Enjoy this post? Share the love.
On the close of December 13, our stock market timing system shifted from “buy” to “neutral” mode. This means we now have no firm bias with regard to near to intermediate-term market trend for swing trading.
The lack of substantial bullish follow-through in leading individual stocks in recent weeks, the absence of leadership in most ETFs (other than international ETFs), and the bearish pattern on the weekly chart of the S&P 500 Index (below) are all valid reasons to avoid the long side of the market now. Nevertheless, recent price action in the stock market has not yet convincingly confirmed the balance of power has shifted back to the bears, so we are a bit cautious about aggressively jumping in the short side of the market just yet.
Below is a longer-term weekly chart pattern of S&P 500 SPDR ($SPY), a popular ETF proxy for trading the benchmark S&P 500 Index. Notice that $SPY will likely print a bearish “shooting star” candlestick pattern for the week. This is a topping pattern that often indicates near-term bullish momentum is running out. Since a weekly chart is a longer-term interval than a daily chart, the formation of this shooting star pattern on the weekly chart is more important than if the the same pattern occurred on a daily chart:
Notice that the formation of the shooting star candlestick also occurred as $SPY “overcut” resistance of its downtrend line from the September high. This overcut of the downtrend line is significant because it sucks in new buyers, just as institutions are starting to sell into strength. This creates additional overhead supply that subsequently increases the odds of a resumption of the dominant downtrend. This would be confirmed if $SPY breaks below the horizontal price support shown above, which is merely a move below the low of its current weekly candlestick.
Although the weekly pattern of $SPY looks a bit ominous, at least in still trading above technical support of its 20, 50, and 200-day moving averages on the shorter-term daily chart. That’s more than one can say about the Nasdaq 100 Index, which sliced back below its 50 and 200 day moving averages yesterday. As you can see on the daily chart of $QQQ (an ETF proxy that tracks the Nasdaq 100), a break below yesterday’s low would coincide to the Nasdaq sliding back below its 20-day exponential moving average as well:
We concluded yesterday’s technical commentary by saying, “Given the lack of explosive price action in leadership stocks and the late day selling in the averages the past two days, the market could be vulnerable to a sell off in the short term…We are not calling the current rally dead, but we do not mind stepping aside for a few days and monitoring the price action.” To coincide with this statement, we made a judgment call to take profits on all long positions in our model trading portfolio by selling at market on yesterday’s open. Given that the broad market subsequently trended lower throughout the entire session, this worked out pretty well. Now, we are back to “flat and happy,” sitting on the sidelines 100% in cash.
One big challenge for swing traders right now is that volume levels in the broad market will likely begin heavily receding next week, as we approach the Christmas holiday. As we have warned several times in recent weeks, swing trading in low-volume environments is challenging because day-to-day price action tends to be more erratic and indecisive. Therefore, we’re not in a hurry to enter multiple new positions (either long or short) ahead of the holidays, but will still consider new stock and/or ETF trade entries (possibly on the short side and/or inverse ETFs) with reduced share size if an ideal trade setup with a firmly positive reward-risk ratio presents itself.
We do have one new setup to possibly sell short iShares Nasdaq Biotechnology ($IBB) on a slight bounce in today’s session. Review this recent post on our trading blog to see the bearish setup for $IBB. Our exact, preset entry, stop, and target prices for this swing trade setup are available to regular subscribers of The Wagner Daily swing trading service(risk-free subscription available to try it out).
Do you use a market timing system? What are some of your favorite indicators to determine your overall market bias? We’d love to hear your thoughts, so drop us a line below.
Enjoy this post? Share the love.
We think you may enjoy these posts:
- Our stock market timing model shifts to “neutral”
- Our market timing system shifts to “buy” mode as market breadth improves
- How To Handle A Choppy Stock Market With “SOH Mode”
- Why Our Stock Market Timing Model Is About To Trigger A “Sell” Signal
FAQs
The spring-loaded ball is responsible for locking the transmission into gear. If a spring in the shift rail becomes weak or broken, the manual transmission will not lock into gear. Instead, the spring-loaded ball may slip out of the notch, causing the transmission to jump into neutral unexpectedly.
Is it okay to shift to neutral in traffic? ›
If you engage Neutral at every traffic light, you'll be subjecting the driveline to unnecessary shock when you re-engage Drive. The exception to this rule is if the stop is on an incline. Then you should throw it in Park and use the parking brake.
