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By: Stock Barometer | Sun, Jul 13, 2008
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Bi-Weekly Stock Barometer No. 182
7/13/2008 9:57:10 AM

Here's why you should subscribe to a financial newsletter.

Welcome to the biweekly stock barometer. This article comes out every 2 weeks and gives our big picture view of the market. If you're interested in following our signals and learning more about our system, then I invite you to click here and subscribe to the daily service - since the market can turn on a dime and so too can our interpretation as the market gives its daily clues to the future. Or sign up for our free weekly newsletter, where we provide up to date articles from our various trading services.

We also offer a free weekly indicator chart if you visit our home page and scroll to the bottom. This chart will be updated each week, so be sure to check back frequently for updates. www.stockbarometer.com - don't forget to scroll to the bottom.

Good Sunday morning readers. Periodically I step back and look at the big picture. Why do people write financial newsletters and how can they benefit you?

I think there are two types of people in this world. Those who like to help others and those who like to help themselves. It's very important to know the motives behind the authors of the newsletters you subscribe to. Greed is a very scary beast and it impacts everyone - and I've been doing this long enough to see all types.

As a matter of background, I've been writing newsletters since 2000. Which I must say was a great time to get into writing about the markets. My first venture was with another publishing company, writing a twice weekly technical analysis column. I'd break down stocks (to the nth degree) and project their future action. When the firm I wrote for partnered with a big name financial firm, they couldn't have me contradicting their new partner, so they removed me from the site.

Since I had been doing this for a couple of years, I had built quite a following. So they moved me to one of their dormant newsletters. So I spent a while writing about asian stocks and learning about overseas investing. Building on my continued success in recommending trades, they moved me once again to my own newsletter, recommending candlestick trades. During this time, I had been building an extensive data base of financial data and did some modeling of the markets to try and predict future movement and more specifically, give me higher confidence in making candlestick trades. Combining sentiment with technicals was a winning formula for me (and my readers).

Over the years, I've learned a lot about trading. From being able to interpret traders' bias and made it a point to try and point out to traders when they were making irrational decisions. These occurred mostly at tops and bottoms. What amazes me the most is that you can go through these cycles year after year, and no matter what you tell people, they'll react based on their emotions and then in hindsight, regret that they didn't heed your advice.

So I built my own website and offered my own services and now answer to no one as respects offering an opinion that may be against the opinion of a much larger company. Fully independent is the way to go. So what I offer to you is historic perspective. An understanding of being through most of these cycles before. Having seen the bull market of the 90's, the short term crash in 2000, the bear market that initiated 9/1/2000 and culminated in a monstrous low on July 2002 retested in October 2002 and finally the March 2003 low - and the ensuing Bull Market.

This experience is priceless. For every day since 2000, I've been writing about the financial markets. I've seen most all. Granted it was only a decade worth of writing and reflecting on trading, but it was quite a decade. I started like most traders, building wealth through mutual funds, getting interested in stock investing, then learning about trading and making the plethora of mistakes that most new traders make and finally coming out on the other side. It's a process that's different for every trader and is what makes each trader different.

So in the time I've been writing, I have seeked out others who were of a similar mindset, traders who could offer 2 critical things; 1) independent trading advice and 2) invaluable insight and education on trading in various market conditions.

So let me run through my writers and what they offer you.

Angelo Campione writes Advantage Credit Spreads and can show you how to make 5-10% per month trading once or twice per month. It's a laid back service that offers incredible potential and consistent profits. Subscribing to Angelo's service will give you a unique education on how to make consistent money from the market. Click here to learn credit spread trading from Angelo.

As with all my services, we offer free trials.
I recommend subscribing for a few months
and learn what you can from each of the traders.

Patrice V. Johnson is the author of The J.E.D.I. Way and shows you how to use the force of volatility in options trading. Patrice takes the time to give you detailed responses to your questions. Again, not only do you get specific trading advice, you can question the trades. She welcomes your comments. You can't get this type of response from reading a book. Click here to learn from Patrice.

Bill West is a former commodities trader and manages our Fat Pitch ETF Advisory. I don't know about you, but half of my 401k is in ETFs because they just offer you more diversity. Bill manages a portfolio of ETFs using his Proprietary Fat Pitch System. Click here to learn what Bill has to offer.

And last, but not least, we have Lynn T - our longer term leveraged investment focused advisor who manages the 1-2-3 Plus Alert. Her system is short the S&P right now after moving to cash several weeks ago. She's also getting ready to issue an important signal. Click here to give her service a try.

I also have a special offer for you to give all the above services a try for free. Simply click on each of the following links and sign up to all 4 services.

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Try them for 4 weeks and keep only the ones that you like.
Feel free to ask your questions to any of our authors. This is your chance for not only expert advice, but feedback from a partner with a common objective. Profit! Click the above links to take advantage of this opportunity and get almost $120 in services free for 4 weeks!

On to this week's charts. (Please note there's a significant call for a market reversal in this week's article).

