12/8/2007 12:02:24 PM
We remain in a bullish seasonal period, but.
Stock Barometer Analysis
The barometer remains in Buy Mode. No need for 'trend' considerations, as the barometer is back to pointing higher.
The Stock Barometer is my 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. A Buy or Sell Signal is triggered when the indicator clearly changes direction.
Stock Barometer Cycle Time
Monday is day 18 in our UP Cycle. This may seem extended, but as the system is designed to get into moves early and they give them some room to materialize (through support and resistance modes) - the market spent the first 9 days moving sideways before the upward move really initiated.
This also creates a bit of inefficiency in the signal. But the most profitable signals are also the longest ones -as the represent the resilience of the move.
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, 10/19, 11/29, 12/13, 12/23. We publish these dates up to 2 months in advance.
We have 4 days until our next date - 12/13. Considering the seasonality, I would say that we have a little more consolidating to do before we take off.
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, 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'.
QQQQ Spread Indicator (NASDAQ:QQQQ)
The QQQQ Spread Indicator will yield its own buy and sell signals that may be different from the Stock Barometer. It's meant to give us an idea of the next turn in the market.
Gold Spread Indicator (AMEX:GLD)
To trade Gold, utilize the Gold ETF AMEX:GLD. This gives us a general gage to the overall health of the US Economy and the markets, as well as to assists us in the entry of positions in our stock trading service.
US Dollar Index Spread Indicator (INDEX:DXY)
To trade the US Dollar, I'd utilize the Power Shares AMEX:UUP: US Dollar Index Bullish Fund and AMEX:UDN: US Dollar Index Bearish Fund.
Bonds Spread Indicator (AMEX:TLT)
To trade Bonds, I recommend Lehman's 20 year ETF AMEX:TLT. Note that 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)
To trade OIL, utilize AMEX:USO, the OIL ETF. We look at the price of oil as its level and direction can have an impact on the stock market.
Supporting Secondary Indicator
What I love about the markets is that two people can look at the same chart and come up with entirely different view points. That's what makes a market. And I'm sure the following chart will cause the same discussion (or emails from readers). What you'll probably notice is the red line turning down. However, note that the rediline turns down because the 20 week is moving down - technically, the 40 week is still rising, but the 20 week normaly dominates the shorter term action. We'll be preparing another version of this for 2008.
I monitor over a hundred 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 - and to give you an education on what professional traders utilize.
Summary of Daily Outlook
We remain in BUY MODE as the market is poised to rally, considering that a short term consolidation is due before we continue higher as we've been up for the last 3 days.
In the longer term, we're coming off significant lows off many of our indicators, so I think we have a bit of time to rally in to mid January - as all the naysayers keep pointing to the potential for a recession.
And another basic rule is don't fight the fed. We have the fed signaling green light. And while that means red light for others, and I'm sure eventually we'll get bearish market conditions, but it usually comes when the bears give up and join the bullish party - and we're not there yet.
On a side note, another service that we offer, Advantage Credit Spreads, is now being auto traded by Think or Swim. This service returned close to 100% in 2007 - which is pretty remarkable considering the lack of risk it also incurred. If you're interested in trying the service and then having the service auto traded, click any of the links below:
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If you have any questions or comments, email me at Jay@stockbarometer.com.