Key Reversal Date

By: Stock Barometer | Tue, Jul 15, 2014
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7/15/2014 5:59:33 AM

Good Morning Traders,

There's no way to slice it, the market is strong, and about as strong as we've seen it in the past 15 years - very reminiscent of the 2000 stock market peak. As we approach our mid July key reversal date, the market appears loaded to continue higher. Except for longer term measures of market sentiment, the internal measures are supportive of the rally continuing. That being said - once the selling starts - if you think of a chart showing 5 people on the left, and one person on the right, where the 5 people represent sellers and the 1 person represents buyers - that situation is the only think that can create an imbalance in the market and a resulting sell off.

We've continued to position and hedge for downside. But as with any liquidity fed advance, it can be quite frustrating. But it's the process the market goes through. Here's an update to our position.

As for the Nasdaq Barometer:

QQQ Trader, Primary System Chart


Stock Barometer Analysis

The barometer is in Sell Mode, but the stock market is testing highs. That test is crucial to our call. And it appears the barometer is positioning to bounce. That being said, the lack of any real bounce in the barometer as the market tests highs is a bearish divergence.

The Stock Barometer is our 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. We'll target the next key reversal date for timing. 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 QQQ if you're trading leveraged funds and options with our trading service).


Potential Cycle Key Reversal Dates

2014 Potential Key Reversal Dates: 1/15, 1/21, 2/5, 2/16, 3/20, 4/10, 4/26, 5/6, 6/18, 6/23, 7/16, 9/6... These dates have an accuracy of +/- 2 days. We publish dates up to 2 months in advance.

7/16 is our next Key Reversal Date. We're in the window for a reversal, but I don't believe this rally will end very easily. The dates have played into the market movement - and the bullish forecast of the model is being followed, which would suggest this is a top.

2013 Potential Key Reversal Dates: 1/16/13, 1/29, 2/14, 3/6, 3/15, 3/28, 4/5, 4/25, 5/13, 5/30, 7/19, 8/20, 8/29, 10/4, 11/3, 12/30. These dates have an accuracy of +/- 2 days. We publish dates up to 2 months in advance.

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. Our 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.


Timing Indicators

Use the following timing/momentum indicators to assist in your trading of the QQQ, 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 (NASDAQ:QQQ) Chart 2

The QQQ Spread Indicator will yield its own buy and sell signals that may be different from the Stock Barometer. It's meant to give us a big picture idea of the next turn in the market relative to the barometer signal.

Bonds Timing Indicator (AMEX:TLT)

Bonds Timing Indicator Chart

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.

US Dollar Index Timing Indicator (INDEX:DXY)

US Dollar Index Timing Indicator Chart

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. The dollar direction can have an impact on the market and multinational companies - as the dollar goes up, it lowers the earnings for multinationals and can weaken the stock market and more so the Nasdaq.

Gold Timing Indicator (ARCX:GLD)

Gold Timing Indicator Chart

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. Want to trade gold options - try our Gold Options Trader service at www.stockbarometer.com - trials are only $1.

OIL Timing Indicator (AMEX:USO)

OIL Timing Indicator Chart

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. Want to trade OIL (USO) options - try our OIL Options Trader service at www.stockbarometer.com - trials are only $1.

Secondary Stock Market Timing Indicator

NASDAQ Advancing Stocks Chart

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

As a subscriber to ANY Stock Barometer Newsletter, you also get access to all of Investment Research Group's charts and research on Market Timing.


Daily Stock Market Outlook

We remain in Sell Mode, looking for this retest of highs to fail - and we have a key reversal date in line with a fed testimony. There is consensus that the fed pulling out of this position in the economy will cause some damage, where people disagree is when the damage will result. Given the date of 10/1 for the end of bond buying, traders are getting very nervous. The general rule of thumb is that they won't fight the fed, until the market turns lower - then look out below - as sellers outnumber buyers significantly can result in a significantly accelerated move lower.

That being said, things look very bullish here. What's happening to support an uptrend is happening - like people betting bearish at tops. And buying puts as the market drops. Even more bullish is the buying of puts as the market retests highs! So while the internals may have got a little over bought, just as it does in the natural movement of the market, the big picture remains bullish. So why would we be bearish here? It's the nature of a hedge to position for potential downside when that potential exists.

But eventually, all good things must come to an end. This is one way to view that - as we are approaching a level of relative out performance of the Qs to the SPY that can result in a weaker than normal market or even a sell off...

SPY versus QQQQ Relative Strength Chart

What about Natural Gas:

Natural Gas Seasonality versus Natural Gas 2014 Chart

Regards,

 


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Stock Barometer

Author: Stock Barometer

www.stockbarometer.com

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