Market Review
The market was doing well this week until the Friday decline, mostly based on the failure of the politicians to agree on the Fiscal Cliff situation. Perhaps after Christmas they will finally come to a mini-agreement that puts off the major decisions until 2013. Nevertheless, the stock market closed off the Friday lows which was encouraging, and the market averages closed up for the week, after two weeks of drifting nowhere.
For the week the NASDAQ Composite was up 1.67 % closing at 3021.01 which was above the critical prior support level of 3000. The S&P 500 Index closed at 1439.15 gaining 1.17 % for the week, and still above critical support of 1400. Lastly, the DJIA closed at 13190.84 up 0.43% for the week and still above critical support at 13000.
Indicator Review
Indicator #2 NASDAQ Composite and 100-dma. Although this indicator issued a BUY signal mid-week (refer to earlier blog), it gapped down and closed will below the 100-dma on Friday, thereby reverting to a SELL signal again.
Indicator #5 NASDAQ Composite with MACD. This indicator is on a BUY signal. (Refer to upper chart), and is moving higher, although it tilted slightly lower on Friday due to the price decline.
Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest December 19 reading was 46.4% bullish compared with the December 12th reading of 43.2% bullish. So investors have become more bullish over the past week’s survey period.
Indicator #8 NASI Summation Index and MACD. This indicator is bullish (refer to second chart).
Dashboard on “3”BUY signal
Dashboard-V2-December 21, 2012
A chart of the Dashboard BUY and SELL signals is presented here:
http://stockcharts.com/h-sc/ui?s=$COMPQ&p=D&yr=2&mn=0&dy=0&id=p50034199149&a=250074893
Top 5 ETFs
The Top 5 ETFs registered a mixed week. So far this portfolio is up 1.98% compared to the benchmark average of 1.32%. So far so good. The link to the current portfolio and statistics is here:
Top-5-ETF-Tracking-December 21, 2012
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 at www.etfscreen.com/buydonthold (second item on upper right side of screen) to see if any ETFs should be sold and replaced. Any changes will be reported in the weekend blog. EPI is currently ranked #7 and was at #10 during the past week. Make sure to check on EPI during the week to see if it drops below rank #10.
Additionally, make sure a Stop Limit order is placed on each position according to your risk tolerance. Be careful with your stop placement and percentage used, as year-end distributions may trigger stops that are too tight.
Dark Liquidity
www.dark-liquidity.com/BDH2new.php provides the BDH strategy results performance for the year 2012 of 13.24%. This compares favorably to the 7.97% gain for the DJIA, the 13.72% gain for the S&P 500, and 15.96% gain for the NASDAQ Composite.
Conclusion
This market made progress last week, but ended on a sour note as mentioned earlier. The Fiscal Cliff will have a major impact on the market action next week. We’ll have to wait and see what develops. Be patient and do not make emotional decisions on your investments based on news report. That is the sure way to make mistakes that you’ll regret.
I wish everyone a Happy Holiday and hope you have a terrific year-end.
With the strong market the past few days, most likely due to some sort of agreement on the Fiscal Cliff, even if very modest, the stock market has had a nice run-up. At today’s close the NASDAQ Composite Index solidly broke through its 100-dma to the upside. Therefore, Indicator #2 is now on a new BUY signal (refer to chart) which pushes the Dashboard to a “4″ reading.
The NASDAQ can continue moving higher or consolidate around this moving average line. I will not post through Friday,if the index falls below this moving average as it does not impact the “3″ buy signal formerly in place.
A full post will occur this weekend as usual.
This will be a two-part report this week. Part II contains another website that tracks a version of the BDH V2 strategy.
Part I. Market Review
This is the second week in a row where the market has been marking time awaiting the outcome on the fiscal cliff situation and the European financial situation. For the week, the NASDAQ Composite was down 0.23 % closing at 2971.33 (with large intra-day moves in Apple’s price) still below the key support level of 3000. The S&P 500 Index closed at 1413.59 losing 0.32 % for the week, but still above critical support at 1400. Lastly, the DJIA closed at 13124.94 down 0.15% for the week and still above critical support at 13000.
