VIEWPOINTS OF A COMMODITY TRADER

My brother Jim has been trading the markets for over thirty years. Yesterday, we got involved in a conversation about the markets and the stock market in particular. He always does a good amount of research to support his own trading decisions and since sharing observations is one of the reasons I started this blog, I thought we should at least be aware of these points. 

According to Jim’s work: 

• The Market PE is historically overvalued. The Current PE is @ 17 on the S&P.
• The Stock Market is overbought when measured by the number of stocks above their 50 day moving average lines.
• Bullish Sentiment is high. The Daily Sentiment Index (DSI) hit 89%. This reading is the same as the Oct 2007 high.
• The American Association of Independent Investors, (AAII) registered 19% bears. This is the same reading as the all time high reading.
• The trading volume is poor. There is less volume on each push up.
• Insiders are selling at 28 times the amount they are buying.
• September is traditionally a tough seasonal month.  17 out of the last 20 years have been down.
• Markets have rallied up over 50% off the bottom in 5 months. This is the farthest and fastest in history.
• The NASDAQ 100 has retraced over 50% of the decline off the all time highs.
• The S&P Index has retraced 40% of the decline.
• The Aug 24th high was not confirmed by the 14 day RSI and MACD reading creating a divergence.
• The Shanghai index has dropped over 20% from the highs. This market bottomed before our markets and led the U.S rally up.
• 25% of NYSE volume recently has been FNMA, Freddy Mac, and Citicorp, all low price stocks that the public buys. (speculation)
• The volatility Index (VIX) hit a new low on 8/25 confirming the bullish sentiment readings. This is a signal of NO fear in the markets.

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Filed under: Food For Thought by Charles Maley
Tags: «day trading - Jim Maley - makets - S&P - swing trading »