Close, But No Cigar
2/25/2007 8:55:10 AM
Is the market teasing the bears? We'll take a look here.
Stock Barometer Analysis
The barometer remains in Sell Resistance Mode - Friday's action suggested we're going to return to just sell mode.
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 26 in our Down Cycle. Since we've remained in Sell Mode, extended through a couple of short term bounces, this time is extended as well.
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
2007 Potential Reversal Dates: 1/10, 1/14, 1/27, 1/31, 2/3, 2/17, 3/10, 3/24. We publish these dates up to 2 months in advance.
The 2/17 date still appears to be a top on the NYSE, suggesting we'll move lower into 3/10.
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.
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.
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 Buy mode, above zero.
The dollar Spread Indicator remains in Sell Mode, below zero.
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 Sell Mode, expecting the market to continue lower into 3/10, our next key reversal date.
Of interest is the high level of bearishness on Friday's weakness. This concerns me in that it may provide fuel for a continuation of the advance.
As traders, we have to fight the urge to be right - right now. You can make a correct observation on the market but be early in your call. You also have to understand that you can be outright wrong. That's the trading evaluation. It's slightly different than the application of a system. In a system, there's not much to be decided. However, in trading, it's entirely different.
For example, you can use my indicators however you want. Some 'stock' traders follow the indicators as when to be buying long or selling short. Also note that the larger moves in the market are going to come near the end of the trend - as the sentiment extremes normally bring in all the buys and sellers. But that's also a sign that the trend is ready to turn. Once all have bought, there's no one left.
Of course, the most notable thing about this advance is the liquidity - pushing us to higher levels. One of the first things they teach you as a trader (and I teach in my trading classes) is that a trend can persist a lot longer than your trading capital can hold out. So when you're wrong - it's best to admit that as soon as possible, move out and move on.
As always, if you have any questions or comments, feel free to email me at Jay@stockbarometer.com.