In last Monday's Seasonal Forecaster newsletter I showed how it was likely that the S&P 500 would soon set a short term high and begin falling off into a short term cycle low. We didn't have long to wait. The S&P 500 fell 2% last week from Monday's open.
Is it premature to jump back in yet. Focusing on the S&P, it is best to wait until the index at least returns to is 50-day Moving Average. If a larger pullback is in order, it is not uncommon for it to get somewhat below the 50-day MA before rebounding. A better approach is to watch the Stochastics indicator. A decline of the indicator below the 20 level and then a rebound above has recently been a good time to ‘go long the market'.
How long do these pullbacks typically last? Two weeks and 3.8% for the S&P 500:
Crimea and the Ukraine
As I write this, about five hours before the markets are due to open, the big news is that Crimea has voted to secede. This makes it likely that the United States will begin imposing sanctions on Russia. While the futures indicate it will be a positive open, this is likely to be a volatile week. Risk will be higher this week. I don't think the short-term low has been set, although today may produce a good gain.
If you've been reading my newsletter for a while, you know my advice in periods like this. Go down to Panera Bread, pick up a coffee and a cheese danish, come home, and watch the markets as an interested, but nonparticipating spectator.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, type in www.markettamer.com/seasonal
By Gregg Harris, MarketTamer Chief Technical Strategist
Copyright (C) 2014 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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