We are at another turning point so for the benefit of background:
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Unedited commentary for March 11, 2002:
The market's internals improved a bit more on Friday, they don't seem to be showing a top yet. The screen stock ratio bolted up to +4.74 favoring buying, the estimate of market risk drops back down to low, after one day at moderate. Any kind of positive day will likely see the SSRatio climb again, and it is already in overbought territory. I figure we will see a short-term market top the first of this week, the last SSRatio top, January 4th, was +4.86. Another indicator of a market top is that we have fewer and fewer stocks that have favorable risk/reward, so many are at the upper end of their range.
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Unedited commentary for March 12, 2002:
The market's internals were mixed to mildly positive on Monday. The screen stock ratio took another jump to +6.19 favoring buying, the estimate of market risk remains low. I was able to look at the numbers the day before yesterday and reasonably predict that the SSRatio would climb. Doing the same for today, I can estimate that there is only a 1 in 15 chance that we would see enough buying to raise the SSRatio again. So trade with the knowledge that tomorrow the risk will be back to moderate. With that in mind, I figure we saw the short-term high Monday, and the market, best case, will be choppy here.
Lastly, to have an idea how speculative a 6.19 ratio is, over the last two years, there were only two days that had a more extreme ratio, September 24th and 25th following the relentless selling after the market reopened September 19th, 2001. Though during those two September days, the ratio was negative, it is not fundamentally different when you are accessing the volume and direction.
Ok, this will be the last comment <g>. The Category 3 screening had only 3 stocks show up which have fair enough risk/reward to make a short term trade. All 3 were already on the watchlist. Normally we get 20+.
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Unedited comments from the Savvy Trader Growth Stock Journal for March 25, 2002:
The screened stock ratio has dropped again going into this week, we start out at +3.22 with between 1 to 2 looking like a good value in an up trend.
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April 3rd: We are there, the screened stock ratio is now between 1 and 2, meaning that we if it goes much lower i.e. negative, the market risk will be too high to trade long, the momentum will have shifted to the downside. So, most stocks are now trading near the bottom of their range, very little risk if you set a stop just below the range and the reward is tremendous, multiple point gains.
Good Trading!!
Sam |
