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A Chizophrenic Market?

Triple digits down on the Dow last Tuesday, followed by a triple digit gain on Wednesday only to get a close triple digit haircut on Friday. This shows that while the market is trying to bounce off deeply oversold levels it is unable to hang on to the gains because of economic conditions that don't match the triple digits enthusiasm.

The "iffy" jobs report last Friday mirrors the murky U.S. economy and so the market continues its volatile trading activity that has characterized Wall Street so far this year. For the last six years investors have welcomed iffy economic reports as a sign that things out there are so bad they are actually good. They kept the Fed in a dovish frame of mind, keeping interest rates low and "easy-money" QE spigots wide open.

But now that the Fed has started to hike rates and taper these QE spigots, bad economic news is seen as bad while good economic news is still being perceived as bad too and that makes for a SNAFU situation in the stock market with major indexes swinging in and out of the red.

Note that these three major indexes DOW, SPX and RSP show extremely bearish Moving Average configurations with wide gaps between the red lines below the green lines. Now that will certainly keep the bulls in check.

Yet, the MACD momentum bars are strongly bullish on top of their respective demarcation lines which, of course, favor the bulls in this game [SPXL.] Talk about a market with a split personality!

Meanwhile, the bears in this market [SPXS] are losing altitude even though they are still well supported by an extremely bullish [for the bears] MA lines configuration [red line above the green.]

But also note that the MACD momentum bars are negative below the demarcation line which indicates that the bears' supremacy in the market is coming to an end and that the bulls will soon be back in charge of this game again.

But investors' confidence [XIV] in this market is still pretty low. The MA lines configuration remains sharply bearish [large gap between the red line below the green] while the RSI strength indicator seems to be stuck in bearish territory as well.

But note that the MACD momentum bars are still working on a foothold above the demarcation line. This means that something positive is happening with the confidence in this market.

No meaningful market advance can succeed when the risk-tolerance [X:X] in this game is as lousy as it appears to be on this chart. The MA lines configuration is extremely bearish [large gap between the red line below the green] while the RSI strength indicator along with the MACD momentum bars are in bearish territories as well.

A couple of weeks ago NASDAQ [NAS] was in a nice consolidation mode, but then its main component [IGM] technologies developed a nosebleed and down came the NAS index.

Technologies are looking particularly vulnerable here. The MA lines configuration is extremely bearish with this wide gap between the red line below the green. The RSI strength indicator has slipped into bearish territory and the MACD momentum bars are not looking all that healthy either.

But keep in mind that this lousy scenario will make for an excellent buying opportunity-someday!

The commodity index [GTX] is trying hard to improve and for now that calls for consolidation. But with the MA lines configuration still bearish [red line below the green] and the RSI strength indicator in bearish territory it is hard to see what could get commodities to rally again any time soon.

Yet, the MACD momentum bars are strongly above the demarcation line and that means something bullish is happening inside this index.

The bulls [BPS] are trying hard to get back into this game and with the RSI strength indicator back on the neutral line again and the MACD momentum bars solid on top of the demarcation line, they could just make it.

But with the MA lines configuration so extremely bearish with this large gap between the red line below the green, no chance for now.

This market-forecasting junk-bond canary [JNK] is projecting a bleak scenario for the bulls. Although the MACD momentum bars are still positive on top of the demarcation line, the MA lines configuration with the red line below the green remains sharply bearish. Meanwhile the RSI strength indicator is still in its bearish territory, all of which doesn't sound like a bullish tune by this bird.

The yellow metal [GOLD] keeps projecting a doomsday scenario for the market and probably for the economy as well. Everything about gold has turned sharply bullish. While this index is soaring it remains well supported by a strongly positive MA lines configuration with a large gap between the red line above the green. But the RSI strength indicator shows that this index is overbought, and that could pull gold down a bit.

Meanwhile the MACD momentum bars remain bullish on top of the demarcation line as they have been since early December. All of this suggests that gold is on its way to higher highs.

Oil [WTIC] is trying to find a bottom here and so keeps consolidating. Even though the momentum bars are solid on top of the demarcation line, the large bearish gap between the red MA line below the green line will probably keep a lid on any of oil's rally attempts.

Last Friday,Wall Street posted its worst January since 2009. It shows that markets are having a rough time so far this year as investors are anxious over the slide in oil prices, global economic growth and the diverging monetary policies around the globe.

The question now is, was all of that washed out in January or is there more damage ahead. So, as usual, we have to observe the charts to see what really is going on with this game. Yes, there is money to be made in the market but only at the right time with the right play.

But now is not the time and it is still the best to just stay at the sidelines and watch the market unfold. Patience is called for because for most of the time the market is neutral with neither bulls nor bears having an advantage. That is the time to watch and get ready in case the market unfolds your way.

Here are some favored ETFs to keep on tap for when the time is right to trade.

ETF sectors:

Energy, Discretionary, Industrials, Materials;

Leveraged Bull ETFs:

NASDAQ 2x (NYSEARCA:QLD), Materials 2x (NYSEARCA:UYM), Small-Caps 3x (NYSEARCA:TNA), DOW 2x (NYSEARCA:DDM), Mid-Caps 3x (NYSEARCA:MIDU), S&P 500 2x (LLSP), Technology 3x (NYSEARCA:TECL), Energy 3x (NYSEARCA:ERX), Semis 3x (NYSEARCA:SOXL), Gold 2x (NYSEARCA:UGL), Gold Miners 2x (NYSEARCA:NUGT), Jr.Gold Miners 3x (NYSEARCA:JNUG);

Non-Leveraged Long ETFs:

Russell 2000 (NYSEARCA:IWO), Financials (NYSEARCA:IYG), NASDAQ (NASDAQ:QQQ), Semis (NYSEARCA:XSD), Mid-Caps (TWS), S&P 500 (NYSEARCA:IVW), Small-Caps (NYSEARCA:RZV), Biotech (NYSEARCA:PBE), GOLD (NYSEARCA:DGZ), Gold-Fund (NASDAQ:PSAU), Gold Explorers (GLDX);

Leveraged Bear ETFs:

S&P 500, 2x (NYSEARCA:SDS), Financials 3x (NYSEARCA:FAZ), NASDAQ 2x Small-Caps 3x (NYSEARCA:TZA), Russell 2000, 2x (NYSEARCA:TWM), Gold-Miners 2x (NYSEARCA:DUST), Mid-Caps 3x (NYSEARCA:MIDZ), Technology 3x (NYSEARCA:TECS), Energy 3x (NYSEARCA:ERY), Semis 3x (NYSEARCA:SOXS), Commodity 2x (NYSEARCA:DEE), DOW 3x (NYSEARCA:SDOW)

Non-Leveraged Short ETFs:


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