Indicator Review
Indicator #2 NASDAQ Composite and 100-dma. This indicator is still on a SELL signal. The NASDAQ is now about 40 points away from crossing over its 100-dma to the upside. The index actually crossed above that moving average on Tuesday and Wednesday intra-day, but was unable to hold its gains and closed below it.
Indicator #5 NASDAQ Composite with MACD. This indicator is still on a BUY signal (refer to upper chart), however the indicator is starting to turn over and a further market decline will result in an imminent downward crossover for a SELL signal on this indicator.
Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest December 12th reading was 43.2% bullish compared to the December 5 reading of 42.2% bullish. So investors have become a bit more bullish in the past weekly survey period.
Indicator #8 NASI Summation Index and MACD. On Friday, November 23rd the Summation Index experienced an upward crossover of its 5-dma. And on November 27 the MACD had a positive crossover resulting in a BUY signal for this indicator (refer to second chart). This index and MACD lines are still moving higher.
Dashboard Remains of “3”BUY signal
Indicator #5 is in danger of a negative crossover this coming week which would reduce the Dashboard to a”2” NEUTRAL reading if it occurred.
Dashboard-V2-December 14, 2012
Top 5 ETFs
The Top 5 ETFs registered a mixed week. So far this portfolio is up 1.86% compared to the benchmark average of 0.26%. So far so good. The link to the current portfolio and statistics is here:
Top-5-ETF-Tracking-December 14, 2012
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. Any changes will be reported in the weekend blog. EPI is currently ranked #7 and was at #10 during the past week. Make sure to check on EPI during the week to see if it drops below rank #10.
Additionally, make sure a Stop Limit order is placed on each position according to your risk tolerance.
The link to the Decision Page: http://www.etfscreen.com/buydonthold/bdh-decision-page.php
Dark Liquidity
www.dark-liquidity.com/BDH2new.php provides the BDH strategy with 2012 performance results of 13.54%. This compares favorably to the 7.45% gain for the DJIA, the 12.42% gain for the S&P 500, and the 13.86% gain for the NASDAQ Composite over the same time period.
Conclusion
This was another week of low overall stock market movement and volatility. The fact that the NASDAQ is declining is not a good sign, as that index typically leads the market. The NASDAQ Composite in now below its 200-dma, the 50-dma and the 100-dma. This deterioration, if not improved upon by rising prices this week will lead to further market declines.
Remember that December 18 is the key date for a compromise of some kind on the fiscal cliff, as Congress recesses on December 21 and needs three days minimum to pass any legislation presented to it. Therefore, as far as the fiscal cliff is concerned the key date is December 18 not December 30.
Part II. http://chartmill.com/buydonthold.php
Chartmill.com has posted a version of the Buy Don’t Hold V2 strategy on its website with the link provided above. This is updated as necessary.
Their free site at http://chartmill.com provides a wide array of technical indicators for stocks and ETFs. The BDH strategy variation is found in the Systems tab, third item down. You can register for free and take advantage of this site’s vast capabilities. Check out the basic and advanced charts, and stock screener, sector analysis and breadth tabs. Those of you who enjoy increasing your knowledge of technical analysis will benefit from this site’s numerous features.
The BDH V2 strategy was modified by this site’s owners. They include Indicator#1 which I no longer use. They use short selling which I don’t use. They use the S&P 500 to track the results compared to the NASDAQ Composite which I use. And they don’t use a confirming MACD indicator on Indicator #8. However, it is interesting to see their results and their description of the model.
