Post Expirations January Effect
1/23/2012 9:33:16 AM
Here's the way we se it...
January tops are quite historic. Usually, there is a top around the middle of January - or even just a pause. I have a little bit on The January Effect on my blog. Click the links to take a look.
That's why we issued the PUT recommendations on the QQQ. However, we are in the midst of a liquidity advance. In the rock scissor paper model that governs the market, liquidity trumps everything.
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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
The barometer remains in Buy Mode. We're looking for a move higher into 1/27, but how that date plays out is critical to our next call...
I believe we're in a liquidity advance that can last weeks - so we'll continue to be patient before moving into sell mode.
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
2012 Potential Reversal Dates: 1/12, 1/27, 2/16. We publish dates up to 2 months in advance.
Our focus is on 1/27. Initially, 1/12 was to be a reversal lower, but inverted to an acceleration higher. The key here is what we do into 1/27. That will set up the next larger move I believe.
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.
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, 12/26.2010 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. 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 premium services, you also get access to all our charts and research. Email Carl@stockbarometer.com to upgrade and also save 20% on your subscription.
Daily Stock Market Outlook
We remain in Buy Mode, the markets are moving ahead in a potential liquidity move so we expect an advance into 1/27.
Secondary to that call, if we see a post expiration pull back into 1/27, it may set up the next leg higher. The reason I'm giving some weight to the possibility of a pull back here is just a gut feeling based on my experience and the way everything is lining up. Sure liquidity moves can continue for an extended period, I am seeing things that would normally be indicative of a top. So I just want you to be prepared that while we'll stay long here, I'm getting nervous :) Which I've learned to get excited, when I get nervous, because of the potential of a move... Remember, the market makes only several really good moves over the course of a year. I personally only need to catch two of them to have a good year in my own accounts, any more than that, and I'm a happy camper.
The above chart shows me when individuals are back in the market. That's usually (more often than not) a sign that the market is getting toppy.
If you want to learn more about some of my models, I use my blog to cover them in more detail.
Our blog is back up. If you're looking for more information, please visit our blog - I'll have updates and publish other articles there. http://investmentresearchgroup.com/Blog/