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Kevin Wilde
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Kevin Wilde is the chief trading strategist at alphaking.com and a Marketocracy.com Master. Investors can follow his trading advisories via his Daily AK newsletter, or have their money run for them via Marketocracy.com money management services, where Kevin's trades will be automatically entered.
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  • The End Is Nigh - Get Ready To Sell 3 comments
    May 17, 2013 8:58 PM | about stocks: QQQ, DIA, SPY

    If you would like to track updates on the charts shown below sign up at alphaking.com, click on the verification email, and get SIX months access to my on-line newsletter for free!

    First off, bonds have triggered a new trend sell signal, as have muni-bonds, with high yield not far behind. This could either be a sign that money is moving from defensive sectors of the markets to more cyclical and aggressive, or the early warning shots that the FED liquidity bubble is in the process of popping. If it's the latter, stocks should not be far from peaking and joining the bear slide misery.

    There are four phases of the bull/bear cycle, with the current phase the orange line high risk - blow off - bull. The first chart below shows the average monthly returns for each phase of the cycle, with the black line current trading action for 2013 for the NASDAQ. That chart says we are overdue the corrective churn period highlighted by the numbers 2 through 5. If the bears score a big win during that expected corrective churn phase, then the next Great Bear has likely begun, with the maroon extreme line showing how those progress once confirmed. Update continues below chart…

    (click to enlarge)The second chart shows the Dow Jones Industrial Average rocketing to a touch of the upper trend-line of an expanding triangle with point E near the 16,000 level. That was the target of my 2013 forecast I wrote about late last year, with the Dow a week or so of further rally away from touching that potential bull killer line. Parabolic moves coming at the end of prolonged bull markets reverse with similar speed experienced during the upslope, with this chart suggesting the bulls better be ready to hit the sell button on any further rally push. Update continues below chart…

    (click to enlarge)

    The third chart below focuses more closely on the usual path stocks takes during high risk - blow off - bull phases, using other high risk years of 1987 and 2007 as a comparison, especially in regards to the position and expected movement of the contrarian indicator on top, and trend trading indicator at the bottom of the chart.

    That comparison shows the white line of the current NASDAQ tracking returns experienced during the 1987 run up in the middle rally position. If so, then we are facing a swift correction that drives the contrarian indicators from the red circle to the green buy one, to be followed by one final rally surge later in the summer.

    The bears may score the big win that confirms the bull market is already in the final rally position, though I believe the middle rally position is best fit, especially in regards to the trend trading indicator at the bottom racing toward the yellow circle at the high risk - exit - line, which is my cue to take profits on longs and head for the hills.

    That said, the position of the Dow Industrials and the upper trend line of that expanding triangle shown above says the bulls are skating on very thin ice, with the prime question just how elaborate and prolonged the topping process will be? We should have a better clue on that once the corrective churn begins, though for now the set-up says clearly to get ready to sell… (click to enlarge)

    If you would like to track updates on those charts you can take a six month free trial to my alphaking newsletter. Simply sign up for the 30 day trial at alphaking.com, click on the verification email, and we will adjust to six months. I run four tracking portfolios - so lots of stocks to buy and sell! - as well as a 401K advisory for those looking to make and protect money in their retirement nest-egg.

    Disclosure: I am long QQQ.

    Stocks: QQQ, DIA, SPY
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Comments (3)
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  • You had the global mortgage market collapse, then the Euro sovereign debt collapse, now I see the corporate bond collapse as zero interest rates are implemented by all central bankers in an attempt to stem the tide of losses. Fed soon to stop sopping up bad debts of too big to manage banks and four will see the exit door and exist no more.
    17 May 2013, 10:34 PM Reply Like
  • Thanks for a fascinating update. Summation index now +1192, with +1000 considered overbought. It was at +1100 end of last January when many stocks and indices began correcting and then it slid to +600. However, the slope is still positive and it will take some churning to roll over to negative. McClellan oscillator backed off from +60, a frequent top, a couple weeks ago to zero and started rising again and should have room to rally back to +50 now that momentum is positive again. Looks to me like indices have a little more room upward. Sell in May (again)? Need a major intra-day reversal (open up, close down, and a drop below last weeks trading range, and probably a weekly reversal to get any sustained downward movement in indices.
    18 May 2013, 06:03 PM Reply Like
  • Author’s reply » I read an interesting piece on margin debt from safehaven (google it) where is shows a chart of margin debt and stock market peaks, where margin debt starts to roll-over before stocks do. That suggests the middle rally - correction - that lead to new highs in final rally position is probably correct, where we can expect divergences to emerge post correction.
    19 May 2013, 05:38 PM Reply Like
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