If you’re an investor, you should pray for a pullback.
Nothing earth-shattering, of course. Just a nice, orderly few days with stocks in the red.
What you need is a buying opportunity. More to the point, you’re looking to pick up some shares without feeling like you’re a dog chasing your neighbor’s Mustang down the street.
Don’t fret — the market understands. Stocks won’t move straight up forever. In fact, they’re showing early signs that a minor top is on the way in short order.
It’s all about bullish momentum…
This is a look at the S&P 500 Bullish Percent Index. The big middle section of this chart shows the percentage of stocks in the S&P that are currently displaying a longer-term technical buy signal. After retreating in October and November, the index is now showing that nearly 80% of its components are flashing buy signals.
But the real story lies in the top momentum gauge. Each time the index has heated up to extreme levels since the 2011 bottom, it has provided a nifty little short-term sell warning (red arrows). You can see the corresponding minor tops on the S&P on the bottom chart. We’re seeing these extreme levels again right now. Therefore, a momentum drop below 70 will be your first clue that this move will stall out — at least, temporarily.
The drop will be your chance to look for buying opportunities. But planning is required. Decide what names you like and have them ready. That way, when the time comes, you can quickly capitalize on the price action.
for The Daily Reckoning
Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.
Addison takes a look behind the curtain during a seminal moment in The Daily Reckoning’s history…
A study published in the most recent issue of The Journal of Neuroscience was sparked by researchers who wanted to find out why cocaine addicts so frequently relapse despite sincere attempts to recover from their addiction. Stephen Petranek has more…
While smaller microbrews might not be the best investment right now, I think the trend of better beer isn't going anywhere. And the bigger breweries are realizing they need to figure out how to compete in a market where tastes are clearly evolving.
We recently had a conversation with our friend Chuck Butler -- editor of the Daily Pfennig and Managing Director of Global Markets at EverBank. We discussed U.S. fundamentals… China… special drawing rights… emerging markets… and more!
Just when you thought the bond bull market was over... Jim Rickards gives his insight on what could cause a bond market rally.
…the grim reaper doesn't exactly make for a sexy sales pitch. Think about it. Why would a trader want to buy death care stocks when he could just as easily play the latest social media IPO? Nobody wants to talk about death. I can see you practically squirming in your chair right now just reading this.