Market Review
The stock market had a lackluster week closing with a minimal change from the prior week. The bulls don’t seem to be giving up control as the market refuses to go down. The DJIA meandered around the critical 14000 level all week, but was again unable to close above it by the Friday close, as it flat-lined for the week with a tiny loss. For the week the NASDAQ Composite was down 0.05% closing at 3192.03. The DJIA declined 0.08% to close at 13981.76 and S&P 500 Index closed at 1519.79 up 0.12%. Both the DJIA and S&P 500 are still within a few percentage points away from their October 9, 2007 highs. The NASDAQ Composite still has a ways to go, as it has lagged on a year-to-date basis.
Indicator Review
Indicator #2 NASDAQ Composite and 100-dma. This indicator remains on its January 3 BUY signal with the index price well above its 100-dma. (Refer to first chart).
Indicator #5 NASDAQ Composite with MACD. This indicator is on a January 30, 2013 SELL signal. On two days this week the MACD did cross to the downside, but it was a miniscule crossover. By Friday it was again back above the trigger line, but barely. (Refer to first chart). As you can see in the chart the MACD was flat-lining for over a week and could move in either direction above or below the trigger line until a decisive move in the NASDAQ occurs.
Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest February 14th bullish reading was 42.3%which was a minimal decline from the February 7 bullish reading of 42.8%. This indicator remains on its SELL signal from January 31st.
Indicator #8 NASI Summation Index and MACD. The indicator remains on its BUY signal, although the MACD had a negative crossover the week of January 28th. Remember that the Index needs to crossover its 5 day-ema, as well for this indicator to issue a SELL signal. So watch this indicator this week for a possible downward crossover. (Refer to second chart)
Dashboard Still on a “2”Neutral signal
A chart of the Dashboard BUY and SELL signals is presented here:
A chart of the BDH Dashboard signals is presented here:
http://tinyurl.com/cth7plq
Top 5 ETFs
The Top 5 ETFs had an overall gain of 0.59% outpacing the overall market. So far this portfolio has gained 6.18% since the November 28th BUY signal compared to the average benchmark’s gain of 7.39%. EPI was sold on the open on February 11, as its ranked 14th. It provided a negative return of 4.91%. There are now three remaining ETFs in the portfolio, as no replacement was added since the Dashboard is not on a BUY signal. EFA, currently is ranked 10th, and will be sold if it drops any further. Here are the current ETF rankings:
Top-5-ETF-Tracking-February 15, 2013
Remember that Pass/Fail readings are used solely when an ETF is to be purchased not when they are already in the portfolio. Only if an ETF drops below rank 10 or it is stopped out 9 (based on your stop LIMIT price) should it be sold. Note that the remaining three ETFs have a “fail” rating since their MACD reading is ever so slightly below 0 (meaning a cross-over to the downside). These ETFs are mirroring the negative MACD crossover of Indicator #2 which is wavering above and below the trigger line. This is a cautionary sign that an overall market decline may have begun, ever so slightly so far.
Please note that I do not post changes to the ETF Top 5 portfolio during the week. It is your responsibility to check the Decision Page daily to see if any ETFs should be sold and replaced if they fall below rank 10. Any changes will be reported in the weekend blog. Additionally, make sure a Stop Limit order is placed on each position according to your risk tolerance. The Decision Page link is as follows: http://www.etfscreen.com/buydonthold/bdh-decision-page.php
Dark Liquidity
www.dark-liquidity.com/BDH2new.php independently tracks the BDH performance. The ETFs year-to-date are up 3.52% which is well below that of the major indexes. This portfolio initially was invested mostly in international ETFs which have underperformed the U.S. domestic ETFs. Year-to-date the DJIA is leading the race up 6.70%, followed by the S&P 500 up 6.55%, and the NASDAQ Composite up 5.70%.
Conclusion
The markets advance stalled this past week with minimal price changes, but near yearly highs. The NASDAQ is now the laggard, as it valiantly tries to move ahead of the pack, while the DJIA again was unsuccessful in overtaking the 14,000 level and remaining above that level on a consistent basis. This week the market experienced minimal volatility, but still held up well. We will what happens the next few weeks. The market usually makes a decisive move after stalling, so be on the lookout for it. Unfortunately, we do not know which direction it will take, but my guess would be that it will be in a downward direction based on the market’s lethargic nature and loss of momentum.
Whether the DJIA and S&P 500 are able to reach their 2007 peaks in the next few weeks remains to be seen. If it does reach those levels, then the question is whether or not it can exceed those levels or retreat a bit. We’ll have to wait and see what happens.
The market is extremely overbought and overdue for a correction.
It’s being pushed up not very convincingly by latecomers who don’t want to miss the party.
Once the last of the bull wannabes has entered so belatedly, there will be no juice left to push it any further and the market will fall back. It’s happening soon.
Fasten your seat belts!
I think the pullback/snapback/correction is here as of today. The major markets were way overbought on both the weekly and daily charts, both of which reached 70 RSI reading. While the markets can stay at 70 RSI on the daily charts for a while, the kiss of death comes when the weekly charts become this overbought too. The only reason that the NASDAQ Composite didn’t get to 70 RSI was because Apple (AAPL) was in its own bear market and makes up a lot of the movement in the NASDAQ Composite. I agree with Ed Sadowski above, fasten your seat belts!
Interesting observations.