A Stock Crash is a low probability event
The main factor that confirms all is well is our trend indicator. It is bullish, and so that means all market pullbacks have to be viewed as buying opportunities
Secondary indicators confirming that Dow is not going to crash
When the ratio moves to the extreme as shown above; when you see that, it is a signal to pay attention. Used with several other indicators, it could provide (advance) warning of a bottom or top. It has put in a nice higher low formation, but the ascent up was a bit too fast, so a pullback to the 2.9-3.2 ranges is warranted. This pullback will coincide with a pullback in the markets. A stock crash occurs when the masses are euphoric, until that moment in time, the markets are unlikely to crash. However, individuals stocks will crash in a bull or a bear market as that event depends on what management does or does not do.
The Dow has a minor zone of resistance in the 17250 ranges; if it closes above this level, then it should be able to trade to the 17500-17600 ranges. At that point, the Dow should reverse course and trade down to the 16500-16700 ranges. Market Update, Oct 17th, 2015
Dow looking to let out steam
The Dow has been on a tear and it’s looking for any reason to let out some steam. As the trend is extremely bullish, we will embrace all pullbacks; in fact, we would be very happy if the market pulled back strongly for it would provide us with a lovely opportunity to buy quality stocks at a huge discount. A pullback is likely to lead to a test of the 17700 ranges. Once that area is tested we can further fine-tune our analysis but as we stated above, nothing would please us more than the market letting out a huge dose of steam. The masses would panic as usual and dump the baby with the bathwater and we would be ready to back the truck up and load up on all the quality stocks we can lay our hands-on.
V-readings have also soared so this means that the trading ranges have widened; a stronger amount of force is exerted on the direction determined by the trend. As the trend is up, we expect the Dow to roar 2X more than it pulls back. Ideally, the Dow will pullback at least to the 16500 ranges. If it happens to drop lower, view it as God sent.
It is sitting right at resistance now; the 170 ranges provide a decent zone of resistance. It needs to close above this on a weekly level. If it can achieve this, then it will set the way for a move up to the 180 and subsequently 190 plus ranges. Market Update, Oct 17th, 2015
Broker-Dealer index flashing a long-term bullish signal
The $XBD traded closed above 170 on a weekly basis and that’s a very bullish development. The next obstacle is 183.00 and there is a good chance it could take out that zone over a short period and will go on to double before pulling back strongly.
Even though it’s trading off its highs, it’s not something to be concerned about; this index is letting out a well-deserved dose of steam and in the process its building momentum to soar significantly higher. The stronger the pullback the better the opportunity, finally the Dow utilities are holding up well and based on the Tactical Investor Dow theory, the outlook for the future remains bright.
SP 100 development is a Bullish Development
Experts will have you believe that it’s a bad omen if more than 50% of the SP 100 stocks are trading below their 200 moving average. Its faulty advice at best and rubbish at it’s worst; when the trend is up (and the trend is up), this development has to be viewed through a bullish lens. Why? Because it provides the astute investor with an opportunity to purchase top quality stocks at a discount. We have never had a stock crash when the trend is up. Once again, your best options are to focus on the trend and ignore the noise coming from commercial outlets
Should you fear a stock crash in 2018?
Market sentiment is not supportive of a stock crash; take a look at the above two images. Even though, bullish sentiment is in the 41% ranges, the combined score of the neutrals and the bears indicates that at the very most the market is likely to pull back. A stock crash, therefore, is a low probability event, but a correction would not surprise in the least and would be a very welcome development in our opinion. The masses are notorious for bailing out at the wrong time and buying when one should sell. Don’t follow their lead unless you want to lose your maid.
The Trend is Positive
The trend is positive, so all sharp pullbacks should be embraced. As soon as the markets start to let out some steam, bullish sentiment will plunge and bearish sentiment will soar. Its groundhogs day every day for the masses; they never learn; their only solace is that misery loves company and stupidity demands it. A stock crash is not in the works and will not be in the works until the masses embrace this bull market.
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