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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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  • TA Moment Of Truth 3 comments
    Jan 24, 2014 7:15 PM

    Trend Watch --

    Trends: semis +, transports +, small caps +, energy -, China -, gold -, UK +, financials +, copper +, high yield +, munis +, US bonds +, emerging markets -, Yen carry trade +

    The trend momentum power rating has slipped a notch to a 70% bull.

    Energy joined gold, China, and emerging markets in sell mode this week, with many other indexes breaking down ahead of potential change in trend.

    Next week should answer the question of whether the top is in, or near the corrective low that proves to be a great buy the dip moment.

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

    High risk blow off phases are like this - quick rallies that soon falter, resulting in a corrective swoon, that takes off again just when the bears think are about to feed, until the bulls fail to prevent the bears feeding, then the top is in and all hell breaks lose.

    Next week should provide the answer to the new bear versus buy the dip! conundrum.

    The first chart below - which is my forecast for 2014 - shows the bear potential, as the Dow Industrials are reversing hard after struggling at the upper trend-line of an expanding triangle, with the dotted red line my expectation of what happens once the stock market starts to reverse for real.

    This is based on the rules of triangle analysis, as well as the position of the bull/bear cycle.

    (click to enlarge)

    The next chart shows the current S&P500 performance to start 2014 (black line) matched against the orange line expected in high risk blow of risk phases. The position of that black line is subject to change, as it uses monthly data.

    Currently the S&P500 is tracking between the yellow line of moderate churn years and the maroon one of extreme risk - new MAJOR bear market underway - one.

    How January closes out - next week! - should set the S&P500 on the path it is likely to take for the remainder of 2014.

    (click to enlarge)

    The next chart shows the trend - up - confirmed with a new sell from the hedging indicator - I am buying TZA as a hedge (10% of total portfolio value,) with the trend trading indicator at the bottom of the chart moving into the low risk - enter (longs) - zone.

    Low risk in this regards means losses are likely to be very modest if the trend turns south for real, rather than any bet on probability of stocks heading higher from here.

    And to top this situation off where next week answers the question of whether the stock market heads on its next rally phase from this position, versus the bear starting with red ink for January as the month closes, the FED have a two day meeting - when taper versus no taper is warred over (again) - all landing with $16 of FED QE bond buying to help sooth the pain of their decision.

    Needless to say, we have the fuel for next week to be quite spectacular and volatile, though the direction of the fireworks is very much in question, with the fate of 2014 in the hands of eager bears and nervous though greedy bulls, as well as a clueless FED who have put their heads in a tight noose and asking, "shall we pull the lever, Janet?"

    Have a great weekend!

    -Kevin

    (click to enlarge)

    Disclosure: I am long SSO, TZA, .

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Comments (3)
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  • Jer01
    , contributor
    Comments (9) | Send Message
     
    Hi Kevin,

     

    Interesting analysis. I am concerned about the lack of significant corrections in the stock market over the past 2 years as you are.

     

    The fact that the DJIA is at the top of the triangle in the DJIA l t chart should give us caution here. The problem I have with it is that there is no confirmation of that in any of the other major indices. The SPX chart has significantly broken above its up sloping line in May of 2013. IXIC and the small and mid cap indices all also look very strong on their l t charts, with no resistance areas in sight. The DJIA seems to be all alone in its cautionary tone here.
    25 Jan, 03:15 PM Reply Like
  • lovermann
    , contributor
    Comments (63) | Send Message
     
    i dont see reason the market to correct significantly, something must happen in the world that triggers the fall. what will be, and when?
    23 Feb, 06:08 AM Reply Like
  • Kevin Wilde
    , contributor
    Comments (82) | Send Message
     
    Author’s reply » The stock market is extremely overbought in the intermediate, short, and long term, with record margin debt and coming off the highest active money manager bullish sentiment reading ever recorded. History shows that that is the recipe seen at important market peaks when trees that try to grow to the sky fall over of their own weight.
    25 Feb, 11:24 AM Reply Like
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