Is switching from drive to neutral bad? ›
It is widely believed that switching the car to the neutral mode while driving will save fuel. However, it is dangerous to do so. Switching to neutral will reduce the control you have over the car. This can prove to be life-threatening in a risky situation.
Why does my automatic car go into neutral? ›
Sounds like the shifter is out of sync with the transmission. Exact cause depends on the vehicle and the nature of the linkage between the shifter and the transmission. This is a dangerous situation, which could lead to serious injury if the car starts moving when you think it's in neutral but is actually in drive.
How to fix a slipping transmission? ›
Many automatic transmission slipping issues can be fixed by adding more transmission fluid to the system. Draining worn-out fluid and refilling it with fresh transmission fluid can also be a remedy. If the transmission is leaking fluid, you'll need to find the source.
What are the symptoms of a bad torque converter? ›
It's important to note that symptoms of bad torque converter can vary depending on vehicle model. Symptoms can range from transmission slipping, shuddering during acceleration, rough idling, shaking in certain gear, unusual noises, delayed or rough shifting, and even complete transmission or torque converter failure.
What happens if you accidentally shift into neutral while driving? ›
If you've ever accidentally bumped your gear shifter into neutral while driving, you know the feeling of sheer panic when your vehicle suddenly revs without accelerating. While this moment can be panic-inducing, in most cases, it won't cause major damage.
Under what conditions should you shift to neutral? ›
You can't “Drive” in “Neutral”. The vehicle doesn't move if you try to drive in neutral. You can shift to neutral if you want to coast, but the only time this will do any good is on a downhill, if on a level road you will lose speed fairly rapidly, and on an uphil, you will lose speed very rapidly.
When should I switch my automatic transmission to neutral? ›
N - Neutral: If you're stopping at lights or in traffic for a couple of seconds, you should put the car in Neutral. Just be sure to use the brake/handbrake too to avoid rolling. D - Drive: Used to go forwards, the car will automatically switch to second, then third and so on providing you're moving fast enough.
Does shifting to neutral save gas? ›
DON'T DRIVE IN NEUTRAL
With modern vehicles, if you're not accelerating, your engine already has cut off fuel consumption and you're not wasting any fuel while you coast. All you have to do to stop fuel consumption is to take your foot off of the gas pedal. That means that shifting to neutral does not save fuel.
In the meantime, it's a good idea to familiarize yourself with the tell-tale signs that you may be low on transmission fluid.
- Noises. ...
- Burning Smell. ...
- Transmission Leaks. ...
- Slipping Gears. ...
- Slow Gear Engagement. ...
- Vehicle Accelerates Poorly. ...
- Check Engine or Transmission Warning Light Is On.
It might be fine when driving in a low speed, but once you committed the shifter to neutral, you lost the ability to accelerate to avoid any last second problem arises from the traffic around you. Your response time to maneuver will increase if you have to re-shift to a positive gear and apply gas to avoid trouble.
Why is my car only driving in neutral? ›
A common complaint from many drivers is a transmission that's stuck in neutral. Some potential causes for this problem are low transmission fluid, a damaged transmission shift cable, and a faulty control module.
Is it safe to leave an automatic car in neutral? ›
Leaving your car in neutral minimizes the speed and movement of your car. So, there is no reason to put the gearbox in neutral while waiting at a signal. Its fine to leave it in drive mode. You should always park your car in 'P' mode or the parking mode.
Is it good to put your car in neutral at stop lights? ›
Avoid Using Neutral while the car is at a stop light/traffic. Automatic vehicles that are on neutral while on neutral doesn't save on fuel, use hand break instead so that you don't wear out your transmission. Damage happens when if the gear is in N when the light turns green.
Who does my transmission slip into neural sometimes? ›
Causes of Automatic Transmission Slipping
If you are experiencing slipping, the first thing you should do is check your transmission fluid levels. If they are low, you should top it up and check for leaks. Slipping can also be caused by burned or worn out fluid.
What is the most common cause of transmission slipping? ›
Transmission fluid: One of the most common transmission slipping causes is a faulty transmission fluid, so this should be the first component you check when diagnosing the problem.
Why is my car jerking in neutral? ›
If the fluid level is too low, it can cause the transmission to overheat and wear out faster. Yes. Because the car work at a lower rpm while at neutral so it makes the car jerks.
Why is my automatic transmission slipping under load? ›
You may just need to refill the fluids, but if the problem persists, then there may be a leak in the system. Another cause is the various parts found within your car's transmission. Over time, these parts can break or wear down. If not corrected soon, it could very likely lead to transmission failure.
