Climbing the Wall of Worry

Our indicators -- and in particular, our overbought/oversold indicators remain bullish. The past week or so has seen some scary declines, where analysts have been predicting larger declines and mini-crashes. We may see that, yet, but for now, our indicators remain bullish.

This "stance" has led us to some pain over the past few trading days, although our Short-term models helped to reduce the losses to some degree. The Shorter-term systems follow the tape and had to turn bearish as the market declined on some of the recent volatile days.

While some people are surprised that we remain bullish, some contrarian investors like the fact that people are very emotional these days. With so many people predicting a large decline, it means that the markets are "balanced" a bit. It means that we can "climb this wall of worry" perhaps a bit more...

Emotions are very difficult -- and the reason we like to use systematic trading systems for our investments and trading approach. For now, we will continue to follow our bullish indicators -- AND we will alert our readers (at least via Twitter; but often with a Twitter and blog post) when the Overbought/Oversold indicators turn to neutral or bearish.

Today's opening "gap up" has us getting ready to enter more bullish positions after a typical "gap fade" decline.

Bullish Stock Market Indicators

Our overbought/oversold stock market indicators went from neutral to bullish. Our long-term indicators are also bullish. No indicator is infallible -- but we make special note of these trading signals -- especially at this "scary" junction in the stock market.

We'll look to Short-term market direction to help us size our position -- especially after this morning's early "gap fade" (long bias since market opened lower) tendency dies down.

Oversold Indicator likes long side

Quick blog post. As mentioned on our Twitter, we currently have a gap fade (going short) trade on right now.

However, as of the close on Friday, our Overbought / Oversold indicators switched from short to long. There has been chatter that the market is due for a big fall -- but contrarian investors often like to see "the markets climbing a wall of worry." The fact that there are some big-time bears out there gives us some comfort with the bullish indicator.

Our long-term and short term stock market indicators are both currently long -- so we are looking to enter the long side soon.

In other futures markets:

• The Japanese Yen has been wildly strong as traders believe that Japan will not intervene to slow the rise.
• The Gold rush has slowed for now -- but depending on market action, our systems will look to re-enter the long side at some point.
• Bonds continue to rally.

Stocks Open Down; Look to go Short after Gap Fade

After the stock market's recent run-up, the market opened lower today by about -0.7%. Our Long-Term and Intermediate-Term equity models are both neutral to short.

We'll use the typical "gap fade" (market often moves to close an opening gap) to PROBABLY enter short positions. That is, unless the "gap fade" is so strong that the market is looking stronger. With the longer-term models neutral to slightly biased to the short side, the Shorter-Term indicators will dicate our stock "trading" position.