Market Timing 07 (Nov 22 - Dec 25)

[winston]

Why Market Volatility Can Be Your Best Friend

by Marc Lichtenfeld

When volatility is high, you may want to consider selling options, because high volatility pushes option prices higher. So you could sell puts or calls and capture a significant premium.

When volatility is low, you may look to buy puts or calls, because the options should be cheap.

Source: Wealthy Retirement

https://dailytradealert.com/2025/05/13/ ... st-friend/

[winston]

It’s time to bet on another decline phase

by Jeff Clark

[Last week’s] news of a trade deal between the U.S. and the UK seems like good news. Bullish traders used it as a reason to charge into the market – helping the S&P 500 to rally to its highest level since “Liberation Day” in early April.

But there’s a good chance that folks who bought stocks yesterday will regret it in the days ahead.

Jeff believes that “regret” will be even greater for investors who jumped into the China-truce market surge.

Now, one of the technical tools informing Jeff’s latest bearishness is the PMOBUYALL indicator. It’s a momentum indicator that fluctuates between zero and 100.

When it gets to zero, most of the fuel for a large decline has been used up. Traders should look to buy stocks into any additional weakness.

Conversely, when the PMOBUYALL hits 100, most of the fuel for a rally has been used up. Traders should look to sell stocks and/or establish short positions into any additional strength.

To be clear, the PMOBUYALL is not an exact timing tool. But it’s a helpful broad indicator that can traders help frame a market move, and from there, refine their exact trade timing with other tools.

The PMOBUYALL rallied as high as 100 seven previous times over the past year. Each time this happened the S&P 500 was near a short-term high.

The stock market declined each time the MACD turned lower when the PMOBUYALL was in this condition.

The PMOBUYALL hit 100 about two weeks ago. It has been stuck at the 100 level ever since then. Now, the MACD indicator is starting to turn lower.

If the current situation plays out like the seven previous situations did, then we should see a decline phase get started any day now.

But what about the market explosion based on the trade deal with China?
It didn’t change Jeff’s opinion of what’s coming. It just meant there’s farther to fall.

Folks with too much short exposure, or not enough long exposure will be chasing this move.

DON’T DO IT!

Buying stocks into extremely overbought conditions is almost always a bad decision.

And that brings us to today. Jeff just recommended a bearish trade on the S&P.

Here’s part of his thinking:

All the conditions that set the stage for a bounce off the lows last month are now pointing to the potential for a decline. And it looks like that decline could get started as soon as today…

The index is trading historically far above all of its various moving averages. All of the technical indicators have flipped from extremely oversold to extremely overbought. And the financial TV talking heads who were warning of a crash last month are now calling for new highs.

Jeff notes that the current setup is eerily like how things looked back in April 2022. And if the similarity continues, stocks will be much lower in the months ahead.

How much lower?

He sees a bear market bottoming later this fall around 4,125. That’s 30% lower than where I write Tuesday approaching lunch.

Bottom line: If you’re a battered bear, Jeff urges you to hang in there.

Source: Investor Place

[winston]

The Stage is Set for a Massive Summer Rally

by Luke Lango

Inflation didn’t flare up as so many feared. It fizzled. And in this environment, that’s about as bullish a signal as it gets.

The Final Word: Soft CPI Clears the Way for a Summer Surge

The market’s technicals are just as bullish as the macro backdrop is.

Source: Investor Place

https://tradesoftheday.com/2025/05/15/t ... mer-rally/

[winston]

Why the 20% Rally Might Be Just Another Bear Market Trap

by Chris Johnson

The CNN Fear & Greed Index has swung violently in the last month. The index is a good read on investor sentiment- from “Extreme Fear” in April to nearly “Extreme Greed” in less than a month.

The VIX has collapsed, reflecting widespread complacency.

Bear market rallies typically:
Recover 20% to 25% of prior losses (often retracing a Fibonacci 50% level)
Fail to reclaim the 200-day or 20-month moving averages
Peak on lighter volume
Coincide with a temporary macro catalyst (rate cuts, stimulus, headline relief)
End with a swift reversal that takes out the prior lows

Because in every major bear cycle the biggest losses came after the strongest rallies. And right now, this market feels more like a setup than a solution.

Source: Money Morning

https://tradesoftheday.com/2025/05/16/w ... be-a-trap/

[winston]

It’s time to bet on another decline phase

by Jeff Clark

Big picture, Jeff believes we’re in a bear market that won’t bottom until later this fall around 4,125. That’s 30% lower than where it trades as I write Tuesday approaching lunch.

The S&P 500 managed to recover all of yesterday morning’s losses, and close up a few points on the day. Much of that action, I suspect, was bears and reluctant bulls throwing in the towel and just buying anything in order to participate in the rally.

Meanwhile, all of the technical warning signs remain.

So, as I’ve argued for the past several sessions – if not the past few weeks – there is a pullback coming. I can’t say definitively when. Though, I suspect it’ll happen soon…

Technical conditions are stretched. Fundamental valuations are stretched. And, the risk in the market right here is far greater than the potential reward.

Troubling as that might sound, even in a bear market, Jeff writes that there’s plenty to look forward to – massive rallies (within a broader decline) that we can trade for fast, double-digit profits, followed by a “generational buying opportunity” at the ultimate bottom.

Source: Investor Place

[winston]

Mystery options buyer bets some $3 billion on US stock rally

By Bernard Goyder

Over the past month, market participants have noted steady buying of mostly June 2027 call options across a swath of large US companies.

