7/8/2007 12:32:11 PM
The Qs are extended here as a pullback is expected, but just how much?
Stock Barometer Analysis
The barometer remains in Sell Resistance Mode as Friday's action tested the highs from Thursday on lighter volume.
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 12 in our Down 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
2007 Potential Reversal Dates: 1/10, 1/14, 1/27, 1/31, 2/3, 2/17, 3/10, 3/24, 4/21, 5/6, 6/15, 8/29. We publish these dates up to 2 months in advance.
We still believe 6/15 will mark a top for the market over the next few months. Here's how:
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 Spread Indicator (NASDAQ:QQQQ)
The QQQQ Spread Indicator remains in Buy Mode, above below 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 Spread Indicator (AMEX:GLD)
The Gold Spread Indicator remains 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 Sell 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.
OIL Spread Indicator (AMEX:USO) *NEW*
The OIL Spread Indicator remains in Buy Mode, above zero.
We look at the price of oil as its level and direction can have an impact on the stock market, which we'll examine over the coming months and years.
Supporting Secondary Indicator
Here's a chart of the QQQQ/SPY RSI Spread which shows the RSI at a level which has resulted in a pretty serious decline in the past. Are we on the verge of the same thing here? Of course I can't say, all I know is that this indicator usually reverts back to the centerline - at a minimum.
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 Resistance Mode as the market is poised for at least a retracement or a larger move lower.
On a side note, I've gotten a couple questions on more obscure technical indicators. That's prompted me to add these short Q&A features - of course, if you want a question answered here, just let me know:
How to read our various technical indicators.
Welcome to the Stock Barometer. If you're interested in following our signals and learning more about our system, then I invite you to click here and subscribe to the daily service - since the market can turn on a dime and so too can our interpretation as the market gives its daily clues to the future. Or sign up for our free weekly newsletter, where we provide up to date articles from our various trading services. We're also going to be releasing a free trading video in 2007 - so sign up today.
Over the past several years, I've been accumulating data. Why? Because I'm a data nut. I love numbers and I love solving and predicting things. As a Mechanical Engineer, the market intrigued me on two levels. First, from a technical point of view, I saw the market as an equation in need of solving - not a random walk as so many people believe. Second, there was actually a reward for all your hard work. A pay day so to speak. I believe there is a huge motivational link between hard work and making money (or the potential to make money).
Also, historical data is good to be able to go back to a period in time and see precisely what the level of an indicator was at that time. And when you record the data, you control the data - I can't tell you how many data services report bad ticks so to speak and recording the data on your own allows you to make an adjustment for the bad tick. Also data services sometimes go back and modify their data (by changing a calculation). This happens more than you speak and it's why I'm an opponent to back testing. I've seen so many services that work well in back testing but never seem to work well in real time.
Ok, so you now know why I have a few spreadsheets full of data and love to look at technical indicators showing the markets action on several levels. Granted, it's also important to note that there is no holy grail in the market. There is no indicator that you can follow that will always result in huge profits. Otherwise we'd all be millionaires. These indicators simply show the market on several levels so that you can compare conditions today with conditions in the past and use them to set up your predicted trade - because at the end of the day, that's all that a trade is, a prediction of or bet on what you think will happen.
That being said, let's take a look at a few indicators that I don't show every day.
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As always, if you have any questions or comments, feel free to email me at Jay@stockbarometer.com.