8/6/2007 7:01:47 AM
Markets retested the lows on Friday - here's what it means.
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Stock Barometer Analysis
The Barometer remains in Sell Mode.
The Stock Barometer is my proprietary market timing system. The direction or slope and level of the Stock Barometer 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. All the information contained in this email is considered in making our calls.
Stock Barometer Cycle Time
Today is day 14 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.
The market will likely set up a b-wave bounce and retest the lows once again in late August.
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 signals or cycle times. However, due to their past accuracy I post the dates here.
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 Sell Mode, 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 Sell mode, below zero.
The dollar Spread Indicator moved into Sell Mode, above 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 moved into Sell 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
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 as the market retested the lows and broke them on some indices.
Futures are up big this morning, but traders know to look past am futures, especially on a Monday due to the light volume. Look for any opening gap to get filled by the 10:20 pivot.
With our indicators so oversold, I do expect a bounce at some point - as the market is stretched to an extreme. We now have an upper end of resistance at last Thursday's high (which got many bullish).
The key to retests is volume. A high volume break of a previous swing low suggests that the market will continue lower. If you look at a chart of the SPY - you have a low volume break of the low, which suggests a bounce. Liken it to fewer people coming in your store and dropping prices. This will eventually be perceived as a bargain and buying should improve in the supply and demand ratio.
If you have any questions or comments, email me at Jay@stockbarometer.com.