Where Are We In the Stock Market Cycle?

Posted by Jason Ayres on Aug 29, 2014 11:55:49 AM

I just finished our optionsource.net BreakOut Trader Analytics session where I spent most of the hour discussing why we are at a potential turning point in the stock market cycle. I'm not suggesting that we are facing a new bear market, but we are certainly overdue for a pull back and, more importantly, now is not the time to be chasing stocks.

Back a few weeks ago I suggested that we had an opportunity to catch a swing higher and referenced several technical indicators that lent credibility to that outlook.  You can review that forecast by referencing my blog post titled Where Will The Stock Market Action Take Us This Week?.

Since then, the S&P hit 2000 this week, all be it on light volume and low momentum. While I believe that there is the potential for a continuation higher over the rest of the year, it is highly probable that there will be some healthy profit taking by money managers who have enjoyed substantial gains over the first three quarters of the year. Many bull market supporters on CNBC and BNN are suggesting that we are going to see money coming off the sidelines as result of having not participated in the the present rally. This may indeed be the case, but I believe that in order for investors to feel compelled to put that cash to work, they have to feel they are getting a bargain. After all, most investors and money managers look to buy low and sell high. So the question is...is this a "buy low" opportunity here? I think not.

Below is a typical diagram of a stock market cycle.  Let me preface this by saying that I am not suggesting that we are in the final stages of an equity bubble.  Rather, look at the below diagram as a reflection of a typical trend.  Be it long term or short term, all trends have cycles.

market_cycles

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A Short Term Bearish Trade Idea As TESLA Momentum Slows

Posted by Jason Ayres on Aug 22, 2014 10:59:50 AM

Many investors are familiar with TESLA (TSLA) for their cutting edge, high performance electric vehicles and industry changing advancements in technology .  Since 2013 the shares have advanced from $30.00 to a recent high of $260.00.  This advancement has had its retracements over the last few years as well.  As with many companies doing business in advanced technology, investors are buying into the future potential.  When certain hiccups surface, investors tend run for the exits to insure that profits are locked in.  This can result in a volatile drop in share value and a short term bearish trade idea for an educated options trader.

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Pending Market Crash or Buy on Dip on the S&P500?

Posted by Patrick Ceresna on Aug 11, 2014 10:20:12 AM

Markets are scary again.  The Kumbaya Market has come and gone, but is it time to run for the hills? In spite of the emotional intensity that always accompanies market corrections, the price action does not indicate anything different than we have seen in the past market pullbacks.  So is this time different? Let’s make some technical observations. 

First off, here is a chart of the number of stocks on the NYSE that are trading below their 50 day moving averages.  Notice that selling was intense enough to force the % of stocks to under 30% and that the level is in line with the selloffs of September 2013 and February 2014, each of which resulted in a solid “buy on dip” opportunity.

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Topics: Crash Alert

Where Will The Stock Market Action Take Us This Week?

Posted by Jason Ayres on Aug 4, 2014 12:09:00 PM

scared_investor

We held off posting any new short term Break Out Trade opportunities for our optionsource.net memberslast week as we awaited a barrage of economic data was likely to influence the short term stock market action.  To re-cap, we had U.S. GDP, an FOMC statement, monthly non-farm payroll and employment change as well as the overhang of the Russian sanctions, continuing concern in the Middle East and to top it all off, an Argentinian debt default or "credit event" as the media has been calling it.  All of this created a significant amount of uncertainty and subsequent volatility in the stock market. Sometimes no trade, is the best trade.

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