Expect A Bounce

By: Stock Barometer | Wed, Oct 24, 2012
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10/24/2012 8:10:56 AM

As Sell Pressure Picks Up...

Real quick update on our trade here:


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The level of selling on Tuesday was enough to trigger our short term trin bounce. Looks like this may be a stair step sell off. Overnight the futures bounced and tested the trading highs from Tuesday. That may have been enough to satisfy our trin bounce. We'll see more today.

One thing lacking in this sell off is volatility. That suggests to me that we haven't seen the bottom yet. But obviously every day the market sells off brings us another day closer to a bottom.

The timing of the month end and the election are becoming more and more critical. Overnight there was also a record set on Intrade in the money voting for a romney win. Call it a break out if you will. I'll throw the chart up on my blog this afternoon. It won't fit in my article. So there's a sea change in the election.

We are 5 days away from the October 30 Key Reversal Date. A bounce could last 3-5 days. And then a larger move lower. There's an election signal on the DOW that's 90% accurate that says if the market is lower then where it was on Labor day, then the encumbant loses. So I think both camps are really watching the markets here...

I also talk about the perfect storm for stocks is forming with bonds and the dollar - if there's one thing that can keep these markets moving lower is both of those moving higher, combined with funds selling for their early year end (10/31).

Here's a look at the global stock 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

remains in Sell Mode as we're looking for a move lower into 10/30 and a consolidation of that low into 11/15.

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.

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Potential Cycle Key Reversal Dates

2012 Potential Reversal Dates: 1/12, 1/27, 2/16, 2/23, 3/16, 4/9, 4/25, 5/26. 6/2, 6/15, 7/2, 7/25, 8/13, 8/30, 9/8, 9/25, 10/7, 10/30, 11/15, 12/17, 1/15/13. These dates have an accuracy of +/- 2 days. We publish dates up to 2 months in advance.

With a bounce into 10/7, we're looking for markets to move lower into 10/30.

We added the last date for the year and the first date of next year... Again, how the previous dates set up, predict future dates (rule of alternating) but there is no guarantee that will be the case.

Our IRG Market Timing and Sentiment data service shows 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.

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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

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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

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Secondary Stock Market Timing Indicator

Equity Put/Call Ratio

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Daily Stock Market Outlook

We remain in Sell Mode, looking for a move lower into 10/30. Now cautious of the 11/15 date being a 9 month cycle low date as well. In the very short term, the market will bounce. Whether or not that turns into a multi day move higher is the question. That could position the market for a bounce into 10/30 and a move lower into the election...

The above chart shows the Equity Put Call Ratio - which is at a relative low. I expect a higher level of put buying to mark this bottom, and volatility to pick up, but we're not there yet.

Bigger picture - if we get that bond rally, odds are the S&P will test this longer term uptrend.

SPY versus Bonds Relative Strength

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Click here and my course is in the Finance/Business section.

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Here's our current positioning.

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