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Mullooly Asset Management, Inc

Mullooly Asset Management

Fiduciary Fee-Only Financial Planner | Investment Advisor in Wall, NJ

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Stock Market Negative Momentum : A Much Needed Breather

May 31, 2008 by Thomas Mullooly

Just about the time Mr. & Mrs. Jones realize “hey that stock market is start to look pretty good!” is when the positive momentum often starts to fade — and often swings to a negative weekly momentum.

And that’s precisely where we stand today.

We have some cash on the sidelines. Some clients have a lot of cash on the sidelines. But understand, we’re entering a phase where the momentum has been negative for almost two weeks. On top of that, some of the short-term indicators I use to measure risk in the market have just recently given sell signals.
Momentum swings positive and negative, on average, for around 6 to 8 weeks. Meaning, the “green light” goes on for 6 or 8 weeks, then the yellow light turns on for 6 or 8 weeks. Sometimes it’s only 4 or 5 weeks, sometimes it’s 10 or 11 weeks. You get the idea. And also, every now and then, the red light comes on.

So when the market has been good, a stretch of negative weekly momentum for 6 or 8 weeks gives mutual funds and stocks a healthy breather — a pullback — to buy more, or to get in if you missed something earlier.

Sometimes negative weekly momentum provides a few weeks where the market just “hangs out” and does nothing, goes nowhere. But sometimes negative weekly momentum and short term sell signals are the start of a new turn down in the market.

So, it’s not fatal, but we’ve switched from a green light to the yellow caution light. I want to be deliberate and slow in putting money to work over the next few weeks. We’ll see what unfolds, and act accordingly.

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Filed Under: Asset Management, Point and Figure Tagged With: market conditions, short term indicators

About Thomas Mullooly

Thomas Mullooly is owner and founder of Mullooly Asset Management, Inc. In 2002 Tom opened Mullooly Asset Management, a fee-only investment advisory firm. As an investment advisor, and not a broker, Tom works strictly for his clients. With the help of point and figure charting, Tom builds a realistic game plan for clients.

1971 State Route 34, Suite 102
Wall Township, NJ 07719

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The information on this website and blog do not involve the rendering of personalized investment advice. A professional advisor should be consulted before implementing any of the options presented. None of the content contained in this website should be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

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