D-day?

Is it decision day for the market? I noted here that one of the buy signals I am looking for will be a candlestick bar in the format of a hammer, inverted hammer, doji or other reversal bar. Yesterday, we saw a doji– but we will need some follow through to see how it plays out.  Give it a couple of days to confirm a bottom before jumping in and buying stocks. Note the doji circled on the S&P500 daily chart –created by the mornings rally, followed by some downside then the afternoons almost flat close.

Doji’s can be bearish at market tops. But in this case -its a potential turnaround signal. Doji’s show the market opened and closed pretty tightly – and that can be a sign of change to come. The prior trend was negative – yesterday that trend halted with a moment of indecision. A potential positive hook on the RSI and stochastics indicators are showing further upside potential via the early action on Wednesday. If—and only if- we get a positive follow-through to Friday, I will be start to dip in. Today, as I write, things are positive. So far so good.

S&P nearterm

 

Will I invest my entire 50% + cash weighting?
If all works out, and the Tuesday signal confirms to be a “buy” candle, am I jumping in with both feet? Heck no!!!

I am planning to pick away at stocks, assuming the week turns around into a positive confirmation of Tuesday’s candle. I expect to invest in tiers. The initial purchases will be made later this week or early next week, and I will play the peaks and rallies according to the daily chart patterns.
Remember – if the market fails to hold after Tuesdays potentially bullish candle, more evaluation and time will be needed before starting to buy. All in – the next few days should be quite telling!
Keith on BNN

I will be on BNN’s call-in show MarketCall Tonight today – Wednesday September 30th from 6:00pm to 7:00pm. Tune in to BNN to catch me live on BNN’s premier call-in show, where viewers like yourself can ask my technical opinion on the stocks you hold.

Call in with questions during the show’s live taping between 6:00 and 7:00 pm. The toll free number for questions is 1 855 326 6266

 

15 Comments

  • Keith,

    I like the insight and the caution in this way of trading this current market. I have moved into a couple of biotechs with the same feelings.

    BTW – any way possible that you could set up a system so that your blogs are automatically emailed to subscribers when you publish them.

    I would like that.

    Neil

    Reply
    • neil–if you follow us on Twitter you will recive notification of the blog
      Twitter handle is @ValueTrend

      Reply
    • Thanks for this Bert
      Now heading to the city for an appointment then my BNN show at 6:00pm–hope you can watch it!

      Reply
  • Keith, Two indicators caused my suspicion about this bounce. First one is apple is not participating market rally, and second one is 10 year bond rate is declining. I would like to see further confirmation before put more capital to work. For now, I am only using small funds to trade this market.

    Reply
    • Yes, I have been “conditionally bullish” as you know–meaning that I’d like a few days follow-up for the doji candle noted. Having said that–the bigger picture stuff like sentiment and VIX were/are screaming a forward-looking buy signal. So IMO, its not a question of IF we buy–its WHEN–and that time period will not be too far away.
      You can follow a strategy of legging in. So if the market does show some follow-up on Tuesdays bar reversal, then buy a couple of stocks with 1/5th of your cash–then wait to see the next number of days and see if it trends (higher high, low etc)–and begin to leg in 1/5th at a time-a few stocks at a time-follow a strategy that buys chunks at a time as the market signals.
      Its funny–when I started getting bearish in April (actually, my signals came in March) I had comments leading the other way–ie – why would I want to sell?

      Reply
  • Hey Keith, on BNN it should be noted that you originally recommended cow.to somewhere around the 14th July, therefore the loss on that one is more like 12.62%.

    I bought a bit, guess I should sell, oh Deere.

    -Bob

    Reply
    • Yes–they take the price on the day I’m in the studio–but with me, due to my high turnover, we go month to month with all of my stocks.
      COW was bought in the ValueTrend account at $32.50 for clients.

      Reply
  • Would you consider a full position in XSP which is S&P 500 hedged to CAD for more risk averse investors over several trades? It is very hard to pick individual stocks with confidence. It seemed to be up over three days which proves that the support level should hold. Thanks.

    Reply
    • Sure–a broad index play can be ok–but keep in mind that the market is becoming very rotational, and therefore the indices will not likely do nearly as well as a sector rotational style through sector ETF’s or individual stocks

      Reply
  • Hi Keith & All:
    The S&P candle stick chart pattern looks really positive following Fridays reversal and your note of a earlier Doji.

    I am in with both feet with stuff that is moving like xly, Fb, IBB and CP in Canada. Hoping there is some follow thru to 2020 and then all bets are off. At that stage there is reasonable profits and the call for conviction in the market will come into question. I have read your response to Rebecca above. I am watching the VIX (below 20), WTI and 10 year bond for some direction. I still hold APPL and expect it can do well when the market direction is more solid.

    Given my strategy should i give the S&P 3 days to hold 2020, before moving into a longer time commitment.

    Thanks

    Reply
  • Hi Keith! On BNN you said you were waiting for confirmation. On Friday we saw the SPY make a big reversal. Does that change anything to your strategy? I suppose you only care for the closing price, and since it’s up, that must look good to you and you will start buying your favorites on Monday? Thanks.

    Reply
    • Yup–confirmation received Matt! We bought 15% on Friday—expect to continue legging in.

      Reply
  • I would like your opinion on Microsoft. It has been trading in a sideways range for about a year. Do you think it is worth buying a position in this stock? Would you buy in the consolidation or do you believe it will breakout? Thanks.

    Reply

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