YUM! Brands, Inc.

$YUM is a sell on the long term

The big picture

The long term trendline of $NDX from the lows of 2009 is still intact. There was an attempt to break the line on 11/16. The index dipped below the line but closed above it. The momentum is waning with all the indicators posting lower highs. But, if you are a long term investor, you could wait for the trendline break and then a 5% stop below the break, to exit.

Even after the trendline break, there will be attempts to rise above the trendline again. All this may take few months time. Topping is a process as you all know. I see $NDX topping in this short term at 2725 - 2750 but then there will be several attempts to regain the momentum. In other words, we could see a range bound market for the next several weeks.

Either way, long term investors have no reason to get out right now. If the momentum is very strong, we may even rise above the 2012 peak. There is a very small possibility for this to happen, but there is!

My previous big picture call was posted on September 3, before the market peaked few days later. So far as long as the market doesn't rise above it, it remains the top for this market.

Market update

Market update is typically given for $SPX. Use $SPY to trade the market. 

VST - Bullish

ST - Bearish

IT - Bearish

LT - Bullish

Emerging market's have been outperforming the US markets for the last 2 months now. Recommendation is to short the Qs and go long the EEM. Since September, this trade netted 10% +. I believe the same trade will continue to outperform in the very short term (VST = 3-5 days) and the short term (ST = 20 - 25 days).

I posted AAPL's outlook for the next few months last night, don't miss to read it.

AMZN long term

AMZN peaked for the long term. The ship is going down. For this theory to be invalidated, AMZN must clear 250$.

Market update

Previous market update here .

VST - bearish yet, I don't see any signs of buy in the VST yet. Will update at the next instance of a buy.
ST - remains bearish
IT - cash
LT - remains on bullish signal

$SPX update

My previous update about the market is here . I posted my outlook in all time frames in that post, it is good to know the market is following my outlook since then. We are a mere 13 $SPX points lower compared to Oct. 14th. The market went higher in the very short term and now is going lower.

Before I go to write further, my outlook for the next 2 weeks:

  VST - Bearish

 ST - Bearish still but see signs of + divergence to turn bullish

 IT and LT - Bullish still.

I want to write more about the ST here. Look at the chart below:

Price is going lower vs relative strength is at the same level or higher right now. If this chart should turn bullish, it needs to follow rules: RSI shouldn't go lower than previous low, RSI should turn higher, then buy when price closes above daily close 1417 on the /ES. The same divergence can be seen on the $SPX as well.

There are chances that the divergence may not end up into a bullish tone but watch for the above signs and play the game - good for few days as this is a daily chart.

$SPX update

I was wondering about market correction going on currently, if it is a correction in a bull trend or something serious to take note of. 

Since the June 1st week low of 1274, $SPX rallied ~ 200 pts and topped out in September. There have been 6 minor corrections of 40 - 50 pts along the way. I highlighted them on the graph. All of those corrections didn't exceed more than 40 - 50 pts and maintained consistency. How come there was so much accuracy? This correction is also worth ~ 50 pts so far.There is a difference between the current one and the past 5 corrections in this intermediate trend. None of them tagged the lower bollinger band, the price had a good relative strength (RSI). With these key points in mind, I can conclude that this correction will fall further albeit there may be a bounce into next week because the market is oversold. $COMPX is doing worse than $SPX, $DJI is in a better strength - this is also a sign of coming market weakness. 

Very short term - oversold, looking for bounce

Short term - bearish

Intermediate term - bullish

Long term - bullish by a long way

The Big picture

The stock market has topped for this long term cycle. You have heard it here first! I am using key divergences with RSI and MACD (+ histogram) on the $SPX to understand this topping process. $DJI is showing a similar set up, while COMPX and RUT are not showing similar set ups but showing waning momentum. The The market has been pushing up even though momentum has been waning for almost 1 1/2 years now. As a result the market strength is relatively low. I marked the divergences on price and then the indicators. Use it as an example to see the same on the  topping process in 2007. All tops are not built the same, keep that in mind. As an example, this top could take longer and be very different than the previous one. Further, keep in mind that topping processes are complex and give a 5% rise above the high to be established. 

What would invalidate a top? Renewed strength in the said indicators RSI and MACD would invalidate the top for me. Meaning the indicators have to creep above their previous highs. 

Is it ideal to short the market here? I would not short the market here. Staying in cash is the strategy here. A close below the 50 period MA would be an ideal spot to short with a 5% stop above it.