After a rough 2 ½ year fight with cancer, Mr. Seifert passed away on December 7, 2019. We will miss him big time!
The following is an excerpt from this week’s ‘Weekly Market Letter’ from Market Edge (www.marketedge.com).
Santa Delivers
| The Santa rally delivered the goods and the major averages finished the holiday shortened week in record territory. Stronger than expected retail numbers, especially online buying, kept investors in the holiday spirit. The NASDAQ carried an 11-day win streak into Friday before the tech heavy index turned negative going into the close. Friday represented the last day investors could sell equities and show a loss for the year. Buying was broad based with every sector green except for Utilities (XLU). The gains were led by Consumer Discretionary (XLY), Technology (XLK), Industrials (XLI) and energy (XLE). Crude oil prices and commodities outperformed for a second week on hopes for stronger demand due to the trade deal, and a weaker US dollar. For the period, the DJIA added 190.17 points (+0.7%) and settled at 28645.26. The S&P 500 was higher for a fifth straight week as it tacked on 18.79 points (+0.6%) ending at 3240.02. The NASDAQ continued to outperform and jumped 81.66 points (+0.9%) finishing at 9006.62, while the small cap Russell 2000 snapped a four-week win streak shedding 2.87 points (-0.2%) and closed at 1669.03.
Market Outlook:The technical condition of the market remained bullish last week but the different indexes finished the period overbought by just about any measure. With the steep gains in the different indexes, most investors decided to wait and take profits next week to avoid paying taxes. That absence of selling gave an extra boost to the market setting it up for a round of profit taking next week. I’d expect to see the major averages trade lower over the near term, but there’s little out there to suggest that anything more than a small selloff is in the cards. Cyclical Trend Index (CTI): The underlying premise of the CTI is that the market, as measured by the Dow Jones Industrial Average (DJIA), tends to move in cycles that often resemble sine waves. There are five identifiable cycles, each with different time durations at work in the market at all times. Presently the CTI is Neutral at -1, unchanged from the previous week. The counts for Cycles C and D are bullish while the counts for Cycles A, B and E are bearish. Momentum Index (MI): The market’s momentum is measured by comparing the strength or weakness of several broad market indexes to the DJIA. Readings of -4 and lower are regarded as bearish since it is an indication that a majority of the broader based market indexes are weaker than the DJIA on a percentage basis. Conversely, readings of +4 or higher are regarded as bullish. The Momentum Index is Neutral at +3, down five notches from the previous week. Breadth was positive at the NYSE as the Advance/Decline line added 719 units while the number of new 52-week highs out did the new lows on all four days. Breadth was mixed at the NASDAQ as the A/D line lost 214 units while the number of new highs beat the new lows on each day. Finally, the percentage of stocks above their 50-day moving average increased to 74.8% vs. 74.0% the previous week, while those above their 200-day moving average rose to 71.5% vs. 70.6%. Readings above 70.0% denote an overbought condition, while below 20% is bullish. Sentiment Index (SI): Measuring the market’s Bullish or Bearish sentiment is important when attempting to determine the market’s future direction. Market Edge tracks thirteen technical indicators listed below that measure excessive bullish or bearish sentiment conditions prevalent in the market. In addition, we track money flows into and out of Equity Funds and ETFs which as of 12/25/19 shows inflows of $8.6 billion. Currently, the Sentiment Index is Negative at -5, up a notch from the previous week. Market Posture: Based on the status of the Market Edge, market timing models, the ‘Market Posture’ is Neutral as of the week ending 11/22/2019 (DJIA – 27875.62). For a closer look at the technical indicators and studies that make up the market timing models, check out the tables located below. Industry Group Rankings : What’s Hot (82) – What’s Not (9). Of the 91 Industry Groups that we track, 82 are rated as either Strong or Improving while 9 are regarded as Weak or Deteriorating. The previous week’s totals were 75-16. The following are the strongest and weakest groups for the period ending 12/26/19. Strongest: Retail-Drug Based, Pharmaceuticals, Advertising and Metals/Non-Ferrous. Weakest: Home Construction, Household Products (Non-Durable), Telephone Systems and Building Materials. To review all of the Industry Group Rankings, click on the Industries tab. ETF Center: The top performing ETF categories for the week ending 12/26/2019 were: Commodity-Precious Metals (+2.39%), Sector-Basic Materials (+1.64%), Sector-Alternative Energy (+1.20%), Sector-Internet (+1.08%) and Sector-Technology (+0.94%). The weakest categories were: Commodity-Base Metals (-2.60%), Shorts (-1.19%) and Commodity-Agriculture (-0.73%). To review all the categories in the Market Edge universe, click on the ETFs tab. Calendar of Technical Events:
**The above listed technical events occurred for the DIA on the date indicated. DIA is the ETF for the Dow Jones Industrial Average (DJIA).
