Thursday, April 26, 2012

Trend change

It's 3:30 pm and need to due a market update. after hours I'll come with details.

I've got a "buy" signal this morning on hourly chart that is also confirmed on two hours chart.
I am not very convinced about this leg up since the "buy" and "sell" signal came out one after the other with two little time in between. Statistically we are entering a period of time not too favorable to stocks (you know the "sell in May and go away" cliche) and the situation in Europe is far from over but a "buy" signal is a "buy" signal and market may defy logic one more time.

4 pm update

No big changes at closing time, SPX just lost two points but all the technical aspects remain the same. The big question now is how much should I trust the new "buy" signal? On one hand I am suspicious since too many signals were generated in a relatively short period of time, a clear indication that market is confused. On the other hand all "buy" signal worked well in the recent past, what I had problems was with the "sell" signals that proved to be whip-saws in the end.

Market is now bullish on all time frames. We may see another attempt to establish another 4-year higher high, above 1,420. Market is just 20 points away from this peak. after that it's hard to anticipate what is going to happen next. One possibility is a repeat of last year scenario with market trying unsuccessfully to establish a 3 year higher high followed by a drop in August. However, the situation at the fundamental level is not exactly the same as last year. For now let's pay attention to this new "buy" signal.

Meantime I am going to play a little bit with individual stocks. I consider them more dangerous than the index ETFs but they may work pretty well if carefully chosen. I'll let market settle down a little bit before re-entering index ETFs.

One such individual stock is JCP. Yesterday the stock was upgraded and I noticed a possible change in trend. By coincidence the same pair of EMAs and SMA works well for JCP and SPX. I want to stress this out, when dealing with individual stocks one need to find the best pair of EMAs.

I like JCP since it trades very nicely both up and down so I can use EMAs crossing. If the stock is very volatile forget it, you cannot use EMAs. I'll look at other stocks in the next few days and I am going to let you know if I found something interesting.

No comments:

Post a Comment

Thank you for your feed-back