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Stocks Are Going on Sale

By Jeff Clark
Tuesday, July 24, 2012

Investors have lots of reasons to be cautious right now...  
 
It's not just the turmoil in Europe or the "fiscal cliff" we're running toward in the U.S. The volatility index says it's time to be careful. The McClellan Oscillator has flashed two warning signs.
 
And now, we have an impending sell signal from yet another indicator...
 
This time, it's the New York Stock Exchange Summation Index (NYSI) telling us to sell stocks. Take a look...
 
 
 
The NYSI is an intermediate-term measure of overbought and oversold conditions. Stocks are officially overbought when the NYSI rallies above 1,000. They're oversold when it drops below zero. The indicator triggers a buy signal when the MACD momentum indicator (the bottom box) extends below -200 and then turns higher. It triggers a sell signal when the MACD moves above 200 and then turns lower.
 
The NYSI gave us a buy signal last month when the S&P 500 was around 1,322. Anyone who bought stocks back then could have made as much as 5% within the past month. Now, the NYSI is telling us it's time to sell – at least for the next few weeks.
 
As you can see on the chart above, we've had two other sell signals over the past year. The S&P 500 fell 8% immediately following the sell signal last November. The sell signal in February was a little early, as stocks rallied for a few more weeks before finally rolling over and falling 10%.
 
We're on the brink of another sell signal today. There's no telling for sure what we'll get this time around. It's just one more reason to be a little careful here.
 
Please understand I'm not saying it's time to sell everything. We're not on the verge of Armageddon. In fact, I expect stocks will end the year higher than where they are right now. But now is not the best time to add more exposure to the stock market. You will probably have a chance to buy in at lower prices sometime in the next few weeks.
 
Make sure you have your stock market shopping list together. It looks like stocks will be on sale soon.
 
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. He frequently checks in with volatility, Bollinger Bands, the MACD indicator, bullish percent indexes, and what he calls the only truly fail-proof signal, the Mother Indicator.

In The Daily Crux
Market Notes
Natural gas surges... prices are up 48% in the last three months.
 
American auto makers are suffering... Ford and General Motors shares are down 25%-plus since February.
 
AMD hits a new low... chipmaker is down 47% in 2012. Intel is up 12%.
 
World Dominators are sailing through the sideways market... Wal-Mart, AB InBev, and Constellation Brands are up 30%-plus over the last year, while the market is flat.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1350.52 -0.9% +0.4%
Oil (USO) 33.00 -3.5% -15.2%
Gold (GLD) 153.03 -0.4% -2.0%
Silver (SLV) 26.21 -1.0% -32.9%
U.S. Dollar 83.64 +0.2% +13.0%
Euro 1.21 -0.5% -15.7%
Volatility (^VIX) 18.62 +14.4% +6.3%
Gold Stocks (^HUI) 388.67 -2.5% -32.8%
10-Year Yield 1.44 -1.4% -51.4%

World ETFs
Symbol Price
Change
52-Wk
USA (SPY) 135.09 -1.0% +2.5%
Singapore (EWS) 12.67 -1.6% -7.4%
S. Africa (EZA) 61.68 -3.1% -10.2%
Lat.America (ILF) 40.97 -2.3% -16.2%
Japan (EWJ) 8.84 -1.3% -17.0%
Canada (EWC) 25.75 -1.1% -19.3%
Taiwan (EWT) 11.67 -2.5% -20.8%
China (FXI) 32.60 -2.0% -21.1%
S. Korea (EWY) 51.63 -2.6% -22.1%
Israel (ISL) 11.67 -2.1% -28.9%
India (IFN) 19.67 -3.0% -32.8%
Russia (TRF) 13.70 -2.6% -36.9%

Sector ETFs
Symbol Price
Change
52-Wk
Utilities (XLU) 37.42 -0.7% +14.1%
Retail (PMR) 24.06 -1.5% +12.4%
Consumer Svcs (IYC) 80.33 -1.3% +9.5%
Health Care (IYH) 79.19 -1.1% +8.5%
Big Tech (QQQQ) 63.46 -1.2% +7.5%
Real Estate (IYR) 64.34 -0.6% +6.4%
Construction (PKB) 13.60 -0.7% +3.3%
Biotech (PBE) 23.32 -1.0% +2.5%
Oil Service (OIH) 37.88 -0.8% +0.0%
Big Pharma (PPH) 38.95 -1.1% +0.0%
Industrials (IYJ) 66.71 -0.7% -2.5%
Financials (IYF) 54.00 -0.8% -2.6%
Software (PSJ) 25.55 -1.6% -3.0%
Insurance (PIC) 15.46 -1.0% -3.5%
Media (PBS) 14.57 -1.5% -4.5%
Telecom (IYZ) 22.64 -0.9% -4.8%
Defense (PPA) 18.72 -1.3% -5.0%
Transportation (IYT) 89.54 -1.3% -7.0%
Water (PHO) 18.08 -1.2% -7.8%
Semis (PSI) 13.88 -1.4% -15.6%
Basic Mat (IYM) 63.20 -1.5% -20.3%
Nanotech (PXN) 6.02 -1.8% -31.4%
Alt. Energy (PBW) 4.06 -2.2% -51.4%

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