Short term signals have worked well recently... we got oversold and a bounce yesterday.

The major indexes have been in a very tight narrow trading range this year. Rarely getting close to medium term overbought or oversold but the short term signals have been very reliable as the major indexes reacted to them very well. Yesterday, the stock market did reach short term oversold during mid day and rallied back up. Going forward the stock market have been in a long consolidation with internal weakness underneath. Eventually this should result in the major indexes breaking down hard or breaking up strongly. I believe we will eventually break higher. Whether this short term rally will be the start we'll see.

Caution ahead as stock participation gets narrower and narrower

After the last post, the stock market had several up and down moves each lasting over a week. The last low at early July the stock market got near but not at medium term oversold. This resulted in a week long rally before pulling back about 1% for the SP500 this week. But broad stock participation has gotten narrower and narrower on each leg higher as the indexes are being pulled up by the big cap stocks. On a medium term time frame this usually result a +5% correction. Just when the correct will occur is unsure as the narrow stock market rally led by the major indexes could continue on for weeks or months. For the time being if one is still participating in the stock market , it's better to lightening up on small or individual stocks and concentrate on the major index ETFs. On the chart illustrated below, looking for the SP500 to hold at the black line support level to remain bullish. A break below the support line should result in more downside for the short term.

Back to uptrend support line... as stock market in a slow grinding move up

From last post, the SP500 didn't quite move down to the 2060 level or lower. Instead it got down to 2068 and then turned back up and did set a new all time high of 2134. During that time, much of the individual stocks were consolidating their moves instead of joining the major indexes higher. That hinted the upside was limited... and as such the major indexes have moved down this past week while much of the individual stocks continued to consolidate at current price levels. This also could hint the downside is limited. As the chart illustrated below, the SP500 is back down to an uptrend support line. If the stock market can hold at current levels then another rally back higher could be in the cards. But if the support level is breached then the upside trend could be broken for more consolidation or downside for the short term.

Looks like setting up for lower prices and medium term bottom later this month

From the last post, the stock market did moved up slowly but turned down by late April. Did reach near short term oversold last week but the two day rally that followed was brief and I see the trend to continue down for the coming weeks due to internal weakness (individual stocks being weaker than the major indexes.) As the chart illustrates, I will look for the SP500 to fall toward to the 2060 or lower levels before we see a medium term bottom setup for a rally back above the all-time high level of 2125.

Followup of last post... short term movements turning bullish

After the last post, the major indexes did turned down about 2% before reaching near (but not at) short term oversold levels and then bounced back a bit before turning back down back near the 2% correction. The small cap indexes, as shown in the 2nd chart, have held up better and are actually near their all-time highs at the moment. On the medium term levels, the major indexes went down as far as between neutral and oversold while the small cap indexes corrected down toward neutral. So no medium term signals but the past month action of consolidation hints to me of a slow move higher led by the small caps.

At medium term crossroads... market at overbought

Have been busy since my last post back in early October last year. As the chart below shows, there were two 'minor' medium term signals around Nov./Dec. and January. The stock market is still higher than my last call for a medium term rally in early October. Right now we are close to or at medium term overbought and would expect mostly weakness in the individual stocks in the coming weeks. The major indexes (Dow, SP500, Nasdaq, Nasdaq 100) could follow along with weakness too or they could continue to slowly grind higher for several more weeks before turning sharply down. Good time to start placing sell stop orders or/and shift to selling individual stocks into small positions in the major index ETFs if one decides to take the risk for more upside.

Medium term buy signal made this past week

Have not posted for a several months... busy, lazy, or just waiting for the 200 day moving average to be touched which I probably should not had concentrated too much on this summer. Because of the fear that the SP500 and the stock market will get a steep sell off toward the 200 DMAs had prevented me from being fully invested in the last medium term buy signal in early August. So I'm ignoring the 200 DMA for now this time as there is another buy signal made this past week. There could be one more retest down toward today's low in a week or two... or this could be THE bottom. Either way, coming out of October I expect the stock market to rally for the rest of the 4th quarter to new record highs in the SP500.