Market Review
This week the market marked time awaiting the outcome on the fiscal cliff and other financial matters coming out of Europe. For the week the NASDAQ Composite was down 1.46 % closing at 3010.24 with big swings due to Apple’s volatility of 20 to 30 points a day. Although just 9 points from its 100-dma at the close last Friday November 30, and a strong opening this past Monday, the NASDAQ lost ground this week and closed at 2978.04 below the key support level of 3000. The S&P 500 Index closed at 1418.08 gaining 0.13 % for the week, and still above critical support of 1400. Lastly, the DJIA closed at 13155.13 up 0.99% for the week and still above critical support at 13000. Overall this was a lackluster week for the markets resulting in a rest from its previous two week advance. Based on the continued stalemate on the budget situation the market’s performance was better than expected.
Indicator Review
Indicator #2 NASDAQ Composite and 100-dma. This indicator is still on a SELL signal , but the NASDAQ is now about 46 points away from crossing over its 100-dma to the upside. (Refer to first chart).
Indicator #5 NASDAQ Composite with MACD. This indicator is on a BUY signal. (Refer to upper chart).
Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The December 5 reading was 42.2% bullish compared with the November 28th reading of 40.9% bullish. So investors have become a bit more bullish in the past weekly survey period.
Indicator #8 NASI Summation Index and MACD. On Friday, November 23rd the Summation Index experienced an upward crossover of its 5-dma. And on November 27 the MACD had a positive crossover resulting in a BUY signal for this indicator (Refer to second chart).
Dashboard Remains of “3”BUY signal
Top 5 ETFs
The Top 5 ETFs registered one sale as of Tuesday night. SLV fell to rank 12 and was sold on the Wednesday open. This was replaced with EPI, the highest ranking “PASS” ETF not currently held. As a Dashboard BUY signal is still in place, this purchase is warranted. This change is reflected in the accompanying table.
Top-5-ETF-Tracking-December 7, 2012
The link to the Decision Page: http://www.etfscreen.com/buydonthold/bdh-decision-page.php
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. 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.
Dark Liquidity
www.dark-liquidity.com/BDH2new.php provides the BDH strategy results performance for the year 2012 of 13.36%. This compares favorably to the 7.60% gain for the DJIA, the 12.74% gain for the S&P 500, and 14.09% gain for the NASDAQ Composite.
Conclusion
This was a week of low overall stock market volatility. Except for the weakening NASDAQ, the other two market averages are holding up well. The fact that the NASDAQ is declining is not a good sign as that index typically leads the market. So be careful here.
If you are very concerned about the outcome of the fiscal cliff situation, you can sell a portion or your entire ETF position before December 18, if there has been no resolution by then, and re-enter after it is resolved, assuming there is still a Dashboard BUY signal in place and we haven’t gotten too overbought. Congress recesses on December 21 and needs three days minimum to pass any legislation presented to it. Therefore, as far as the fiscal cliff is concerned the key date is December 18 not December 30.
Alternatively, you can retain your ETF portfolio and wait for any Dashboard sell signals. I’m not recommending the first option. It is your decision based on your own specific financial situation and your assessment of the situation.
Market Review
In Tuesday night’s blog, I reported that the Dashboard signaled a BUY signal as the $NASI had a MACD crossover to match its Summation Index crossover. This resulted in a purchase of the five top ranked ETFs at the opening price on Wednesday morning. The timing could not have been more perfect as the market gapped down on the open and then precede to wind its way higher the rest of the day.
For the week the NASDAQ Composite was up 1.46 % closing at 3010.24, just 9 points from its 100-dma, and above the previous support level of 3000. The S&P 500 Index closed at 1416.18.11 gaining 0.50 % for the week, and above it critical support level of 1400. Lastly, the DJIA closed at 13025.58.68 up 0.12% for the week and above critical support at 13000. Overall this was a decent week for the markets and the second weekly advance in a row.
Indicator Review
Indicator #2 NASDAQ Composite and 100-dma. This indicator is still on a SELL signal , but the NASDAQ is only 9 points away from crossing over its 100-dma to the upside to generate a BUY signal resulting in a Dashboard “4” signal. If this occurs during the week I will NOT be blogging mid-week as we are already on a Dashboard BUY signal.
Indicator #5 NASDAQ Composite with MACD. This indicator is on a BUY signal. (Refer to upper chart).
Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest November 28th reading of 40.9 bullish % was higher than the November 21st reading of 35.8%. So investors have become more bullish in the past weekly survey period.
Indicator #8 NASI Summation Index and MACD. On Friday, November 23rd the Summation Index experienced an upward crossover of its 5-dma. And on Tuesday the MACD had a positive crossover resulting in a BUY signal for this indicator (Refer to second chart).
Dashboard Remains of “3”BUY signal
Dashboard V2 November 30, 2012
Top 5 ETFs
Using the newly available Decision Page on www.etfscreen.com/buydonthold the Top 5 ETFs were purchased on the open on Wednesday morning. They all had a PASS mark. For the three days invested they raised an average of 1.65% compared to 0.46% for the major averages. Make sure stop Limits are placed on each position according to your risk tolerance.
A number of visitors to this site have posted positive comments about the Decision page on prior blog pages. Any comments are always welcome.
Top 5 ETF Tracking November 30, 2012
Dark Liquidity
www.dark-liquidity.com/BDH2new.php provides the BDH strategy results performance for the year 2012 of 13.32%. This compares favorably to the 6.61% gain for the DJIA, the 12.61% gain for the S&P 500, and 15.55% gain for the NASDAQ Composite.
Conclusion
The stock market held its gain from the week ending November 23 which is a positive sign. The major market averages are above critical support levels. The NASDAQ Composite is very close to crossing its 100-dma, while the S&P 500 has already achieved that level. For now, the market is in a short-term uptrend. News out of Washington, DC and Europe will dominate the events that could impact stock market prices. So be patient and be careful. Let’s enjoy the market’s up move as long as it lasts.
Today, Indicator #8 issued a BUY signal as the MACD crossed to the upside to confirm recent Summation Index crossover (refer to chart). This indicator’s BUY signal increased the Dashboard to “3″ from “2″ neutral reading.
Therefore, tomorrow at the open five ETFs will be purchased at the opening price. Using www.etfscreen.combuydonthold.com click on the Decision page in upper right hand corner. This page indicates the top ranked ETFs and whether or not they passed the Initial tests. For those not familar with this new addition to the BDH strategy, please refer to this past weekend’s blog and links.
The following 5 ETFs will be bought: XHB,EWA,RWX, SLV and EFA. Make sure to use stop limit orders appropriate to your risk tolerance if you decide to invest.
This will be a two-part report since there is a major announcement regarding the development of a new tool to help you select the appropriate ETFs to purchase when a Dashboard Buy signal occurs.
Part 1. Market Review — Dashboard Rises to “2″ NEUTRAL Signal
Since the stock market began its rise around 11:30 AM Friday November 16, it has had a consistent advance, ending this holiday shortened week solidly in the black. For the moment, the market’s down trend has abruptly been halted. Whether or not this past week’s uptrend continues, we’ll have to wait and see. So far the past week’s advance is very encouraging. The MACD on the NASDAQ Composite crossed to the upside on Wednesday’s close resulting in a buy signal on Indicator #5 and a change in the Dashboard to “2” NEUTRAL from the prior sell signal. Likewise, the $NASI needs an MACD crossover to match the Summation Index crossover on Friday to signal a buy on this indicator .
For the week the NASDAQ Composite was up 3.99%. It closed at 2966.85, just 50.56 points from its 100-dma, and 33 points away from reaching its previous support at 3000. The S&P 500 Index closed at 1409.11 gaining 3.62% for the week, and above it critical support level of 1400. Lastly, the DJIA closed at 13009.68 up 3.35% for the week and above critical support at 13000. Overall this was a terrific week for the markets and the best week in a few months. The number of advancing issues on the NYSE greatly expanded this past week for a ratio of 8:1 compared to declining issues. This has been the best performance in months.
Indicator Review
Indicator #2 NASDAQ Composite and 100-dma. This indicator is sill on a SELL signal , but the NASDAQ is only 50.56 points away from crossing over its 100-dma to the upside to generate a BUY signal. If one occurs during the week, I will post to the blog at that time.
