Want to know when it’s time to start putting money to work? Check the highs. (October 26, 2018)
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How do we know when it’s time to get back in? There are a lot of breadth indicators that are EXTREMELY oversold, very, very oversold. Not panic stuff yet but close. This is a real quick, easy thing that I want to show you.
I want to give everybody a general idea of how you can look and see when is the selling pressure? After all this time where this thing is down, the S&P ( NYSEARCA: SPY ) was down, at one point, more than 10 percent; now it’s down not quite that much. But how can we tell when it’s time to start getting back in the water? When are we going to get the lift? Easy, well kind of easy.
The last time the S&P ( NYSEARCA: SPY ) made a higher high was back here. Ever since that time, lower high, lower high, lower high, lower high. Even when we had this big gap down and then a rally higher it was a lower high. A lower high still and a lower high still. This was literally a higher low here. This was a higher low, this is an inside day. But what I am looking at is, I am not really looking at the lows so much; because the weird thing about markets is, when they keep hitting lows they just keep hitting more of them. New lows, new lows, new lows.
What I want to know is, when are the buyers coming in? And the imbalance, listen to me because I’m explaining this in a specific way, the imbalance to retaliative AGGRESSIVENESS between buyers and sellers has changed. All the way down the sellers have been more aggressive than buyers. As you know, for every stock that is bought somebody has sold it. So the whole stupid thing about, well, how do you know that the stock is going up? Well because there are more buyers than sellers. No, there really aren’t, they’re just more eager to buy than sellers are eager to sell.
What we want to see is a DECREASE in the eagerness of sellers to sell and an INCREASE in the eagerness of buyers to buy. And you are not going to see that by looking at the lows, you’re going to get all of these fakeouts, like this, like that, like that. You are going to get these fakeouts. What you are going to be looking at is when are the sellers, when do they have less power than they did yesterday.
And so what I want you to look for here is, on the SPY ( NYSEARCA: SPY ), 271.00. On the SPX ( INDEXSP: .INX ), magically, 2692.38, that was the high here. When this starts getting back above there, that’s when you get a sense that it’s time for me to start dipping a toe back in the water on the long side because at least for the NEAR future we are going to have a nice lift to the upside.
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