Longer Term View
3/24/2011 9:58:40 AM
Here's an indicator that gives some perspective on the long term.
I'll cover the indicator below. I'm showing it because one of my Annual Clients raised a question and I prefer to answer clients questions here, for everyone's benefit.
Before I get into that, here are a few articles and that I've put on our blog that I believe may benefit you.
Here's one that addresses a question I periodically get - what are the best ETF Portfolios?
Here's another one that addresses my predictions for the stock market.
And while I know this may sound basic, but this is one question I get as well: What is a etf?
Here is our view of Global Markets.
On the economic front, here is the week ahead...
On to the charts:
Stock Barometer Analysis
The barometer is in Buy Mode. I am looking for an April top. The market is due for a little pullback in the short term.
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
2011 Potential Reversal Dates: 1/15, 1/29, 2/16, 3/10, 3/18, 4/6, 5/21. We publish dates up to 2 months in advance.
If we are at a bottom, we expect a bounce into 4/6 and potentially a LARGE move lower into 5/21. There appears to be a large move coming in the market. I would love that energy to play out to the upside, so how the 4/6 date plays out is important.
Note too that we expect a 9 month cycle low this May, which may come in early - in fact, if things resolve, we may have already seen the 9 month cycle low. Something to be on the look out for.
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.
2010 Potential Reversal Dates: 1/19, 1/28, 3/2, 3/23, 4/7, 5/30, 6/10, 6/28, 7/10, 8/13, 9/7, 10/2, 10/27, 11/21, 12/19. We publish dates up to 2 months in advance. 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 Timing/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 Timing 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 Timing 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 Timing 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 Timing 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 Timing 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.
Secondary Stock Market Timing 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. As an annual subscriber to any of our services, you will get access to all our charts and research.
Daily Stock Market Outlook
We remain in Buy Mode, expecting the markets to establish a low here and rallying into the end of the month - possible into 4/6.
I received the following question from an annual client yesterday on the above chart (as an annual client, you get access to our data base of indicators - and also save 20% off the monthly price).
"I am reviewing chart uDsb it appears this chart is comparing the Nasdaq to the S&P 500. Additionally it appears the S&P 500 (red line) is not at the current levels of the index; is this a lagging indicator or am I misunderstanding this chart?"
This chart is actually comparing the Nasdaq BAROMETER to the S&P 500. The best use of this indicator is to pinpoint intermediate term bottoms - because the interval is 21 days. Note that the barometer has momentum components - so it can periodically pull back early even as the market moves higher. In addition, it's also a measure of all stocks in the Nasdaq. So there are periods where stocks consolidate, but indexes continue higher. End result, this indicator is suggesting we're at an intermediate term bottom. That doesn't mean we can't get a retest. A little fear is good for any bullish advance. But it usually comes quick.
Since this chart shows about 2.5 years worth of data, the SPY pricing is a bit compressed - but it is showing all data and there is no lag.
As I am about to publish this, they're talking on CNBC about the VIX being too low. Here's the dea with the vix. It's only one measure of energy in the market. And it's one measure that comes into play only periodically. There are many more measures of energy in the market that influence pricing. Don't get stuck looking at just one.
If you're looking for more information, please visit our blog - I'll have updates and publish other articles there. http://investmentresearchgroup.com/Blog/