The New Year kicks off this week with the Markets at an interesting crossroads. The Market Radar is a weekly Video that outlines some of the best technical levels lining up in the current market good or bad.. Bad is not the worst thing if we see it coming and can take advantage of it. The Markets are in a way rigged to move higher but the time frame on the surges and pullbacks is what gets people in trouble. The most important tip I consistently repeat on my show is it's to your advantage to trade alone with market strength and short with market weakness. These video's help determine that bias. The First week of the Year 2016 has us teetering on a bigger sell set up but it's been a hard set up to believe in yet. Like i said earlier the markets in a way are rigged to move higher over time.. let me explain a little more.
The Markets are measured using different indices the major ones being the Dow, Nasdaq and S&P500. Each of the indices are composed of multiple companies (Dow 30) (Nasdaq 100) (S&P 500) When a company in the Dow Jones Industrial Average or any Index gets below a certain price, they remove it and replace it with a more expensive company. They do this because the Dow Jones Averages is a price- weighted index. The higher the price of the stock, the better it is for the index. Recently removed in 2013 from the DJIA were Alcoa ($8.00), Bank of America ($14.00) and HP ($21). These stocks were replaced by Goldman Sachs ($165), Visa ($192), and Nike ($70). ( approximate prices)
This will not stop the market from going down but it's like always putting fresh wood on the fire. The indices are padded with high growth stocks and this over time plays a big part in how we measure the markets performance.
There is no doubt in my belief that the markets could and will eventually roll over enough to actually apply a very bearish short selling approach to the markets but this is a something that will destroy most top callers. In my opinion of what we are seeing now, the markets are at a pivotal point . There are very bearish signs that are showing up in the charts and in the overall demeanor of the markets. This is balanced against the Federal Reserve strategy and the forces of demographics, inflation, industriousness, capitalism, technology, reduced labor costs and a 101 other invisible forces at work.
The stock market is all about the earnings of corporate America and companies will continue to grow earnings over time. Recessions occur along the way but are always followed by recoveries.
Final Conclusion... Use what is working and right now and for the last 3 years our signals have given us clear zones to watch for rotations up and down. We will continue to trade the shorter time frame and remember the trade has the most power when the markets are in synch with your trade. I am short going into Monday with the S&P puts but looking to take profits and watch for that next rotation up..
See you in the markets
Vist www.daytradingradio.com for the charts and other trading tools and a more indepth discussion on 2016 markets