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.
GoldMoney’s Alasdair MacLeod explains why the Greek crisis threatens the ECB's solvency and what price action you should expect from the euro, dollar and gold this week...
Bill Bonner answers the question: "What good is gold when gold is declared illegal?"
Mark O'Byrne's most recent webinar featuring Dr. Marc Faber. They discuss gold price manipulation... bitcoin's risks... Asian investment opportunities... and more!
Global electrification and growing use of renewable energy are going to drive up copper demand for the foreseeable future. And these mega trends are becoming inevitable as the world’s developing countries move toward building a global middle class — In fact, it’s estimated that two billion people will get electricity in the near future. That’s going to move the needle on copper...
James Howard Kunstler explains how aggregate industrial growth has ended, the kind of structural reform necessary to exit depression, and the degree of disorder and loss those measures could cause...