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ask Mr. Seifert
Why is market psychology so important to success as a trader or investor?
Without a doubt the most important aspect of trading or investing isn’t numbers. Everyone has numbers. It is your emotional view of the market that is the key. I have been a trader and investor for over 40 years. I have taught scores of people how to trade and the one common trait that all successful traders and investors have is that they understand how the market works. It has never ceased to amaze me how little veteran traders or investors comprehend when I ask them how a trade takes place. How can you expect to beat the New England Patriots if you don’t know what defense they are in? It is incredible that most experienced traders believe that when the market is rallying it is because there are more “buyers than sellers”. They listen to the media and that is what they tell them is going on during a rally. When the market is breaking, they are told there are more “sellers than buyers”. So, here is my first lesson on market psychology. The market is an auction where buyers and sellers bid and offer for a security or option. For every buyer there must be a seller. When they agree to exchange wealth, it is called “price discovery”. The market is in equilibrium, even if it is only for a few seconds. So how does the market rally if the number of buyers and sellers are the same? The buyers are willing to pay more to get in. When they can’t find any sellers at the price they want they must “bid the market higher”, until they find where the sellers will exchange wealth. First lesson. Don’t listen to the media. They rarely have a clue.
FREE Two-Week Trial Subscription
The option Trades and Strategies offered by the Optionomics Group are unique in that they all have limited risk while creating great leverage. Our basic Bullish – Bearish Credit Spread Trade lets you control 100 shares of a $200 stock, a $20,000 position for less than $500 or 40:1 leverage. Your maximum risk is always limited and our strategies produce winning trades in three out of four possible outcomes. Check out The Scoreboard on the home page to see our results.
Optionomics let you become the casino whereby you have a mathematical edge that enables you to grind out consistent returns. These strategies are designed to produce good returns over short to intermediate-term time frames in any type of market environment.
Optionomics offers a FREE Two-Week trial to its entire web site with no cost or strings attached. Each of the strategies are explained in a 5-7 page booklet which includes detailed explanations and sample recommendations. You can see how the strategies are performing every week by clicking on The Scoreboard tab on the Home page. During the trial, you can paper trade the various strategies and get a feel for the deal without risking a penny. Simply click on the appropriate tab on the Optionomics’ Home page to access the informative booklets and then sign up for the trail. As a special offer, you can download a FREE copy of my latest book, “Trading Options My Way”. I doubt that you have ever read anything like this.
The ‘Traders’ Subscription Includes The Following:
- The Bullish – Bearish Credit Spread Trade: A basic strategy to trading weekly credit spreads.
- The One Day Wonder Trade: A one day trade with great consistency and upside potential.
- The Blow Off Top – Bottom Trade: A lot of action and big moves too.
- The Earnings Season Trade: Potential big movers with little or no downside risk.
The ‘Investors’ Subscription Includes The Following:
- The 21st Century Covered Call Strategy: A modern day alternative to the old fashioned covered call strategy.
- The Low Cost Put-Call Hedge Strategy: Sleep at night knowing your portfolio is protected for little or no cost.
- The Billionaire Risk Reverse Strategy: Big time leverage – small time risk.
Each Monday morning by 11:00 EST, the recommendations for each strategy are posted on the Optionomics’ web site. In addition, the updated results from the previous week are posted on the Optionomics’ Scoreboard. I also have a webinar on Thursday afternoon where I discuss various option strategies, what is happening on the trading floors and answer any questions that you may have. Don’t worry if you miss the show. They are archived on the site. Sound Good? Good! You can subscribe to either the Traders or the Investor plans at an introductory special of only $39.95 each per month on a month to month basis with no contract or strings attached. That’s $10.00 off the regular subscription rate ($49.95). If you subscribe to both it is only $64.95 per month. I think you will agree that this is a super offer so give it a try. Go to www.optionomicsgroup.com and get started today doing what the pros do –
“Don’t Buy Them – Sell Them”.
Mr. Seifert