Aha! Nothing like a dip in a screaming rally to let you know where you are — 11/21/2023

The stock market either goes up or goes down, taking its stocks and ETFs with it. And yet It is amazing how difficult it is to recognize that simplicity.

Michael Petryni

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THE TRADING STRATEGY

Short-term swing trading: When the NYMO turns up, it is time to buy stocks on the next open. When the NYMO turns down it is time to sell stocks on the next open.

Longer-term swing trading: When the NYSI turns up it is time to buy stocks on the next open. When the NYSI turns down, it is time to go to cash or to go short on the next open.

Most stocks and ETFs move with the market.

Simple as that.

(Click on the chart for a larger view)

To my mind, there is no better market-timing tools than the McClellan Oscillator (the NYMO) and its Summation Index (the NYSI).

And when the NYMO/NYSI gets rolling there is no clearer example of the value of both the short term (NYMO) and the longer term (NYSI).

THE SWING WAS SET:

The NYSI turned up on October 31st, triggering a general market buy signal on the open of November 1st, now 15 trading days ago. And for fourteen days virtually EVERYTHING WAS GOING UP.

THE NEW STUFF:

That ended today with virtually everything going down.

SPY was down. QQQ, down. The Nasdaq Comp, down. The DJIA, down.

Forty of the stocks in my Nifty50Stocklist, down.

All six of the leveraged ETFs in my so called “Super Six”, down (see the chart panel below).

SO WHAT TO DO NOW?

The NYMO was down with a second high below a high (see the red circles on the chart above). With the NYSI still rising, it usually takes two to four of those high below highs to stop a raging rally and start a significant sell-off.

See last July on the chart for pretty much a textbook example of the NYMO issuing warnings a turn could come but not turning the market itself.

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Michael Petryni

Journalist, film critic, screenwriter, proprietary trader seeking simplicity in trading. https://thegodoftrading.medium.com/membership