Estimates vary of the total premium being spent, with Nomura Holdings Inc. tallying nearly $3 billion.

Speculates that the buyer is a deep pocketed and broadly optimistic investor.

The trades are being done by a “big global macro player who is long term bullish and wants the optionality and volatility exposure of long calls as opposed to buying equities.

The options buyer spent $316 million for at-the-money calls on Amazon.com Inc., $159 million on similar options on Salesforce Inc. and $878 million on ARM Holdings Plc.

Since the options are years away from expiring, the premium is far higher than for the shorter-term contracts — zero-day-to-expiry in particular — that have driven much of the trading.

While it’s difficult to say for sure that it’s a single investor, the repeated pattern of buying lines up with one party building up most of the position, with others possibly copying the trades.

Source: Bloomberg

https://theedgemalaysia.com/node/756361

[winston]

We Have a Rare and Powerful Contrarian Signal Right Now

by Brett Eversole

Recency bias drives expectations. When times are good, everyone expects the good times to continue… And when times are bad, folks expect more trouble.

That’s why contrarian investing works. When expectations hit massive lows, there’s no one left to drive prices down further. So instead of getting “more of the same,” you get a major reversal.

Nearly half of investors expect stock prices to fall. That’s one of the highest readings on record.

As contrarians, this should get our attention. Sure enough, history shows this is a good buying opportunity that could lead to double-digit gains…

Consumer Confidence Index: Nearly Half of Folks Expect Stocks to Fall

We want to buy when everyone else assumes the worst. That’s the key to contrarian investing. And right now, we have a rare and powerful contrarian signal. Don’t miss it.

Source: Daily Wealth

https://tradesoftheday.com/2025/05/23/w ... right-now/

[winston]

This Stock Market Rally Is Just Beginning

by Brett Eversole

The S&P 500 Index jumped 18% in just 25 trading days. That handed investors about two years’ worth of returns in just five weeks – a truly incredible result.

Importantly, history shows that this kind of rally only happens at major market bottoms. In fact, we have annual upside potential of 31%. So instead of worrying, we should be bullish.

We’ve only seen five similar setups since 1950. They all signaled fantastic buying opportunities… And four out of the five unfolded at generational bottoms.

In short, we’ve just lived through a momentous rally. But history says the good times are only beginning. Again, you really want to own stocks in times like these.

So don’t worry right now. Instead, history tells us now’s the time to buy.

Source: Daily Wealth

https://www.investing.com/equities/most-active-stocks

[winston]

The second stage of this bear market will be brutal

by Jeff Clark.

Now, perhaps your reaction is, “what bear market?”

As I write Monday, the S&P is just 4% below its all-time high set back in February. Plus, this earnings season has been strong; and on Friday, the University of Michigan’s consumer sentiment survey showed sentiment improved in late May.

If anything, it feels like bullish momentum could carry us deep into the summer.

Here’s Jeff explaining what he sees coming next:

This is what bear markets do.

The first rally phase in a bear market is designed to punish bearish traders who’ve held on to short positions for too long and then coax reluctant bulls back into the market.

It makes folks question if we’re even in a bear market at all.

Then, the bear takes another swipe.

To illustrate, Jeff points toward a similar setup during the bear market in 2022.

In the chart below, note how the S&P peaked in early January of that year, then suffered its first decline phase – about 16% in two months.

But then, it delivered a stunning “V” shaped rally where it recovered most of that initial decline. “What bear market?” was likely the reaction from investors.

V-shaped rallies are dangerous. Investors who sold at the bottom regret their decision. They buy back in at higher prices.

And, this time, they vow not to get “bluffed” out of positions on the next decline because apparently, stocks only go up.

During the second decline phase, these investors hold onto their stocks and endure larger losses because they’re convinced they made a mistake selling the first time around.

Jeff believes that even if he’s wrong, the S&P’s technical set-up limits additional gains from here:

If I am wrong, since the market is already in an extended condition – with the various moving averages expanded far away from each other – we’re not going to miss out on a huge move higher.

There’s not much fuel remaining for that sort of a move.

As we’ve highlighted in past Digests, Jeff believes we’re in the early stages of a bear market that won’t bottom until later this fall – potentially, somewhere around 4,125. But at that point, we’ll have what Jeff calls a “generational buying opportunity.”

Jeff warns that the financial sector will lead the market lower over the next several weeks.

Behind this call is the Bullish Percent Index for the Financial Sector (BPFINA) that just triggered a new sell signal.

It appears the bear is gearing up to take another swipe.

The last time the BPFINA generated a sell signal was in December.

Source: Investor Place

[winston]

BofA’s Hartnett Says Global Stocks Are Close to Sell Signal

by Sagarika Jaisinghani

The market is running too hot after surging 20% in just two months.

He cited data points on fund flows and market breadth as evidence that investors have been rushing into risk assets and positioning is getting stretched.

Inflows to stocks and high-yield bonds were 0.9% of overall assets in the past four weeks. Should that reading increase to more than 1%, it would be a marker for investors to sell.

At the same time, the market is approaching “overbought territory”. About 84% of country indexes are above their 50- and 200-day moving average. His sell trigger is when that metric reaches 88%.

Global equity funds have attracted about $515 billion so far this year, on track for their second-biggest inflow on record.

Source: Bloomberg

https://finance.yahoo.com/news/bofa-har ... 31975.html