Breaking Point

By: Stock Barometer | Thu, Mar 29, 2012
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Here's what it means.

Just as a heads up, the way the barometer system works is that it gives buy and sell signals, and we position for advances or declines accordingly - not knowing what is going to happen - with the goal being to catch certain types of moves in the market. There are normally 7 of these moves every year. But there are also lots of moves that we will not be able to profit from. This is called applying a static system to a market - with the goal being to catch certain types of moves when they present themselves - knowing that you don't know what will happen next.

I'll put a video together detailing exactly what I'm saying, because it's a complex topic. But basically newer traders will tend to apply a variable trading system to varying market conditions. This means they have to right on two fronts - what style to apply and what the market is going to do. By fixing your style, you only have to be right on one side of the equation. It's just math.

It'd be like trading only break out trades. Something I did a lot in my past because in good markets, it gets you in the best stocks. In bad markets, you're not seeing a lot of break outs. I developed the barometer to tell me when the BEST opportunities are to position for break outs. And also to tell me when not to trade stocks. But it also became an effective market timing tool and I eventually started trading ETFs primarily and not trading stocks as much. To me, ETFs are safer...

Over the past decade, my work has taken me many places, and my work analyzes many different components of the market. I've always tried to remain consistent in the product I deliver, but recognize that markets change, and needs change. So I'm going to ask you a question.

How can I make this service better? What could I add more of? And what could I remove that you don't really care about. I know I can't please all the people all the time, but I do recognize that your trading needs may change over time and I would love to hear your feedback. Email me at jay@stockbarometer.com with any comments.

Here are a couple of questions I get: Can you put the report out before 8am? Recognizing that this is a daily article and we generally issue about one or 2 signals a month - that leaves a lot of time in between. Generally the decision point for the trade varies with market conditions. 8am is not a decision point. I have added a section where I talk about our current position and my view for actions that we may take. That's where you should be looking for daily advice. But in the morning, I may generally wait for the 830 reports to come out, or sometimes the 10:30 reports to come out. But if there's a signal that I need to communicate, I will get it to you as soon as I'm comfortable in making the call. I don't like to be tied to a certain time as things can change before the actual trade has to be made.

Why don't you show more normal charts? To me, a chart isn't worth that much - 1) since anyone can view them, and 2) there is a random component to the market. My research is deeper than the chart. I look at things you can't see on a chart. So I prefer to not have you focus on the candle pattern (even though I was the Samurai Stock Trader for a few years of my life) and focus more on the general direction of the pice action. I know this sounds confusing as I do teach people how to read charts - but it's important to understand that the action behind the charts is what governs price action. That's what I'm all about. So if someone is sending you a chart that you can get elsewhere, you're not getting the whole story. I'm about the bigger truth behind the charts.

So please, feel free to hit me up as my kids say with your questions. I'd be glad to explain more and streamline my report so as to better meet your needs. I've been writing this report daily for about 10 years (yes, that's over 2500 articles) - and I want to make it as good for you as possible - balanced with efficiency with what you need.

As for the markets, we're working on our third down day, weakness overseas persists, as we approach quarter end. But there's something happening behind the scenes that you need to know, I'll cover that below.

Here's a look at the global markets:

cnn 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.

weekly economic report calendar

On to the charts:

stock market timing


Stock Barometer Analysis

We remain in Buy Mode, but the barometer has ticked into Sell Mode, meaning we will position short on a close below the 9dma at 67.32.

One thing that would cause me pause is how weak the market is when we go into sell mode. For example, the last time we went into sell mode, we also noted that we had a short term buy signal - that turned into the last advance. So we'll be cautious for that here. If I see it, I will advise.

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.

Accordingly;
• 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, 2/23, 3/16, 4/9, 4/25. These dates have an accuracy of +/- 2 days. We publish dates up to 2 months in advance.

Our next two KRDs are 4/9 and 4/25, I think you know the drill - if we move into sell mode, we use the next date as our next KRD. That would be the 9th. And then we would project a bounce into the next KRD. The 25th.

Subscribers to our IRG Market Timing and Sentiment data service can see the performance of these forecast turn dates going back to 2003 and for the remainder of 2012.

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.


Timing Indicators

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'.

QQQ Timing Indicator (NASDAQ:QQQ)
qqq trading

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 (ARCX:GLD)
Gold Trading

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)
Dollar Trading

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)
Bond Trading

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)
Oil Trading

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

5-Day Equity Put/Call Ratio

We maintain hundreds of popular and proprietary technical indicators that break down market internals, sentiment and money flow to give YOU unique insight into whether you should BUY or SELL the market. We feature at least one here each day in support of our current outlook.

As a subscriber to the Daily Stock Barometer System at the $50 level, you also get access to all our charts and research. Email Carl@stockbarometer.com to upgrade your subscription.


Daily Stock Market Outlook

We remain in Buy Mode, but with the barometer pointing lower, we will go short on a QQQ close below the 9dma (67.32) and project a continuation of the move into our 4/9 date.

The above chart of the epcr shows protection being bought. My data shows me that it's institutional buying. But this happened last time. So be cautious.

What about gold? Gold is starting to weaken after hitting a bottom 5 days ago. The difference is that people are shifting the bets for more upside. This suggests we could see another move lower...

GOLD Put/Call Ratio

Here's our current positioning.

· Last Recommendation - 3/12,13 - Long qqq(we will go short on a close below 67.32)
· Status - Long QQQ
· Consideration - Maintain stop per money management above. I would consider raising the stop along with the 9dma - or even raising it to your entry point - just in case.

Subscribers to our Market Timing and Sentiment data service can access our bond stock rebalance model, long term cash buy signals and crash alerts on the NYSE and NASDAQ updated weekly.

If you want to learn more about some of my models and indicators, I use my blog to cover them in more detail. If you're looking for more information, please visit our blog - I'll have updates and publish other articles there. http://investmentresearchgroup.com/Blog/

Regards,

 


 

Stock Barometer

Author: Stock Barometer

www.stockbarometer.com

Stock Barometer is completely independent. We have never and will not ever accept compensation from any company whose stock we recommend.

Our goal is to make you money. We offer you the tools and information to do so and leave it to you, the individual investor, to apply them in the best way possible.

Important Disclosure: Futures, Options, Mutual Fund, ETF and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell Futures, Options, Mutual Funds or Equities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as a lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

Investment Research Group and all individuals affiliated with Investment Research Group assume no responsibilities for your trading and investment results.

Investment Research Group (IRG), as a publisher of a financial newsletter of general and regular circulation, cannot tender individual investment advice. Only a registered broker or investment adviser may advise you individually on the suitability and performance of your portfolio or specific investments.

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