Thread: MrJohnRoss' Account Talk

Congratulations Mr Market, you've made a new high by a couple of points. Now everyone wants to see what you're going to do for an encore...


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The average man on the street is going to hear the news stories say, "The stock market hit a new high today", and think, "gosh, I'd better get in!" And that, ladies and gents, is how the big money distributes shares to the unsuspecting masses.

We're now overbought on a short term basis, with the RSI going over 70 today, before a slight pullback late in the day. There seems to be higher odds of a pullback (or consolidation) before any further meaningful advance, IMHO.

I would be careful about chasing the market here. If I was long, today might have been a good day to take some chips off the table.

F Fund (AGG) is looking very toppy here, and I think a pullback is just beginning. Of course, I've been saying "overbought" for at least a week now. Ridiculous.

Chart of Oil (USO):

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USO has really been tanking, making a series of lower highs and lower lows. Note that as it hit it's high of 12.45 early last month, the RSI also hit 70, which was a warning bell. It tried a couple of times to rally, but to no avail. Perhaps we'll get a bounce at the 50% retracement level (around 10.00), or when the RSI hits the 30 area. Keep your eyes peeled.

Mr Market is overbought, but still climbing.


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RSI is at 74. This trajectory higher can't last much longer. Or can it?

I'm searching for some good news as to why the markets are higher. Here are some recent headlines:

"Energy Failures Push US High Yield Default Rate to 6 Year High" - Bloomberg

"Junk Bond Defaults Keep Climbing" - WSJ

"Negative Rates Leading to 'Day of Reckoning' Fear on Wall Street" - CNBC

"IMF Says Italy Faces 'Monumental Challenges', Cuts Growth Outlook" - Reuters

And finally:

"Buybacks Pump Up Stock Rally" - WSJ

There you go folks. Companies are cannibalizing themselves in order to give their executives fat stock option payouts, that's why the market is rallying.

Composite system remains at +3, fully bullish. How long this lasts before the music stops is the big question.

"I would be careful about chasing the market here. If I was long, today might have been a good day to take some chips off the table.

F Fund (AGG) is looking very toppy here, and I think a pullback is just beginning. Of course, I've been saying "overbought" for at least a week now. Ridiculous."

I agree JR! I was listening to one of the financial talking heads yesterday who commented that he could think of at least 100 reasons why the market should be declining yet it just keeps on going up! Then he stated that you can't argue with success! Now that's ridiculous!

Thanks MJR for the great charts analysis. I've read this rally was prompted by Bernanke's visit to Japan last week and probability of Q.E. by Japanese P.M. Abe..
This causes yen to devalue increasing liquidity in the markets enabling big banks and corps., to leverage their buying 3 or 4 times.. it is all about inflating the market, bad news
be damned. Markets are manipulated. Watch yen values. Yen down, markets up and vice versa..

What time frame are your charts?

Originally Posted by clester

What time frame are your charts?

Sorry, just saw it. Looks like 60 min

Originally Posted by Dutchy

Thanks MJR for the great charts analysis. I've read this rally was prompted by Bernanke's visit to Japan last week and probability of Q.E. by Japanese P.M. Abe..
This causes yen to devalue increasing liquidity in the markets enabling big banks and corps., to leverage their buying 3 or 4 times.. it is all about inflating the market, bad news
be damned. Markets are manipulated. Watch yen values. Yen down, markets up and vice versa..

Dutchy, can you please post the link you use to follow the value of the yen? Is it USD/YEN? Tia.

Originally Posted by Scout333

"I would be careful about chasing the market here. If I was long, today might have been a good day to take some chips off the table.

F Fund (AGG) is looking very toppy here, and I think a pullback is just beginning. Of course, I've been saying "overbought" for at least a week now. Ridiculous."

I agree JR! I was listening to one of the financial talking heads yesterday who commented that he could think of at least 100 reasons why the market should be declining yet it just keeps on going up! Then he stated that you can't argue with success! Now that's ridiculous!

Heh heh heh, Scout. Another way to put it: only price matters anymore.

Originally Posted by Dutchy

Thanks MJR for the great charts analysis. I've read this rally was prompted by Bernanke's visit to Japan last week and probability of Q.E. by Japanese P.M. Abe..
This causes yen to devalue increasing liquidity in the markets enabling big banks and corps., to leverage their buying 3 or 4 times.. it is all about inflating the market, bad news
be damned. Markets are manipulated. Watch yen values. Yen down, markets up and vice versa..

I think you may be right Dutchy. You're not the only one watching the yen carry trade.

Originally Posted by clester

Sorry, just saw it. Looks like 60 min

Yep, you're right clester, it's a 60 min chart that I use for "short term" analysis.

Just a consolidation, or is the market beginning to (gasp!) roll over?


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Well, at the very least, we're consolidating. RSI is still high, but not red hot, so at least the engine isn't going to melt. If we have a pullback (and that's a big if), a logical support area would be the 2108 - 2120 area. Lots of support lines at previous resistance areas.

Options expirations are this Friday, so there may be increased volatility tomorrow and Friday. You certainly wouldn't know it by the VIX. It's barely above 13.

Oil continues it's waterfall lower, gold is taking a much needed break, as are bonds.

Composite system remains at +3, a strong buy.