Indicator #5 NASDAQ Composite with MACD. This indicator’s MACD crossed decisively to the upside this past Wednesday so this indicator is on a new BUY signal. (Refer to upper chart).
Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest November 21st reading of 35.8% was significantly higher than the November 14th reading of 28.2%. So investors have become much more bullish in the past weekly survey period.
Indicator #8 NASI Summation Index and MACD. This indicator had a SELL signal on September 28 and is now nearing a BUY signal after this week’s sizable rally. On Friday the Summation Index experienced an upward crossover of its 5-dma. A market advance this coming week will result in a positive crossover of the MACD as well. (Refer to second chart).
Dashboard Rises to “2” NEUTRAL signal
Dashboard V2 November 23, 2012
A chart of the buy and sell signals is provided here:
http://stockcharts.com/h-sc/ui?s=$COMPQ&p=D&yr=2&mn=0&dy=0&id=p50034199149&a=250074893
Top 5 ETFs
There are no ETF positions held at this time, as they were sold on the last Dashboard SELL signal.
Dark Liquidity
www.dark-liquidity.com/BDH2new.php provides the BDH strategy results performance for the year 2012 of 11.71%. This compares favorably to the 6.47% gain for the DJIA, the 11.90% gain for the S&P 500, and 13.72% gain for the NASDAQ Composite.
Conclusion
The stock market put in a solid performance this past week with substantial gains in all three major averages with critical support levels surpassed to the upside. A continued advance next week will result in a Dashboard BUY signal as both Indicators #2 and #8 are close to experiencing positive indicator crossovers. I will post a blog on any week day that this occurs. Don’t jump the gun yet, as this one week rally does not guarantee follow through next week. As always be patient and be careful.
Part II. ETFScreen.com Decision Page Announcement
For the past few months, I have been working with two devoted BDH users who have collaborated to develop a powerful way to use www.etfscreen.com/buydonthold when selecting ETFs for purchase once a Dashboard BUY signal is given. They have designed an enhanced screen that is referred to as the Decision Page. This page contains all the criteria used to select the highest ranking ETFs, as well as the Decision column to indicate hwether an ETF has passed or failed the tests. Now you can access this page by clicking on the the second item (Decision Page) listed on the right side of the etfscreen BDH home page. Once you see the page you will note the new format for this page. Make sure to go to the top of that screen and click on “these instructions” to view the simple instructions for using this page. Remember that the main page for etfscreen is www.etfscreen.com/buydonthold.
A detailed memo on the subject of the decision making for selecting ETFs is presented here and shown as a link in on the BDH FAQs page, as well:
BDH Decision Page Description 11 24 2012
I want to thank the two BDH users who developed this enhancement for their time, insight, expertise, and interest in providing a logical approach to selecting appropriate ETFs for purchase. I also want to thank Hugh Todd, the owner of ETFScreen for his willingness to provide and program an additional resource for the BDH users. Hats off to these three contributors for a great job.
After using the Decision Page, we would be interested in receiving your comments to see how you like this addition to the BDH approach. These can be input into the comment section of any blog posting.
I hope you and your family had aa Happy Thanksgiving.
Market Review
The market continued its decline this week ending with a slight reprieve on Friday. At about 11:30 AM Congressional leaders held a news conference indicating their willingness to move toward a solution to the Fiscal Cliff before year-end. This sparked an immediate rally, and the market trended higher for the day. However with a DJIA gain of only 45 points for the day, the market’s response was tepid. I would have expected a 200 point rally based on that news. The market trend is still down.
For the week the NASDAQ Composite was down 1.78%. Its closest level of support is 2800 which is 53 points away form its Friday closing price of 2853. The S&P 500 Index closed at 1359.88 losing 1.45% with support at 1350. And the DJIA is at 12588.31 down 1.77% for the week with support at 12,500. So all the major averages have taken hits from their highs in late September when they were at much higher levels.
