Entering text into the input field will update the search result below

U.S. Stock Market Weekend Update

Feb. 02, 2014 9:25 AM ETDIA, QQQ, SPY, TZA
Zedpher profile picture
Zedpher's Blog
2 Followers
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

After a turbulent week in the markets, let's see how they stand at the moment.

DJIA

The Dow has been showing short-term weakness in the IMTS since New Year's Eve, when it peaked at 0.009 (which is the usual range for mature bull market short term peaks). It entered red (negative territory) on January 22nd and is now solidly in negative short term territory. The Dow is still in a Bull Market in the IMTS (still orange in the first colored column), but is very close to leaving that area. If the Dow drops below 15627, the IMTS will give a "Go to cash" signal.

S&P 500

Much like the Dow, the S&P has weakened over the past couple of weeks, but it remains much more solidly in bull territory than does the Dow. The Dow has been the weakest of the four main indices that we follow over the course of this bull market and it is now the weakest on the way down.

One sign of trouble that showed up was when the index, back on December 31st, made a new price high at a short term reading of 0.007. Then , on January 15, it reached nearly the exact same price level but only managed a short term reading of 0.004. This weakening, along with a potential double top, showed signs that a downturn was in the making.

The S&P is still solidly in a bull market at 105.27 and would have to drop below 1728 in order for the IMTS to tell subscribers to go to cash. The last time the S&P dropped down to the white "exit longs/go to cash" area was on December 28, 2012 when it entered this zone for one day, before jumping back into bull market at 1426, and us telling subscribers to get back into the index for a year+ long bull run and a 350+ point gain.

NASDAQ

The NASDAQ is one of three bubbles that we are tracking right now for subscribers, along with the Russell 2000 and the Nikkei. To give you an idea of just how extreme prices have gotten, it would take the price dropping down to 3806 for the IMTS to signal a "go to cash" position. And even there, the IMTS would still show the index to be in a bubble.

The NASDAQ is in dangerous territory, since a downdraft at these lofty levels can mean a deep drop. While this is not a sure thing, as the index currently has a lot of upside momentum and can continue in bubble territory for a long time, signs are showing that investors are becoming fearful after a big price runup last year, rising interest rates, and emerging economy weakness. These factors could sap strength from the NASDAQ and cause a bigger drop in prices.

Subscribers will be updated regularly as the story unfolds.

Russell 2000

The Russell is currently the hottest of all the markets. The levels that it recently hit within the IMTS (0.112 yellow, and 0.06) were the highest ever recorded and even surpassed what the small cap index recorded during the Dot Com bubble. Back in December, I wrote that a 10+ correction in the Russell was imminent in the next month or two, as the index was approaching a level that it only had been at a few times before and that a severe correction was likely. The Russell then managed to go on to one more spike upwards to break previous readings before suffering a sharp drop back down to support.

Currently, even with the recent drop, the Russell is still at the a level that it has only been at a few times before. Couple that with a string of weakness and I feel that a deeper small cap correction could be underway. We are currently short the Russell (Beginning from the 1160 level) via TZA and will see how it plays out in the IMTS in order to maximize returns for ourselves and investors.

Disclaimer: We are currently only invested in TZA and hold no other positions. We may exit or change weighting on our position within the next 72 hours.

Disclosure: I am short TZA. corgano.com, ivancic.ca

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.