5/7/2014 5:51:40 AM
Good morning Traders,
The barometer has issued a sell signal, placing us in Sell Mode. Accordingly, close your long position and go short the market. We will evaluate another trading day to see if we should leg into some PUT options in our options service - as well as issue some covered calls to take advantage of the a potentially weaker period in the market.
The action in the markets is potentially concerning - dollar dropping and bonds rallying - and bonds are normally right. Here are some charts to digest:
This time we will start with the barometer. We have gone through a period of chop and are looking for resolution. While I would be surprised to see the head and shoulders pattern play out, it is too potentially profitable to ignore.
And since it is Wednesday, we start to get updates on our weekly indicators:
As with any indicator, they never work all the time. The key is to look for periods where they reach a peak or trough and could align with a market reversal. Look for a confluence of other signals and you increase your odds of calling a top or bottom...
The EPCR turned lower, though from a lower level. Now it can go much lower, but it suggests to me that any sell off here could be sharp and short lived.
And finally, another reading of the barometer, which we use when the market speeds up a bit - noting that the barometer is a hedging tool to capture mid term trends.
The stock market is due for a correction, we have been looking for a 9 month cycle low coming in around May 19th. The potential is there. Absent any sell off here, our forecast would be for the market to put in a late July top and top and deliver a bottom closer to the 20 week cycle low in October. You can subscribe to get all our charts, cycles and forecast for only 9.95/month - updated every weekend. Visit our site to learn more.