Indicator Review
Indicator #2 NASDAQ Composite and 100-dma. This indicator is on a SELL signal
Indicator #5 NASDAQ Composite with MACD. This indicator’s MACD crossed decisively to the downside on September 25 and is on a SELL signal as of that date (Refer to chart).
Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest November 14th reading of 28.2% was much lower than its November 7 reading of 38.5% bullish. Thus, investors have become much less bullish over the week when the survey was taken. This 9.7 percentage point drop is an unusually large one week drop.
Indicator #8 NASI Summation Index and MACD. The Summation Index had a negative crossover of its 5-day ema on September 27, as did its MACD on September 28. Refer to second chart. This indicator is heading lower and is still on a SELL signal.
Dashboard Remains On a “1” SELL signal
Dashboard V2 November 16, 2012
A chart of the buy and sell signals is provided here:
http://stockcharts.com/h-sc/ui?s=$COMPQ&p=D&yr=2&mn=0&dy=0&id=p50034199149&a=250074893
Top 5 ETFs
There are no ETF positions held at this time, as they were sold last week.
Dark Liquidity
www.dark-liquidity.com/BDH2new.php provides the BDH strategy results performance for the year 2012 of 11.71%. This compares very favorably to the 3.12% gain for the DJIA, the 8.27% gain for the S&P 500, and 9.73% gain for the NASDAQ Composite.
Conclusion – Market Still In a Confirmed Downtrend
This continues to be a very treacherous market. The Friday advance may continue for awhile, or we may continue to decline. No one knows which way the market will go. Be patient and wait for the next buy signal. The Dashboard will unemotionally determine when it is safe to re-enter the market
Market Review
The market started off the week in fine shape with positive gains on Monday and Tuesday. Then the market got clobbered with over a 3% loss on Wednesday and Thursday, and a small gain on Friday. The 200-dmas on all three major market averages were pierced to the downside during the week. By week’s end only the S&P 500 was within a point of its 200-dma, while the other averages were much further away.
For the week the NASDAQ Composite closed at 2904.87 down 2.59%. It’s next level of support is 2900. The S&P 500 Index closed at 1379.85 losing 2.43% with support at 1360. And the DJIA is at 12815.39 down 2.12% for the week with support at 12,500. So all the major averages have taken hits from their highs in early October when they were at much higher levels.
The cause or causes of the decline have been bandied about by the financial media, but no one really knows exactly what caused the decline this week. As far as the election results are concerned, there really was not any doubt as to the probable outcome, as visitors to www.intrade.com have followed the probabilities of the candidates winning and the key swing states outcome for months with a clear picture as to the situation. Just before the election Obama had a 71.2% probability of winning which clearly was not as close as the press had indicated.
Indicator Review
Indicator #2 NASDAQ Composite and 100-dma. This indicator is no a SELL signal confirmed by the decline below the 200-dma (refer to upper chart). Refer to blog posting of October 23 to see why the 200-dma was brought into the picture for this signal call.
Indicator #5 NASDAQ Composite with MACD. This indicator’s MACD crossed decisively to the downside on September 25 and is on a SELL signal as of that date (Refer to upper chart).
Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest November 7 reading of 38.5% bullish compared with its October 31st reading of 35.7% bullish. Thus, investors have become much more bullish.
Indicator #8 NASI Summation Index and MACD. The Summation Index had a negative crossover of its 5-day ema on September 27, as did its MACD on September 28. Refer to second chart. This indicator is heading lower and is still on a SELL signal
Dashboard On a “1” SELL signal
Top 5 ETFs
As of the November 8th market open the four remaining ETFs were sold. Therefore, the portfolio is in cash awaiting the next buy signal. For this last buy signal the ETF portfolio gained 0.73% versus 0.30% for the major averages. The NASDAQ Composite lost 0.12%. Look at the spreadsheet to see the final numbers for this last buy signal:
Top 5 ETF Tracking November 9, 2012
A chart of the buy and sell signals is provided here:
http://stockcharts.com/h-sc/ui?s=$COMPQ&p=D&yr=2&mn=0&dy=0&id=p50034199149&a=250074893
Dark Liquidity
www.dark-liquidity.com/BuyDontHold.php provides the BDH strategy results performance for the year 2012 of 11.71%. This compares very favorably to the 5.44% gain for the DJIA, the 9.18% gain for the S&P 500, and 8.44% gain for the NASDAQ Composite.
