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Complacency To Greed

8/22/2014 6:32:14 AM

Good morning Traders,

As expiration week comes to a close, we have a sharp move back up into highs and what we need to set a top is in process. Moves like this tend to be the market participants simply agreeing to step in and bring the market higher. What happens near the end of these moves is that individuals move into the market via ETFs. This drives up a narrower group of popular stocks and leaves the market vulnerable. Since it is Friday, we will look at Money Flow to show that point. Visit www.stockbarometer.com to sign up to access our over 300 research charts.

Cumulative Money Flows Chart

Above is the equity money flow cumulative data (our calc) including ETFs. As you can see, flow remains bullish - touching the danger level, but bouncing.

Below is the same data, excluding ETFs. This flat lining is pretty unique, even looking back to 2005. Point is, if we go lower, this will start flashing a warning sign. It's a characteristic of a bearish market for this line to trend lower. We're not there yet. But stay tuned.

Cumulative Money Flows Chart 2

Here's the AAII data for Bulls only:

AAII % Bulls Chart

And bears:

AAII % Bears Chart

and finally, the equity put call ratio:

Equity Put/Call Ratio Chart

There's a point when traders go from complacent to greedy. Those spikes in options as shown above are usually punished with a sharp move lower. We're close. To that point, we're close to issuing our top 100 covered calls and PUT options in our Stock Options Speculator Service to profit (and hedge gains) from potential future downside. So stay tuned - this is the barometer cycle in action.

Regards,

 

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