Message From The Markets

Market action is ruled by sentiment and by monitoring market internals and studying sentiment you can reasonably predict future market movements. The basis of the Stock Barometer system is overlaying extremes in sentiment with sound technical analysis to predict the likelihood of future price movement. Each indicator and chart measures the hope, fear and greed of investors and traders from different angles. Follow along with my charts and over time, you'll also learn to understand how to read the markets, which is essential prior to setting up each and every trade.

STOCK BAROMETER CHART

The Daily Stock Barometer is a proprietary measure of market energy. The direction of the stock barometer determines our short-term outlook on the market's direction. A BUY or SELL signal is triggered when the indicator clearly changes direction. If the line is moving up, we are in BUY MODE and if it's moving down, we are in SELL MODE. The black line is a 5-day moving average that we use to confirm changes in direction. We may wait for the QQQQs to break support or resistance before changing mode.

EQUITY PUT CALL RATIO CHART

The CBOE put/call ratio is comprised of two sets of data; equity options and index options. The index component contains items that are used as a hedge, thereby distorting the correlation and interpretation of the indicator. I use the equity put/call ratio. This is one of the most accurate read of investor's fear and complacency.

TRIN/ARMS CHART

Richard Arms developed the arms index. It is also referred to the Trading Index or TRIN for short. It is a measure of the ratio of up stocks and down stocks divided by the ratio of up volume and down volume. Our Spread Chart converts the arms index data into momentum Buy and Sell Signals.

TICK CHART

The tick index is represents the sum of all stocks ticking higher minus all stocks ticking lower (a stock is said to be trading on an up tick when it trades at a higher price than the last sale). It's utilized as a day trading tool as it gives you an up to the second read of the intensity of buying and selling.

BREADTH (ADVANCE - DECLINE) CHART

Each day several thousand stocks either advance, decline or remain unchanged. The number of advances and declines normally ranges from +2500 to -2500. A high number of advancing stocks normally marks a top just as a high number of declining stocks normally marks a bottom. Monitoring the 5 and 13-day moving averages of this allows us to better predict future prices.

VXO CHART

The VIX is a measure of volatility on options pricing. We use the old VIX, which is now called the VXO. The higher the volatility, the more likely the market is close to a bottom, as traders are willing to pay more premium for puts, which act as Insurance on their long positions.

Cycle Time

Monday will be day 4 in our UP cycle.

The Stock Barometer signals tend to follow a 5, 8 and 13 and sometimes 21 day Fibonacci cycle that balance with 'normal' market cycles. Knowing where you are in the current market cycle is important in deciding how long you expect to maintain a position.

Potential Cycle Reversal Dates

2008 Potential Reversal Dates: 1/11, 2/1, 2/13, 3/6, 4/5, 4/22, 5/23, 6/6, 6/27, 7/13 9/2. We publish these dates up to 2 months in advance.

We've added our 9/2 date - and this Sunday was a key reversal date, so we're looking for the market to make a significant bounce initiating next week.

My timing work is based on numerous cycles and has resulted in the above potential reversal dates. They're predictive and have nothing to do with the barometer cycle times. However, due to their accuracy in the past, I post the dates here.

2007 Potential Reversal Dates: 1/10, 1/14, 1/27, 1/31, 2/3, 2/17, 3/10, 3/24, 4/21, 5/6, 6/15, 8/29, 10/19, 11/29, 12/13, 12/24, 12/31.
2006 potential reversal dates: 1/16, 1/30, 2/25, 3/19, 4/8, 5/8, 5/19, 6/6(20), 7/24, 8/20, 8/29, 9/15, 10/11, 11/28.
2005 Potential reversal dates based on 'other' cycle work were 12/27/04, 1/25/05, 2/16, 3/4, 3/14, 3/29, 4/5, 4/19, 5/2, 6/3, 6/10, 7/13, 7/28, 8/12, 8/30-31, 9/22, 10/4, 11/15, 11/20, 12/16.

Stock Barometer Buy And Sell Signals

QQQQ or SPY Chart: A chart is provided in every bi-weekly report and shows the barometer Buy and Sell Signals (which are provided in my morning updates) as well as showing the next highlighted 'reversal' window. The numbers adjacent to the buy and sell signals are the number of days between signal (cycle time).

Here's one years of our end-of-day buy and sell signals for the Stock Barometer over the past year. They're marked on the QQQQ chart with red and blue lines (or red and blue arrows). Note we recently changed bottom and top to read buy and sell.

