Weekly Update

By: Angelo Campione | Mon, Jan 19, 2009
Print Email

1/19/2009 8:04:41 PM

Welcome to the Advantage Report, this report summarizes the general market as well as the Nasdaq 100 and issues BUY or SELL signals when the conditions present themselves.

General Commentary:

Both the SPX and NDX are now on Preliminary SELL signals.

This past week saw prices deteriorate at a quicker rate than anticipated and while the key level of 850 was broken on the SPX, we finished the week right on it. Evidence is now building that we're heading for a period of indecision and range bound action is likely. We will stay with our longs for now and only close if we get a full sell signal.

As a side note, I got a question during the week that asked why I would not take action to close the longs when I was seeing weakness in the markets. My answer is that we have a system in place that takes away any bias I may have. At the end of the day, I don't know what tomorrow will bring and while sometimes the market can give the appearance of a movement in a certain direction, it quite often is a false sign and this is why whatever system you have in place, it needs to be robust enough to handle all sorts of situations so that over the course of a year you still end up with a profit, and that's the system we have.

This leads me to another point about timing systems. Timing the market for tops and bottoms is a tricky thing, our timing system works on a confirmation basis, meaning that in order to know that a top or bottom has happened and we are now reversing, a confirmation on the opposite move is required. We do this so that we don't get bumped off on a false move. The downside is that sometimes by the time confirmation comes, the market has moved substantially against us, which minimizes the potential gain. This is often the scenario in sideways markets, and that's what we seem to have at the moment.

In back testing our system, I noticed that this scenario tends to happen for 2 to 3 months of a year, however all the performance for the rest of the year more than makes up for the poor performance during these indecisive periods. Remember, a good system is one that puts you in the right position for the big moves and keeps you there until there is a definite change. In big volatile markets this isn't easy to stomach, but in the long run it pays off very handsomely.

While this type of whipsawing price action is frustrating from a directional trading perspective, it's handy to have a part of your portfolio in a non-directional trading strategy like our Advantage Credit Spreads service. The aim there is to make a slow steady return of 5% - 10% per month regardless of market conditions. Over the last 3 months we've averaged 5.5% for each month. If you'd like more information on this: Click Here

On to the markets..

SPX Chart - Bigger Picture

Last week I mentioned how the 850 level needed to hold in order for the V bottom to maintain its integrity. Well 850 did in fact break intra week and the potential picture now is a symmetrical triangle for the medium, where we trade between 830 and 930 until a direction is chosen.

SPX Chart - Shorter Picture

In the shorter term, we broke through the key 850 level and found support around 820. We finished the week on solid volume right on 850 and with no clear indication of a direction for the week ahead.

The MACD has turned negative also, however the indecisiveness of the market means that it's possible for the market to still push higher from here.

Overseas markets are down at the moment and the S&P futures are down 1.5% at this point but the exuberance around the inauguration of Obama may reverse that when trading begins on Tuesday.

For this week, support on the SPX is at 820 and resistance is from here up to 930.

The VIX Picture

The VIX went up strongly last week as the weakness continued in the market, although fell sharply on Friday suggesting, we could get a bit of a bounce this week.

Having said that, for real strength to return to the market, we need to see the V bottom break. i.e a drop below 42.

The VIX measures the premiums investors are willing to pay for option contracts and is essentially a measure of fear i.e. the higher the VIX, the higher the fear in the market place.

NDX Chart - Shorter Picture

It seems that the scenario discussed in last weeks report played out as weakness set in and pushed us down to the 1140 support point. We're now in a sideways pattern between 1140 and 1300.

The MACD is essentially flat here and basically confirms that there's not a lot of clarity on the direction in the short term.

For this week, support on the NDX is around 1140 and resistance is 1300.

Quote of the Week:

In commemoration of Martin Luther King today, here's a quote from the great man, "Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that."

Feel free to email me at angelo@stockbarometer.com with any questions or comments.

If you are receiving these alerts on a free trial, you have access to all of our previous articles and recommendations by clicking here. If you do not recall your username and/or password, please email us at customersupport@stockbarometer.com. If you are interested in continuing to receive our service after your free trial, please click here.



Angelo Campione

Author: Angelo Campione

Angelo Campione
"Improved Speculation Through Timing"

About The Advantage Report Trader Alert:

The Advantage Report is a timing service that allows you to maximize profit in both bullish and bearish market, we have a proprietary system that issues buy or sell signals based on several algorithms.

The signals we have are:

BUY - This means go long in your desired investment vehicle.
SELL - This means go short in your desired investment vehicle.
PRELIMINARY BUY or SELL - This means be alert to a potential change of signal and be ready to take action shortly but DO NOT take action yet.
STOP - This means close your positions and go to cash

To Learn more about us: Click Here

Not a subscriber yet? Want to be? Click here and sign up for a no cost trial. Sign up for our TRADE TUTOR weekly newsletter at no cost to get a trading education from Pro Traders.

Important Disclosure:

Futures, Options, Mutual Fund, 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.

There is a very high degree of risk involved in trading. Past results are not indictive of future returns. Stock Barometer and all individuals affiliated with Stock Barometer assume no responsibility for your trading or investment results.

Copyright © 2007-2010 Angelo Campione

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com