretty weak right now with the NASDAQ barely over 50% in Stage 2, and the S&P 500 and NYSE actually underneath 50% as of today.


Finally I like to drill in to some specific groupings, most notably U.S. sectors to see which are the strongest and weakest.  Energy has been weak for a while and I continue to expect it to remain weak while the Stage 1 base in oil plays out and wears everybody out.  We’re starting to see Industrials, Commercial Real Estate, and Consumer Staples get toppy in a Stage 3.

screener3Overall this market is very weak with the only opportunities occurring in select things like Health Care, Semis, and Financials.  I wouldn’t be surprised to see another move higher since this market has consolidated for so long but we will see if this market can muster any type of real broad based participation.  Or it could be deteriorating into a something that the bulls aren’t expecting which is a market that actually corrects.

Adding Uranium Stocks To The Stage Analysis Screener Watchlist

I’ve just added some uranium miners to the Stage Analysis Screener Watchlist, which is a curated list of stocks that I’m paying attention to for potential trading opportunities.  The idea is to keep tabs on stocks breaking out into new Stage 2 advances to get in as early as possible in a new bull move and maximize potential gains.  You can checkout the screener at screener.nextbigtrade.com.

Over time I plan on adding more functionality to the tool, in the meantime feel free to contact me if you are interested in seeing a stock list, specific stocks, or other types of analysis methods added to the tool.


CNBC Viewers Expect More Gains For The Dollar

You would think that after an unprecedented nine-month run higher without a pullback, the most extreme overbought levels ever recorded in the currency, and rampant pervasive bullishness would be enough reasons to be cautious on buying something.  Not for CNBC viewers and the U.S. dollar though!  According to this poll on CNBC’s website 80% of those polled expect the dollar to hit parity with the Euro either in March or by June, and 90% expect parity sometime this year.


Source: cnbc.com

The fact is the U.S. dollar looks like silver in 2011, Bitcoin in November 2013, or 3D printing stocks in late 2013, or maybe oil in 2008.  Or numerous other parabolic charts I could go on and on listing.  It looks like a terrifying parabola that is going to crush those late to the party.  The other two parabolic surges in the dollar were destroyed after they topped, and this parabola looks far worse.  In my view if you’re still bullish on the dollar here you are ignorant of all parabolas ever recorded in the history of the markets and you need to check into parabola rehab before you get yourself into serious trouble.