Selling Intensity

By: Stock Barometer | Thu, Apr 5, 2012
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4/5/2012 9:03:18 AM

Selling Intensity

Was it enough to put in a bottom?

There are certain things we look for when markets are selling off. Generally I'm looking for a level of selling intensity to reach a level that suggests the market has to bounce the next day.

We did not reach that level. So I am still bearish here. But the next few days are going to be interesting. Why?

Well, Friday's a trading holiday for stocks, but not futures. In addition, it's the first Friday of the month, so we get the ever so critical Friday Jobs Report. The market is really interested in this data. No I know I've made a name for myself saying that the news doesn't matter - that's because what matters is how traders position their money and trade their money during the day.

It's what I spoke about in Chicago at the World Money Show. And if you haven't seen the presentation or some interviews from my trip there, feel free to visit the homepage, and scroll to the bottom. They're all there... www.stockbarometer.com

(Note we're running a special this week - if you sign up to the DSB this week, you'll also get access to Stock Trading Secrets my 14 day trading course - and my day trading book as a bonus.)

So, generally speaking, I'm not seeing enough fear in this market to suggest this is a bottom. But throw in the fact that we have a couple of Key Reversal Dates approaching, first being Monday and the next one coming in at the end of April. So - what I would normally say at this point in time to my clients (you) is that the next two days will determine the next month... i.e. if the Stock market bounces today into Monday, then I would be more bearish - versus the stock market tanking today, and putting in a more signifiant low next week - then I'd be more bullish.

Also remember the market works differently in different time frames. In addition to many intra day systems, there are daily and weekly systems that kick in based on certain end of week action (like our retirement system). So how we close this week could kick those systems in starting next week...

Here's a look at the global markets:

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.

Economic Calendar

On to the charts:

Daily Stock Barometer


Stock Barometer Analysis

We remain in Sell Mode, looking for markets to move lower into 4/9. Our next date after that is 4/25. It's critical how the market moves in the next two days as to our longer term forecast.

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 Key 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.

We see the markets moving lower into 4/9 and then higher into 4/25. That being said, we'll analyze the market at 4/9 to see if the market is setting up for a larger move lower into 4/25. You NEVER know what you're going to get.

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 Timing Indicator

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 Timing Indicator

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)

US Dollar Timing Indicator

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 Timing Indicator

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 Timing Indicator

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

NASDAQ New Highs minus New Lows

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 Sell Mode, looking for the markets to move lower into 4/9. The next couple of days are critical to whether this is a short term pullback or a deeper one.

As a quant guy, I maintain this data looking for timing signals and relationships between various asset classes. When relationships change, it generally creates an opportunity to exploit from a trading perspective. By the time you hear it on CNBC, it's usually too late (depending on who's doing the talking). So the numbers are facts - what you hear on CNBC is noise, your job as a trader is to eliminate the noise from your thinking - and trade solely on facts.

The above chart shows the Nasdaq new highs minus new lows - the relationship between these two data points is very telling. It's at a make or break level. But once the new lows take over - the number goes negative, that's very bearish. We're close to a bearish signal here - if the markets break down. And we're also close to a buy point, if the level holds. This indicator is in the middle, most indicators are more telling at extremes.

Here's another one to chew on:

SPY Versus QQQQ Rel Strength

The key here is if this relationship breaks down, we will enter a new market phase... A more bearish one. As the Qs become weaker than the SPY, volatility tends to pick up...


Here's our current positioning.

• Last Recommendation - 4/2 - Short the QQQ
• Status - Short QQQ
• Consideration - Maintain stop per money management above.

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.

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