Islands In The Sea
11/3/2011 9:02:02 AM
Crazy action in the markets set up some interesting technicals.
An island is created when you have a gap up in one direction followed by a gap in the other direction. Wednesday's gap lower followed by today's gap higher created somewhat of an island, or price action that stands alone. Those gaps are very strong technically. Sure, they need to hold today and as the Japanese like to say if these 'windows' hold for 3 days, they will hold for much longer.
Here's what it looks like:
And that's where we are. People who don't know me may question why I would remain bullish during a period of such incertainty - and the charts looked very ugly - but remember this, everyone can see the charts - what I povide is the insight of the market behind the charts. And I saw a magnitude move higher that I'd prefer to stay long for.
That being said, the surprise rate cut from the ECB has to be absorbed into the market. In the very short term, it's bullish, and the higher it can propell the markets the better. I've got an upside projection on the qqq of 64. Oddly enough, if the markets reverse hard on something today and breaks lower, I've got a downside projection of 54. Interesting how that works out.
Note today's charts are from before the ECB lowered rates.
Here's a look at the global markets:
On the economic front, here is the schedule for this week. Pay close attention to the timing of the report and the potential for the markets to make short term reversals at those points.
On to the charts:
Stock Barometer Analysis
We remain in Buy Mode. Premarket action is so far supporting our decision to remain bullish here.
The key here is how the market digests this move. Remember, I'm not so much a believer that the news moves the market, but how people position their money is what moves the market. We monitor the latter. And it's why we're right more often than not.
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, 9/4, 9/25, 10/21, 10/25, 11/25, 12/26. We publish dates up to 2 months in advance.
We're still positioning for the market breaking higher here. In the very short term, on an hourly basis, dollar and bond action may work against us. But that will flip at some point during the day and we'll see if another leg of rally will get going.
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)
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OIL Timing Indicator (AMEX:USO)
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Daily Stock Market Outlook
We remain in Buy Mode here. Techhnically (on the QQQ) the pullback has remained in a flat base, suggesting that a rally up and out of here is still possible.
I'm still betting on a break out of this price action and a rally into Turkey day.
In our ESA and SOS Service yesterday I gave 3 stocks and CALL Options to take advantage of this move.
Here are a couple more thoughts on the next move:
FYI, our blog is back up. I'll start posting new content there. If you're looking for more information, please visit our blog - I'll have updates and publish other articles there. http://investmentresearchgroup.com/Blog/