Conclusion – Market in a Confirmed Downtrend
This is a very treacherous market. Historically speaking, November – January are the most positive months for the NASDAQ index, so it is possible that the market may find a near term bottom soon and base here before heading higher. If and when it does, the Dashboard will provide a BUY signal after the market turns up. The market is very oversold right now, so do not be surprised if we bounce higher from here, although that bounce may be temporary. Be patient and be careful.
As has always been the case, when market conditions look the bleakest then that is usually the time to invest. The Dashboard will unemotionally determine when it is safe to enter the market.
Market Review
With today’s crushing stock market decline, the NASDAQ Composite 200-dma (2982) was immediately penetrated to the downside on a gap down opening price and proceeded to fall throughout the day with some small intermittent intra-day rallies. At the lows of the day, the DJIA was down about 371 points and the NASDAQ Composite was down about 85 points, both down over 2.5% at those levels. The NASDAQ closed the day at 2937.28 down 74.65 points while its 200-dma closed at 2982.40. The DJIA fell a huge 312.95 points.
With Indicator #2 now on a SELL signal, the Dashboard has moved from a neutral position to a SELL at a “1” reading. According to BDH strategy this means that all four ETFs in the portfolio should be sold at the open tomorrow morning.
Indicator Review
Indicator #2 NASDAQ Composite and 100-dma. This indicator is now on a SELL signal confirmed by the decline below the 200-dma (refer to upper chart).
Indicator #5 NASDAQ Composite with MACD. This indicator’s MACD crossed decisively to the downside on September 25 and is on a SELL signal as of that date (Refer to chart).
Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest October 31 reading was 35.7% bullish compared with its October 24th reading of 29.2% bullish. Thus, investors have become much more bullish over the past week.
Indicator #8 NASI Summation Index and MACD. The Summation Index had a negative crossover of its 5-day ema on September 27, as did its MACD on September 28. Refer to second chart. This indicator is heading lower and is still on a SELL signal.
Dashboard On a “1” SELL signal
Top 5 ETFs
All remaining four ETFs in the portfolio should be sold at the open tomorrow leaving the position in cash, awaiting a new buy signal. Hopefully, stop limit orders were in place to limit losses.
Conclusion – Market in a Confirmed Downtrend
With today’s crushing decline, the market blew through its 200-dma on the NASDAQ Composite. As you can see in the chart, the index was hugging its 200-dma for seven days and that level appeared to offer a solid support level. But, today’s vicious decline negated that situation big time. At this point, due the market’s oversold condition it could rebound enough resulting in a Buy signal on the Dashboard or the market could continue to decline. We will have to wait and see what develops.
Interestingly, the MACD in Indicator #5 almost crossed to the upside on Tuesday (refer to chart). Had the market risen modestly today, this indicator would have been on a BUY signal which would have put the Dashboard on a “3” BUY signal instead of today’s SELL signal. It is amazing how one big down day at a crucial time can change the Dashboard signal to the opposite direction.
This is a very treacherous market and may be volatile going forward. Historically speaking November – January are the most positive months for the NASDAQ index, so it is possible that the market may find a bottom and base here before heading higher. If and when it does, the Dashboard will provide a BUY signal after the market turns up. The market is very oversold right now, so do not be surprised if we bounce higher from here, although that bounce may be temporary. Be patient and be careful.
As the manager of your own portfolio you may decide to sell your ETFs tomorrow or you may decide to hold on hoping for a temporary rebound to exit at a better price. That is strictly your call. As far as the BDH strategy is concerned, we will follow the rules that have been set up.
