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This Indicator Just Flashed a Rare Buy Signal

By Jeff Clark
Tuesday, June 12, 2012

There are lots of reasons to be bearish right now.  
 
Europe is on the brink of collapse... China's economy is slowing down... The United States is at risk of tumbling into a recession... And the stock market is struggling to hold on to any of its gains for the year.
 
But one of my favorite trading indicators says it's time to buy. Take a look...
 
This is a chart of the New York Stock Exchange Summation Index (NYSI).
 
 
The NYSI is an intermediate-term measure of overbought and oversold conditions. The blue circles on the chart indicate the times when the NYSI was oversold and when the MACD momentum indicator (the bottom box) extended below -200 and turned higher. This is a bullish signal that often precedes a stock market rally.
 
Here's how the S&P 500 behaved following each of these "buy" signals...
 
 
We've only had four buy signals over the past three years. The NYSI pegged the exact bottom of the market twice. In the other two cases, stocks drifted slightly lower for a couple more weeks before starting to rally. Six months later, though, stocks were anywhere from 18% to 50% higher.
 
There's no telling for sure what we'll get this time around. But based on this NYSI buy signal, it's a good idea to buy stocks into any weakness over the next few weeks.
 
Best regards and good trading, 
 
Jeff Clark




Further Reading:

In addition to the NYSE Summation Index, Jeff uses several other indicators to gauge where the market's headed next. Read up on some of his favorites here: volatility, Bollinger Bands, the MACD indicator, bullish percent indexes, and the one truly fail-proof signal, the Mother Indicator.
 
Last week, Jeff told Growth Stock Wire readers about a risky way to trade that can lead to incredible profits. "Now that the stock market has given up all its gains for the year," he writes, "this is the type of chart that offers the best trade setup on the long side." Get the full story here.

In The Daily Crux
Market Notes
Natural gas hits a one-month low... prices are down 54% over the past 12 months.  
 
Low oil prices help boost retailers... Wal-Mart, Target, and Under Armour hit 52-week highs.  
 
Phone giants AT&T and Verizon gain about 10% in the past three months... meanwhile, the S&P 500 is down.
 
Weak global economy hurts steel prices... U.S. Steel, Schnitzer Steel, and AK Steel sink to three-year lows.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1308.93 -1.3% +3.0%
Oil (USO) 30.70 -3.5% -21.4%
Gold (GLD) 155.36 +0.4% +4.1%
Silver (SLV) 27.79 +0.1% -21.2%
U.S. Dollar 82.58 +0.2% +11.3%
Euro 1.25 -0.1% -12.8%
Volatility (^VIX) 23.56 +11.0% +24.9%
Gold Stocks (^HUI) 436.24 -1.5% -14.2%
10-Year Yield 1.60 -2.4% -46.1%

World ETFs
Symbol Price
Change
52-Wk
USA (SPY) 131.42 -1.3% +5.2%
S. Africa (EZA) 62.32 -2.2% -8.2%
Japan (EWJ) 8.82 -0.5% -10.0%
Singapore (EWS) 11.58 -0.3% -11.6%
S. Korea (EWY) 52.84 -1.0% -13.7%
Canada (EWC) 25.10 -1.6% -16.9%
Lat.America (ILF) 39.80 -1.6% -17.7%
Taiwan (EWT) 11.61 -0.8% -21.0%
Israel (ISL) 12.28 -1.4% -21.0%
China (FXI) 32.79 -0.1% -21.1%
India (IFN) 19.06 -2.5% -32.8%
Russia (TRF) 13.21 -0.7% -39.4%

Sector ETFs
Symbol Price
Change
52-Wk
Retail (PMR) 24.20 -1.8% +22.4%
Utilities (XLU) 36.79 -0.1% +15.2%
Consumer Svcs (IYC) 78.33 -1.4% +14.2%
Big Tech (QQQQ) 61.81 -1.7% +14.2%
Real Estate (IYR) 60.96 -2.0% +8.4%
Health Care (IYH) 75.41 -1.1% +6.3%
Construction (PKB) 12.68 -1.7% +2.4%
Software (PSJ) 25.01 -1.5% +0.9%
Oil Service (OIH) 34.64 -1.8% +0.0%
Big Pharma (PPH) 36.87 -0.8% +0.0%
Industrials (IYJ) 65.42 -1.4% -0.3%
Media (PBS) 14.04 -0.3% -1.0%
Insurance (PIC) 15.45 -1.3% -1.0%
Transportation (IYT) 89.61 -1.5% -1.1%
Financials (IYF) 52.41 -1.8% -1.9%
Biotech (PBE) 21.20 -1.4% -2.1%
Defense (PPA) 18.59 -0.5% -2.3%
Water (PHO) 17.26 -2.3% -5.8%
Telecom (IYZ) 21.47 -0.5% -8.5%
Semis (PSI) 14.29 -1.5% -13.3%
Basic Mat (IYM) 62.40 -2.2% -15.6%
Nanotech (PXN) 6.03 -2.1% -28.8%
Alt. Energy (PBW) 4.17 -2.6% -50.7%

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