one thing i look at when determining what kind of market we're in is: i watch the "leading stocks." william o'neil says that when the overall market is about to drop that "leading stocks" will go down first also, "leading stocks" tend to rise first when the market turns bullish.

so... what are "leading stocks?" according to o'neil these are stocks with top fundamentals - the IBD 100 index would be leading stocks. every week i put the ibd 100 stocks into a folder at stockcharts.com & i watch them. usually when i buy stocks long i pick from this group. but when it seems the market is under selling pressure i look at these stocks to see if they're falling. i used to watch moving averages but now i watch weekly parabolic SAR dots to determine if a stock is moving up or down.

when 10 to 15 "leading stocks" go bearish according to the p. SAR dots i take that as an early warning sign for the overall market. as of today there are 24 bearish SAR dots on "leading stocks"! 19 of them occured within the past two weeks (many went bearish TODAY.)

this alone doesn't necessairly mean much - but this along with a very bearish COT makes me think that; not only are we in a bearish environment, but the market may be starting to turn now. the COT is not a great timing indicator... but watching leading stocks is pretty good - (no flawless, but good).

personally, i will not be adding to my long positions (except for some oil stocks) & i have recently been dumping my current longs. this is not advice... just some thoughts.

-ja

I think Wednesday's trading was telling. If the stock market can't muster more than a little dead cat bounce on a day when oil dropped $3 a barrel, there's trouble in River City. Watch the yield curve. If it inverts -- or even looks like it's going to invert -- high priced equities (which are most equities) will get hammered.

The conventional wisdom on gold is that it went down because of the expectation that the Fed will continue to raise short term rates, making gold less attractive an an alternative investment. Watch the COT on this one. If the smart money continues to sell, then gold's going to have a hard time going up. But if they lift hedges again -- it may be the report a week from Friday that will tell us -- then gold is going to continue its advance.

All during this primary bull market in gold the commercials have been selling rallies and buying dips. They just keep doing it from higher levels. That's going to make gold hard to hold on to because it will go up in fits and starts. However, that will change one day when gold -- seemingly out of the blue -- makes a parabolic move to the upside. I don't want to take a chance of being out of the market when that happens.

Larry

the week ended with 30 out of 100 "leading stocks" from the ibd 100 with bearish parabolic SAR dots.

i'd say this could only be interpreted as either bearish, sector rotation or just odd behavior during a bull market.

we'll see.

-ja

The commercials are really putting the hammer down on Gold this week (-193,336). Looks like they managed to turn gold around before it could make a new high.

Gary

Just curious, during the first 2 quarters did the IBD 100 index turn bearish also?

Gary

on the front page of EVERY ibd there is a section called "market pulse". it will say either "Market In Confirmed Rally" or "Market Under Distribution" or some OTHER phrase which usually means (to me) a "trastion" market. right now it says: "Current Rally Under Pressure".

this "indicator" is very nimble & has gone from bullish to transition to bearish & back to bullish more than once this year - tho' i don't remember the dates. it tends to flop dirction more often than the COT.

there is no ibd 100 "bullish" or "bearish" indicator per se. i just watch the stocks that comprise this index & develop my biasis... then trade accordingly.

sorry, i don't remember what it was when or when it turned. i'm a very "in the moment" guy with a really bad memory! or, as my wife would say; "an air-head".



-ja

$spx weekly sar went bearish today AND today's price closed below it's 50 DMA.

also... getting close to a VTO buy signal.

-ja

vto buy signal as of TODAY!

-ja

an interesting tid-bit...

the current ibd 100 index has 30 stocks making new highs today... nearly HALF of them are oil or energy related.

as larry noted once before, if you are bearish the market but bullish oil you may want to play it by shorting the nasdaq 100 ($ndx or QQQQ). the S&P 500 is comprised of several oil companies that MAY keep the index afloat better than the tech-heavy Nasdaq.

just an idea.

-ja

Joe,

Which oil or energy ETF's do you monitor/trade?

Thanks,
Steve

there are a ton of energy (or energy related) stocks i keep on a list. i think the simplest & safest way to play the oil thing is to watch the weekly parabolic SAR dots - buy when bullish, go to cash when bearish (don't short). here are a few i watch.

ETF's: XLE, OIH, IXC, IYE, & VDE.

high income stocks: BPT, HGT, PTF, PWI, PVX & PGH.

"high fliers": SWN, OXY, XTO, VLO, STO, FDG, HAL, COP, REXI, BR, BRY, INT, PTR, UCL, UPL etc.

mutual funds: ICNEX, ENPIX

i don't own ALL of these (but i do own some). i still think the easiest (& therefore the best) way to play energy is in ETF's or mutual funds using the weekly SAR strategy. it's easy & it works.

-ja