On The Precipice
2/22/2013 9:15:56 AM
Here's what to expect.
Before I get into today's article, I just wanted to give you a heads up on 2 things. First, I've been asked to speak at the world money show again - 3/25. This time I'll be doing it remotely, so I'll see if there's a way to get you access to the presentation either during or after the fact. Second, next week I'll be in the Dominican (my standard February vacation to get some tan back in my skin). Sometimes the technology gods favor us, and sometimes they don't. Either way, I'll do my best to continue the advice without interruption.
As for the markets, it's all about bonds. They STILL haven't bounced out of this consolidation. If the stock market is to move lower, bonds will need to rally. The potential is there, and it's huge, but it's not happening yet.
Here's a look at the global stock 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 Sell Mode, expecting the markets to move lower into 3/6.
The markets are oversold, and we're at the point where things break down, or bounce. They're bouncing in the premarket, so we'll see if they hold.
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
2013 Potential Key Reversal Dates: 1/16/13, 1/29, 2/14, 3/6. These dates have an accuracy of +/- 2 days. We publish dates up to 2 months in advance.
We are seeing a reversal lower around our key dates, which suggests that 3/6 could be a low.
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.
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.
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)
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)
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 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 ANY Stock Barometer Newsletter, you also get access to all our charts and research.
Daily Stock Market Outlook
We remain in Sell Mode, looking for a move lower into 3/6.
The chart above shows the equity put call ratio. We like to see this reach an extreme before setting a bottom. We're not there yet.
On the bullish front, this is where the trin sits. It's so bearish, it's at a bullish level on a contrarian basis.
On our bearish oil call from a week ago, here's where we are: I'm still bearish, but there can be a pause at the 200 day moving average.
When I speak on the markets, I like to hold our a rubber band and use it to explain the energy in the market, and at the end, I like to take it and stretch it so much that it breaks. We're at the point where the market is very stretched, and it could break. But for that to happen, we need bonds to break higher. Here's one way to view that - and where we are...
If you want to participate in a discussion of some of our indicators in Social Media, please visit and "LIKE" our FaceBook page. I'll have periodic updates on there and I WANT your feedback. This will be a good way to share your views with other traders.
Here's our current positioning.
· Last Recommendation - 2/5 Short QQQ @ 67 (previous trade - 11/19 long at open at 62.97 closed 2/5 @ 67)
· Status - As with any new positions, this is where risk management is critical.
· Consideration - Always maintain stops per money management above. Once you have established a gain in a position, there is nothing wrong with taking some profits early...
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.