Got What We Wanted
7/20/2011 8:36:45 AM
Tuesday didn't disappoint. It was a perfect gap up, pause and trade higher type day. Then apple came out with blow out numbers after the close, and that should ice a retest of the highs. Note, my comments are always geared towards the QQQ. Since it's our primary trading tool.
The tough part about a day like Tuesday is getting on board with a trade. That's one of the reasons we give the markets a little room to consolidate while remaining long. The key here is that the market sets up for a continuation higher. For that to happen, certain events must take place. Think of it like when you set up dominoes to topple over. If the right conditions exist, it will continue. If not, it'll stop. We'll monitor those conditions and report back to you...
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Here's a look at the global markets:
On the economic front, here is the schedule for this week.
On to the charts:
Stock Barometer Analysis
We remain in Buy Mode, expecting the markets to move back towards previous highs.
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, 5/31, 6/13, 6/24, 7/16, 8/1, 8/19. We publish dates up to 2 months in advance.
Seasonality remains strong into 7/20. And we have a 20 week cycle top coming in on 7/27. And a key reversal date of 8/1. I expect the markets to move higher into 8/1.
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 continue higher into 8/1.
And in true buy the rumor sell the news fashion, as soon as we extend the debt ceiling, markets will push lower (or consolidate) for two weeks into 8/19. Beyond that, I see a bounce and a larger move lower into September... But as you know, I hate to look too far out, since what happens 3 weeks from now is much harder to profit from than what happens today and tomorrow.
Above is a chart of new highs. Depending on market conditions, it oscillates higher and lower or it can sustain. Oscillations can be 3-5 days higher. Sustained moves don't occur too often, but the stock market can continue higher as the # of new highs drops. Remember, the indices only represent a few stocks. The market is huge. So money can come out of stocks, and move into the indices. Don't think about it too much, thinking is what gets traders in trouble.
Below is our gold leading indicator chart. It's suggesting the move in gold is done for now.
If you're looking for more information, please visit our blog - I'll have updates and publish other articles there. http://investmentresearchgroup.com/Blog/ I've been laying out an oil short trade for a while now. Oil should bounce in the short term but longer term, I see it setting up to head lower.