 

09/2

Projected SELL Signal (36 days from last signal)

 

07/08

BUY (11 days)

 

06/20

SELL (4 days)

 

06/16

BUY (6 days)

 

06/06

SELL (6 days - intra day signal)

 

05/29

BUY (5 days)

 

05/21

SELL (4 days)

 

05/15

BUY (6 days)

 

05/7

SELL (13 days)

 

04/18

BUY (7 days)

 

04/9

SELL (19 days)

 

03/12

BUY (2 days)

 

03/10

SELL (3 days)

 

03/05

BUY (3 days)

 

02/29

SELL (13 days)

 

02/11

BUY (8 days)

 

02/05

SELL (4 days)

 

01/24

BUY (4 days)

 

01/17

CASH (3 days)

 

01/14

BUY (6 days)

 

01/04

SELL (9 days)

 

12/20

BUY (3 days)

 

12/17

SELL (23 days)

 

11/13

BUY (4 days)

 

11/07

SELL (7 days )

 

10/29

BUY (13 days)

 

10/10

SELL (3 days)

 

10/5

BUY (2 days)

 

10/3

SELL (2 days)

 

10/1

BUY (1 days)

 

9/28

SELL (12 days)

 

9/12

BUY (4 days)

 

9/06

SELL (3 days)

 

8/31

BUY (3 days)

 

8/29

SELL (7 days)

 

8/17

BUY (3 days)

 

8/14

SELL (4 days)

 

8/8

BUY (16 days)

 

7/17

SELL (3 days)

 

7/12

BUY (15 days)

  (historical reversal dates and performance figures are published at the Performance Page on the home page and updated at least annually)

The following work is based on my spread/momentum indicators for the QQQQ, GLD, USD, USO and TLT. They are tuned to deliver signals in line with the Stock Barometer and we use them only in determining our overall outlook for the market and for pinpointing market reversals. The level, direction, and position to the zero line are keys in these indicators. For example, direction determines mode and a buy signal 'above zero' is more bullish than a buy signal 'below zero'.

Gold Spread Indicator (AMEX:GLD)

To trade Gold, utilize the Gold ETF AMEX:GLD. This gives us a general gage to the overall health of the US Economy and the markets, as well as to assists us in the entry of positions in our stock trading service.

US Dollar Index Spread Indicator (INDEX:DXY)

To trade the US Dollar, I'd utilize the Power Shares AMEX:UUP: US Dollar Index Bullish Fund and AMEX:UDN: US Dollar Index Bearish Fund.

Bonds Spread Indicator (AMEX:TLT)

To trade Bonds, I recommend Lehman's 20 year ETF AMEX:TLT. Note that the direction of bonds can have an impact on the stock market. Normally, as bonds go down, stocks will go up and as bonds go up, stocks will go down.

OIL Spread Indicator (AMEX:USO)

To trade OIL, utilize AMEX:USO, the OIL ETF. We look at the price of oil as its level and direction can have an impact on the stock market.

Summary & Outlook

We remain in Buy Mode, looking for the markets to bottom this week and rally sharply into September. This is a significant call and contrary to what you're hearing in the media - where it would appear to be the end of the world. We have a key reversal date (today) and it appears lined up with a move higher. Let me know if you have any questions.

Thank you for your time and for reading me. This is actually bi-weekly article number 182, which gives you some perspective on how long I've been writing this. I'm sorry it'd brief, but you don't need me regurgitating all the financial garbage speculation that you can get by reading Yahoo Financial or watching CNBC or something. You don't need that garbage to make money in the markets. You simply need objective and independent analysis and clear and actionable advice. Enjoy your Sunday - I'm off to a cookout, where I'm sure people will be asking me about the current financial markets!

I hope you enjoyed the biweekly stock barometer. This article comes out every 2 weeks and gives our big picture view of the market. If you're interested in following our signals and learning more about our system, then I invite you to click here and subscribe to the daily service - since the market can turn on a dime and so too can our interpretation as the market gives its daily clues to the future. Or sign up for our free weekly newsletter, where we provide up to date articles from our various trading services.

We also offer a free weekly indicator chart if you visit our home page and scroll to the bottom. This chart will be updated each week, so be sure to check back frequently for updates. www.stockbarometer.com - don't forget to scroll to the bottom.

As always, if you have any questions or comments, feel free to email me here at jay@stockbarometer.com.

Regards,

 


 

Stock Barometer

Author: Stock Barometer

www.stockbarometer.com

Stock Barometer is completely independent. We have never and will not ever accept compensation from any company whose stock we recommend.

Our goal is to make you money. We offer you the tools and information to do so and leave it to you, the individual investor, to apply them in the best way possible.

Important Disclosure: Futures, Options, Mutual Fund, ETF and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell Futures, Options, Mutual Funds or Equities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as a lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

Investment Research Group and all individuals affiliated with Investment Research Group assume no responsibilities for your trading and investment results.

Investment Research Group (IRG), as a publisher of a financial newsletter of general and regular circulation, cannot tender individual investment advice. Only a registered broker or investment adviser may advise you individually on the suitability and performance of your portfolio or specific investments.

In making any investment decision, you will rely solely on your own review and examination of the fact and records relating to such investments. Past performance of our recommendations is not an indication of future performance. The publisher shall have no liability of whatever nature in respect of any claims, damages, loss, or expense arising out of or in connection with the reliance by you on the contents of our Web site, any promotion, published material, alert, or update.

For a complete understanding of the risks associated with trading, see our Risk Disclosure.

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