Are we on Mt Everest - Part 2.

On April 4 and on Feb 5 of this year. I wrote about how tops are being formed.

http://bigbullandbigbear.blogspot.com/2013/04/are-we-on-mt-everest-yet.html
http://bigbullandbigbear.blogspot.com/2013/02/are-we-on-mt-kilimanjaro.htm

We are now on April 20 looking again for the same answers that we were looking at.
Now since I wrote the last article 20 more days have passed and we again go back to Mr. Time to give me answers.

Lets look at Market Breadth.

Last time when we looked at the charts, they were at the extreme bullish levels and a turn was right around the corner but turn had not arrived.  We said that we would look for a turn and a big down candle in the in the market and we did that that turn and a big candle down day and all three Bullish percent Indices have turned downwards which is telling us that the Ball has now been passed to Bears and one should not be surprised to see big down days in upcoming days to weeks. 

Lets look at the moving averages to see what to expect. The  8 /21 Exponential Moving average has now crossed over in one of three charts. RUT is definitely in the bearish territory while Dow Jones and SPX charts are right on the verge. 

RUT chart has also formed the ugly looking Head and Shoulders pattern. It tried to trigger this week but bulls came in to fight and defend the 900 -905 levels on the Russell chart. The same happened with SPX chart.  SPX chart tried to breach 1540 area but then it was defended this week.  Also remember that 1540 is the 50 day Moving average too and historically long term trends tend to have a bounce at that Moving average before failing down.

So for now the charts have not fully broken down but Bullish Percent Indices are leaning towards bearish side.

So if you are still long in your 401K account and IRA accounts, use the bounce that will come in next days/week to get out of the position before the Train wreck happens.

Hopefully this should help you protect your 401K and IRA accounts.  If you still need help with your overall trading goals, 401k etc and this type of detailed analysis, you can sign up at www.Bigbullbigbear.com

Are we on Mt. Everest Yet?

I wrote on Feb 5 2013, an article about Tops (http://bigbullandbigbear.blogspot.com/2013/02/are-we-on-mt-kilimanjaro.html) and we are now at April 1 and the same question gets asked again. After a great first quarter, and a ugly day in markets today, the same question Are we on Mt Kilimanjaro or Mt Everest yet.

The only person who has answer to this question is Mr. Time.  The game of stock market is won by people who tries to put the odds in their favor at every given instant of time.  Every person who buy or sells stocks is making a prediction at that point in time on the direction of the stock. The only time he will make money is that Market gods favor him and stock moves in the direction he predicted.

Now if he gets this done in a consistent manner then his profits and accounts will grow. Otherwise his /her portfolio will die the death of thousand cuts.

So next question in your mind is how to predict ?

There are multiple various ways to predict:
1). Market Breadth
2) Moving averages
3) Chart Patterns which are based on human behavior.

So going back the question are we on Mt Everest

Lets look at Market Breadth.

These are the charts of bullish percent indices on SPX and Nasdaq -100 stocks. These charts swing from 20 levels to 80 levels. 80 levels means extreme bullishness and 20 levels means extreme bearishness. Ideally one should buy a the turn near 20 levels and sell at the turn near 80 levels.

Both of these charts are telling us that we are at the extreme bullish levels and a turn is right around the corner but the turn has not yet arrived.. The day these charts start to reverse and you see the market selling off with big candle till then one needs to remain long.

One of the other way to position is to buy at 20 levels before the charts turns upwards and then sell before that chart turns downwards from 80 levels and just target the core of the move. However history has shown the fat tails have been very profitable. So adding the fail tail gains can provide the extra oomph to your portfolio.

Now lets look at the Moving averages: 

All these three charts has their latest lows still intact.A close below the 21 period EMA would indicate further weakness. So the goal is remain long till the stops below these averages are taken out. Otherwise keep trailing the upside moves and let the profits come in.

I will go in the details of chart patterns in a later article.

If you still need help with your overall trading goals, 401k etc and this type of detailed analysis, you can sign up at www.Bigbullbigbear.com