The Next Two Weeks, Will Set Up the Next Two Months
6/23/2010 9:32:34 AM
Our call since the beginning of the year has been for a...
...August and October double bottom in the market in our 2010 Forecast. And while the future is sometimes predictable, that can all invert here - resulting in higher highs. So we're very cautious here as we're seeing sufficient energy in the market to produce more upside, we just need the market to release that energy.
For new subscribers, welcome. For the past decade, I've been advocating for you, the individual investor and trader by showing you when the stock, gold, bond and oil markets are going to turn and showing you how to position and profit from these moves. I believe education is power and am available every single trading day (along with Mark McMillan) in our Market Chat Chatroom from 9:30 to 10:30 to answer your questions, discuss trades and outlooks, and sure, sometimes we'll do a little day trading.
This daily article sets up what am I seeing now. The market is at a critical juncture and our outlooks can turn on a dime. One of the biggest changes is with oil, which is moving into Sell Mode. This could be a sharp move lower, so be cautious.
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Stock Barometer Analysis
The barometer remains in Buy Mode, but turning lower, so we are very cautious here, especially ahead of the fed. There were two similar points in recent history where we had the same characteristics setting up. The energy is there for a continuation of the move higher, but absent a catalyst, the energy alone will do us little good. If we have continued weakness, we could issue an intra day alert to change positions.
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. Trend and support can override the barometer signals.
Money Management & Stops
To trade this system, there are a few things you need to know and address to control your risk:
- This system targets intermediate term moves, of which even in the best years, there are usually only up to 7 profitable intermediate term moves. The rest of the year will be consolidating moves where this system will experience small losses and gains that offset each other.
- This system will usually result in losing trades more than 50% of the time, even in our best years. The key is being positioned properly for longer term moves when they come.
- Therefore it is vitally important that you apply some form of money management to protect your capital.
- Trading a leveraged index fund will result in more risk, since you cannot set stops and you cannot get out intraday.
- Make sure you set your stops so that you can lose no more than 2% per trade (based on the QQQQ if you're trading leveraged funds and options with our trading service).
Potential Cycle Reversal Dates
2010 Potential Reversal Dates: 1/19, 1/28, 3/2, 3/23, 4/7, 5/30, 6/10, 6/28, 7/10. We publish dates up to 2 months in advance.
My forecast remains looking for a rally into the 28th. This is the end of the month and mutual funds need to make their numbers look good. But a move lower into the 28th will put us back on a bearish outlook for this summer. So stay tuned.
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.
2009 Published Reversal Dates: 1/20, 2/11, 3/7, 3/15, 4/8, 4/16, 4/27, 5/7, 6/8, 7/2, 7/17, 9/14, 10/10, 10/24, 11/12, 11/30, 12/9, 12/21, 12/29. 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, 10/3, 10/22, 11/10, 12/11. 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: 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.
Use the following spread/momentum indicators to assist in your trading of 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)
Want to trade Gold? Use our signals with the Gold ETF AMEX:GLD. Gold gives us a general gage to the overall health of the US Economy and the markets.
US Dollar Index Spread Indicator (INDEX:DXY)
Want to trade the US Dollar? Use our signals with the Power Shares AMEX:UUP: US Dollar Index Bullish Fund and AMEX:UDN: US Dollar Index Bearish Fund.
Bonds Spread Indicator (AMEX:TLT)
Want to trade Bonds? Use our signals with Lehman's 20 year ETF AMEX:TLT. The direction of bonds has 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)
Want to trade OIL? Use our signals with AMEX:USO, the OIL ETF. We look at the price of oil as its level and direction has an impact on the stock market.
Supporting Secondary Indicator
We daily monitor hundreds of popular and proprietary technical indicators that break down market internals, sentiment and money flow to give us unique insight into the market. We feature at least one here each day in support of our current outlook.
Summary of Daily Outlook
We remain in Buy Mode, looking for the markets to move higher, potentially into the end of the month, following a consolidation here.
The market dipped a bit more than we anticipated. But we're still positioned with the potential energy to rally. Today's fed meeting provides that potential catalyst.
The chart above shows what I mean about 'potential energy' - simply like a rubber band that is stretched and has the ability to stretch back - and the probability is increased for it to stretch back. This is a mid term indicator, so it's unlikely to change signals day to day.
We've also been studying some money flow indicators - this is our data for bonds. We look for extremes, and we don't have a major one here, but we do have money flowing into bonds, which suggests that this move higher shouldn't be sustained. But don't do anything until you see things start to move lower. You don't need to be a hero to make it in the market, you just need to be smart, consistent and of course, a little luck always helps...
As always, I will be in the chat room from 9:30 to 10:30 am (est) if you want to ask any questions.
If you have any questions or comments, email me at Jay@stockbarometer.com.