Day 3 of Market Correction

Trader Talk

The major stock indexes fell hard once again today on on-going weakness in the housing sector, along with higher than expected inflation, doing nothing to ease trader jitters. Volume was a tad higher than yesterday.

Officially, the NASDAQ fell 1.1% on 1.8 billion shares, while the Dow Industrials dropped 1.1% on NYSE volume of 4.2 billion shares. The leadership profile remains negative, with 42 stocks making new highs versus 286 stocks making new lows.

The short term momentum oscillators remain positive, confirming the bullish stance of the AlphaKing Trading Indicator. We have no new trades at this time.

The relatively low level of stocks making new lows, along with reasonably benign volume on down-days, suggest the current stock market weakness is a normal corrective pullback within an on-going up-trend. We are getting close to levels where the buyers would be expected to step forward, and day four on one-way moves often provide great turning points. Today was day three of the recent selling pressure. The big question with entry trades on day four is whether the low lands at the open, or at the close. Both work well in testing. Our plan is to shoot for the close as being the low, and thus we'll wait till tomorrow's update to switch the unleveraged QQQQ long trade for the Index portfolio to the leveraged QQQQ long one (QLD.)

Kevin Wilde, Chief Trading Strategist AlphaKing.com.

For Free charts with trading signals and fundamentals ratings, visit AlphaKing

New Buy Signal for Stock Market

Trader Talk

The major stock indexes fell today as more financial companies reported heavy losses and write-downs. Volume was interestingly lighter than yesterday. The leadership profile has flip-flopped back into negative territory, with 117 stocks making new highs versus 202 stocks making new lows.

Officially, the NASDAQ fell 0.4% on 2.1 billion shares, while the Dow Industrials dropped 1.2% on NYSE volume of 4.7 billion shares. The short term momentum oscillators remain positive, confirming the now BULLISH stance of the AlphaKing Trading Indicator. We have new trades below to exit all short positions, and to begin the dollar cost averaging process of entering new long picks.

The stock market has been in a bear market since October of last year. Peak losses were over the 20% range. Thus both time and price destruction commonly seen during bear markets has been within expectations this time around. The FED has been aggressive in pumping money into the financial system, while the financial markets experienced a capitulation of sorts, with record numbers of stocks making new lows, and the volatility index almost hitting the wash-out 40 level. Thus the ingredients are present for the bear market to be over, and a new bull market underway.

Fundamentals lag stock market and economic trends, so the bad news may not be telling the real story. Of course the bears could have it right, and our new buy signal quickly turn into a whipsaw sell in the non-too-distant future, but one could have written that at every positive turning point the stock market has experienced in history. The most important element when it comes to making money in the financial markets over the long term isn't whether this or that signal proves to be real versus a failed whipsaw one, rather it is about keeping losses low on the failures while letting the winners and the gains run when the new trend turns out to be the real deal. Our research shows that the AK Trading Indicator is the best there is at delivering that high gain/low loss requirement. It has spoken, and we are acting. The QQQQ long position for the Index portfolio will be changed to a leveraged long ETF on any pullback close to the 50 day MA for the NASDAQ going forward, while we will add new long positions to the other portfolios each day until we are fully invested, or our trend following indicators turn negative.

Kevin Wilde, Chief Trading Strategist AlphaKing.com

For Free charts with trading signals and fundamentals ratings, visit AlphaKing

Stock Market Due for a Little Bounce

Trader Talk

The major stock indexes suffered a volatile whipsaw day today as sellers jumped on board positive early action, driving the stock indexes hard into the red, only to see a late-day rally attempt stem some of the lost red ink. Volume was heavy, with most stocks doing much worse than the stock indexes.

Officially, the NASDAQ fell 0.1% on 2.4 billion shares, while the Dow Industrials dropped 0.5% on NYSE volume of 5.3 billion shares. The leadership profile remains VERY negative, with 43 stocks making new highs versus 1,137 stocks making new lows.

The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading Indicator. We have no new trades at this time.

The S&P500 continues to smash through the March low, with zero sign yet that the sell wave is set to end anytime soon. The MACD turning positive from this position would be one clear sign that the breakdown was a fake out before a snap-back rally would launch a new bull phase, though that indicator also continues to trend down in classic bear fashion. We are oversold, and due a bounce, though investor sentiment remains stubbornly complacent, with the VIX closing no where near the 40ish level that indicates the necessary fear is present for a bull turn to land. The VIX spikes to such levels at important bottoms as investors race to buy protection from further losses in the put option market. Such a spike happened around the March lows that lead to a two month advance, and so far such fear has yet to materialize. Which means the capitulation crash - real or fake-out - has yet to land. A bona-fide crash is not out of the question from this position.

Kevin Wilde, Chief Trading Strategist AlphaKing.com.

For Free charts with trading signals and fundamentals ratings, visit AlphaKing

March Lows Won't Hold-No Rally Soon

Trader Talk
Sellers jumped on board positive early action today, driving the major stock indexes hard into the red by the close, with volume a tad lighter than yesterday.

Officially, the NASDAQ fell 2.3% on 2.4 billion shares, while the Dow Industrials dropped 1.5% on NYSE volume of 5.3 billion shares. The leadership profile remains very negative, with 106 stocks making new highs versus 816 stocks making new lows.

The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading Indicator. We have no new trades at this time.

The S&P500 continues to flirt with its March intra-day low around 1260, closing just 1.5 points above that must-hold-if-we-are-to-avoid-a-crash level. This fits the usual bear path that suggests a retest of the 2002 lows is in play. What we should see here is a hard breach of current levels that runs for a while, before a snap-back rebound to broken support lands. And from there the great bear slide would resume. So perhaps one more week of hard selling to be followed by a one to two week rally before the crash run resumes. An out-right running crash from this position is not out of the question, so do not look at any potential for a rebound rally with the view of making some profits on the long side, rather continue to be heavily invested short through-out this process, and look to add to those short positions on any rally.

Kevin Wilde, Chief Trading Strategist AlphaKing.com.

For Free charts with trading signals and fundamentals ratings, visit AlphaKing