8/23/2008 8:58:10 AM
Understanding trading means understanding all the tools, whether you use them or not.
Stock Barometer Analysis
The barometer remains in Buy Mode.
The Stock Barometer is my proprietary market timing system. The direction, slope and level of the Stock Barometer determine our outlook. For example, if the barometer line is moving down, we are in Sell Mode. A Buy or Sell Signal is triggered when the indicator clearly changes direction.
Stock Barometer Cycle Time
Monday is day 34 in our Up Cycle.
The Stock Barometer signals follow 5, 8, 13, 21 and sometimes 34 day Fibonacci cycles 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: 12/31, 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 believe the market will move higher into 9/2 - or maybe even longer.
My Additional timing work is based on numerous cycles and has resulted in the above potential reversal dates. These are not to be confused with the barometer signals or cycle times. However, due to their past accuracy 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, 12/23, 12/31, 1/11/08. 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, 1/25, 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.
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'.
QQQQ Spread Indicator (NASDAQ:QQQQ)
The QQQQ Spread Indicator will yield its own buy and sell signals that may be different from the Stock Barometer. It's meant to give us an idea of the next turn in the market.
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.
Supporting Secondary Indicator
I monitor over a hundred technical indicators, some that are widely followed and some that are proprietary. These indicators break down the market internals, sentiment and money flow and give us unique insight into the market. I feature at least one here each day in support of our current outlook - and to give you an education on what professional traders utilize.
Summary of Daily Outlook
We remain in Buy Mode, looking for the markets to move higher into 9/2.
Confluence means the coming together of two or more things. In trading, you need to understand all the tools used by traders - from tools as complex as Fibonacci to ones as simple as support and resistance and trendlines.
We have confluence of a number of signals that align towards one common target - a move higher to test previous highs in the Qs.
We have a 100% fibonacci projection that aligns with the top of the current channel, the previous highs at 50.6 and our next key reversal date of 9/3.
That's a significant move and as crazy as some might think I am for being long (and being long since the market bottomed in July) I would be cautious if I were bearish.
I was also called crazy for calling a bottom in housing. Now Greenspan is joining me in that call. I've even placed a significant 6 figure bet in that regard. I'll tell you how that one played out - but my last bottom call returned 4-500%. Oh yeah, that was back in 1992 (October to be precise). One thing you have to realize with housing is that 1) you'll never catch the actual bottom and you won't know that you caught the bottom for some time after you bought. Housing is not one of those things that bottoms and bounces. Some markets will drift lower some markets will stay flat for years and some markets will be a bit delayed in the reaction.
It's funny though, you call a bottom in something and the bears come out of the woodwork. But to me, that's awesome, because the more vigorously bears defend their position, the more emotional they are and the more likely they're wrong. Leave your emotions out of trading. You need to be void of emotion to be a good trader - that's why you see people like Jim Cramer on TV and not at a hedge fund anymore. Jim just can't separate his emotion from his trading. But you can, so start now by trying to eliminate any bias you have in your trading and be as objective as possible.
If you have any questions or comments, email me at Jay@stockbarometer.com.