The market retraced on Friday, here's what it means.
Stock Barometer Analysis
We remain in Buy Mode as the market remains in an Uptrend.
The Stock Barometer is my proprietary market timing system. The direction or slope of the Stock Barometer helps determine our outlook on the market's direction. 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. The black line is a 5 day moving average of the barometer and may be used to confirm changes in direction. All the information contained in this email is considered in making our calls.
Stock Barometer Cycle Time
Monday is day 2 in our Up Cycle.
The Stock Barometer signals follow 5, 8, 13, 21 and sometimes 34 day Fibonacci cycles that balance with 'normal' market cycles. Knowing where you are in the current market cycle is important in deciding how long you expect to maintain a position.
Potential Cycle Reversal Dates
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. We publish these dates 2 months out.
We weighted the 10/11 date as a top and that was a mistake in hindsight. Now we're looking at it as a low and the potential for a move up to 11/28. We remain in Uptrend mode as long as the primary trend remains up.
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 cycle times. However, due to their accuracy I post the dates here. These dates are used to influence how quickly we issue a buy or sell signal.
2005 Potential reversal dates based on 'other' cycle work were 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.
The following work is based on my spread/momentum indicators for the QQQQ, SPY, XAU, GLD 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. I provide the spread indicator charts at least weekly and when they deliver reversal signals. 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'.
QQQQ & SPY Spread Indicator
The QQQQ and SPY Spread Indicators remain in Buy Mode, above zero.
The QQQQ and SPY Spread Indicators will yield their own buy and sell signals and may be in Buy and Sell Mode that is different from the Stock Barometer.
Gold & Silver Sector Index Spread Indicator (Index:XAU.X)
The XAU and Gold Spread Indicators remain in Sell mode, above zero.
The dollar Spread Indicator remains in Sell Mode, below zero.
A break out here and we'll load up on some gold stocks in our Gold Stock Investor Service. This is one of our 5 stock services. You can get all 5 for 9.95/month. Or they're all included along with our ETF service in our Premier subscription. Click here to learn more.
I monitor Gold in the form of GLD and the XAU as well as the US Dollar Index as a general guide to the overall health of the US Economy and the markets, as well as to assist us in the entry of positions in our Gold Stock Service.
Bonds Spread Indicator (AMEX:TLT)
The Bond Spread Indicator remains in Buy Mode, above zero.
I include bonds in our studies and use Lehman's 20 year ETF, as the direction of bonds can have an impact on the stock market. Normally, as bonds go down, stocks will go up and as bonds go up, stocks will go down.
Supporting Secondary Chart
I have over 100 technical indicators, some that are widely followed and some that are proprietary. These indicators break down the market internals, sentiment and money flow and give us unique insight into the market. I feature at least one here each day in support of our current outlook.
Summary of Daily Outlook
We remain in Buy Mode looking for the market to move higher into 11/28 after a few days of consolidation.
Friday's action was what they call a bull trap, where a break out is reversed. The focus now is whether this is a larger pullback or a consolidation in the current uptrend. A look at our indicators shows two things. First, the Qs had been consolidating before the break out, so they're closer to a bottom than the SPY. Second, the uptrend in the Qs is mush closer to getting tested than the SPY.
Another thing to look at is that the relative strength of the Qs is weaker than the SPY. At later stages of trends the strength will do a final shift to the Qs. If we've already seen that final shift, then this is a larger sell off. If not, then we'll see support come in play early next week and continue higher. If this Fibonacci ABC pattern plays out, we'd see 45 on the Qs sometime in November.
As always, if you have any questions or comments, feel free to email me at Jay@stockbarometer.com.