• Did We Just Make a Major Peak?

    by  • October 23, 2012 10:17 am • Broad Market Analysis, Quick Hits • 2 Comments


    One major concern I’ve noted over the past few weeks has been the steady increase in buying climaxes.  Back at the start of October I first noted this growing concern and the recent weak overall price action has done little to change my near-term worries.


    First things first,  a selling climax occurs when a stock reaches a new 52-week low, then reverses and closes higher on the week. You tend to see a cluster of these near market lows, and they are considered to be spurred by the “smart money” (whoever that really is) accumulating bullish positions. The flipside is a buying climax, which is a new 52-week high followed by a sell-off and lower prices on the week. In other words, this action could be the result of smart money distributing shares.


    Well, we are currently looking at multiple weeks now of steady buying climaxes.  In fact, there were another 44 last week – bringing the grand total to 427 since the middle of September.

    I continue to think any and all pullbacks will eventually be bought and we will rally into the end of the year.  None the less, no one gets paid just for their opinion – they get paid by actual trading performance.  Be very careful out there as worries continue to mount and this pullback very well could have further to go.  Be smart and don’t be a hero trying to catch a falling knife.


    Ryan Detrick is the Senior Technical Strategist at Schaeffer's Investment Research in Cincinnati, Ohio. He joined Schaeffer’s in 2003 and is a frequent speaker and writer on stock market and economic issues and is widely sought after by financial media for his expertise and commentary. Mr. Detrick is a common guest on CNBC, Fox Business, and Bloomberg Television and has been quoted in outlets such as The Wall Street Journal, BusinessWeek, USA Today, Reuters, the Associated Press, and others. With a decade of financial industry experience in the investment and financial services area, strengths include short-term trading with an eye toward timely technical- and sentiment-based trading opportunities, and advanced option trading strategies. Mr. Detrick received a BA in finance from Xavier University, an MBA in finance from Miami University, and has earned his Chartered Market Technician (CMT).


    2 Responses to Did We Just Make a Major Peak?

    1. October 24, 2012 11:28 pm at 11:28 pm

      Hi Gert. Great point. Could it be a peak that lasts several months? Or a few weeks? I don’t know, but the constant worry about a big correction is a nice sign that hopefully this recent peak will give way sooner than later.

    2. Gert Vennekens
      October 24, 2012 7:46 am at 7:46 am

      It depends on what you call a major peak. I believe more in a temporary peak because of sentiment which remains pessimistic.

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