Traders Corner   20 comments

The S&P 500’s Williams %R daily and weekly are both in overbought territory, as the daily and weekly RSI both nudge closer to overbought. The McClellan Oscillator is also nearing overbought, at 42 (with 60 being overbought).

But even more worrisome is the McClellan Summation Index, which is a long-term version of the McClellan Oscillator. The MSI is at 881, with 1000 being overbought (although it can go higher than that). To give you a taste of what to expect, here are the MSI and S&P 500 charts from last April-July:

NYSI

SPX

While the MSI can go higher than 1000, or even 1200 (which is what it reached on May 21st last year), when it reaches those levels, expect a correction on the way. At 1000, it is time to start taking short-term long positions off the table, and quit adding positions, because a better price is coming. Mind you, the MSI doesn’t always correlate so perfectly with the S&P 500 like in the example above. The MSI is based on the NYSE, not the S&P 500, so the MSI is much more broadly based. But it does make an excellent warning sign for future corrections.

The S&P 500 levels to watch today:

UPSIDE: 1858 (February 24th’s high and the all-time high), and 1880 (top of the Bollinger Bands).
LAST CLOSE: 1854 (February 27th’s high).
DOWNSIDE: 1852 (2 data points), 1849-1850 (January’s high and December’s high), 1840-1847 (8 data points), 1835-1836 (3 data points), 1830 (February 13th’s high), 1823-1826 (5 data points), 1819 (50 day moving average), 1815 (February 12th’s low), 1812 (20 day moving average), 1809 (February 13th’s low), 1798-1800 (3 data points), 1791 (February 10th’s low), 1790 (100 day moving average), 1784 (February 3rd’s high), 1774-1776 (2 data points and October’s high), 1770 (January’s low), 1767 (December’s low), 1758 (February 4th’s high), 1755 (February 5th’s high), 1753 (150 day moving average), 1752 (February 6th’s low), 1745 (November’s low), 1743 (February 4th’s low and the bottom of the Bollinger Bands), 1739 (February 3rd’s low), 1737 (February 5th’s low), 1729 (September’s high), and 1726 (200 day moving average).

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Posted February 28, 2014 by edmcgon in Daytrading, Investing, Market Analysis, Technical Analysis

20 responses to “Traders Corner

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  1. Out of PRAN from yesterday for plus 49 4.3%

  2. Still prancing about!

    • Marshall, what do you think? Looks like LMNS is going to be a dud.

      • Jeff – I plan to be patient on LMNS. At least two or three weeks. A lot of these IPOs recently have taken a week and then they spike. But I would not blame anyone for taking $ off the table.

      • I didn’t like the fact that the offering went out at 25% less than expected and that huge drop yesterday with a single million share sale just looks like large shareholders lack confidence and are trying to cash out. I sold my shares today at 12.50 for a small loss.

        Hope you are right about the two week spike. I may take a deeper look if I have time and if I like the business in general I may get back in. I’ve put them on my watch list.

    • Good one. You’re starting to give w_seattle a run for the money. ๐Ÿ™‚

      • Damn newcomers always trying to steal someone’s gig… In other news, I sold VJET Mar $40 calls yesterday for $1.30. Must be getting old as I didn’t remember putting in the order. Trader, do you forget things like that? Hell, why bother, you wouldn’t remember if you didn’t remember… ๐Ÿ™‚

      • You’re not going to let Marshall gain an inch are you? I think your boss is looking for you. ๐Ÿ™‚

  3. I wouldn’t be too worried yet about anything more than small pull backs. We are a long ways from being overbought on the weekly chart of the SPY.

  4. GTAT looks overbought. I wouldn’t expect much more than a drop to the 13.00-13.50 range if it comes. If it hits that level and bounces I’ll add more. I have a partial position.

  5. FGL has a nice run lately. Thank you Marshall!!!

  6. Anyone have a financial stock that they like right now for the longer term? I would be looking at starting a small position and adding to it when/if there is a market pullback. I want something that has an ok dividend along with capital appreciation to it. Would and ETF be better? Any thoughts would be appreciated.

    • Bobb – my current favorite is C as I think they will finally reinstitute a dividend and share buy back in 2014. If you want something paying a dividend right now, I like JPM. If you are willing to go with a life insurer, MET is my favorite long term play right now.

      • Thanks Marshall I will check those out, would you buy them now or wait? I tend to hold stocks much longer than most people.

      • Bobb – I am very poor at predicting if things will get cheaper. But my view on both those stocks is that the prices are relatively cheap. If you have a two or three year time horizon, you will likely be fine.

    • Bobb,

      The most widely accepted ETF is XLF. It’s holdings include each stock Marshall mentioned above. Def the best way to go in my opinion as you avoid the stock specific risk.

    • Bobb,
      My bank exposure is in one stock and one cef: SAN and JTP. Both pay nice dividends (about 7% for SAN and over 8% for JTP).

  7. wanted to capture some nice 14% gains on my LNG position before the weekend. The stock has not been able to break up over the last several days and I’m feeling a down day on Monday. I love the business and will rebuy if we get any kind of pullback.

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