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Crunch Time

By: Stock Barometer | Thursday, February 7, 2013

2/7/2013 8:50:43 AM

Here's what to look for.

As I detailed yesterday, the Qs have moved sideways since the beginning of January and there seems to be an equilibrium right around where we entered our short position.

This morning we have bonds and dollar making attempts to rally - if their moves higher can hold, then the market should sell off. It's quite the battle going on in the futures market - and one will be right - as stock futures are also pushing up off lows, so that's what I mean by crunch time.

I'm still leaning bearish, though we are quickly approaching our next key reversal date, 2/14 - with our next date 3/6. So if we sell off into 2/14, I could see a bounce into 3/6.

Below I'll paint a very bearish picture with the following caveat - my system is about picking the next move and the timing and not focusing on how big a move will be - because I tend to believe no one knows the future. So any far out forecast is just that - far out...

Here's a look at the global stock markets:

world stock markets

On the economic front, here is the schedule for this week. Pay close attention to the timing of the report and the potential for the markets to make short term reversals at those points.

weekly economic calendar

On to the charts:

stock market timing


Stock Barometer Analysis

We remain in Sell Mode, expecting the markets to move lower into 2/14 and possibly beyond.

Also note that the barometer has pulled back quite a bit as the market has moved sideways, so the potential for this 'energy' to push the market higher is still there. If anything, I'd wait for a break out of this consolidation if you're cautious.

We've held off on layering options onto this call until we see further price confirmation.

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. Trend and support can override the barometer signals.


Money Management & Stops

To trade this system, there are a few things you need to know and address to control your risk:
• This system targets intermediate term moves, of which even in the best years, there are usually only up to 7 profitable intermediate term moves. The rest of the year will be consolidating moves where this system will experience small losses and gains that offset each other.
• This system will usually result in losing trades more than 50% of the time, even in our best years. The key is being positioned properly for longer term moves when they come.
• Therefore it is vitally important that you apply some form of money management to protect your capital.
• Trading a leveraged index fund will result in more risk, since you cannot set stops and you cannot get out intraday.

Accordingly;
• Make sure you set your stops so that you can lose no more than 2% per trade (based on the QQQQ if you're trading leveraged funds and options with our trading service).


Potential Cycle Reversal Dates

2013 Potential Key Reversal Dates: 1/16/13, 1/29, 2/14, 3/6. These dates have an accuracy of +/- 2 days. We publish dates up to 2 months in advance.

Our next key reversal date is 2/14. We're now a week away. A lot of damage can happen to the markets in a week.

2012 Potential Reversal Dates: 1/12, 1/27, 2/16, 2/23, 3/16, 4/9, 4/25, 5/26. 6/2, 6/15, 7/2, 7/25, 8/13, 8/30, 9/8, 9/25, 10/7, 10/30, 11/15, 12/17, 1/15/13.

Our IRG Market Timing and Sentiment data service shows the performance of these forecast turn dates going back to 2003 and for the remainder of 2012.

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.


Timing Indicators

Use the following Timing/momentum indicators to assist in your trading of 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'.

QQQ Timing Indicator (NASDAQ:QQQ)

trade QQQ

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 Timing Indicator (ARCX:GLD)

Want to trade Gold? Use our signals with the Gold ETF AMEX:GLD. Gold gives us a general gage to the overall health of the US Economy and the markets.

US Dollar Index Timing Indicator (INDEX:DXY)

US Dollar Timing Indicator

Want to trade the US Dollar? Use our signals with the Power Shares AMEX:UUP: US Dollar Index Bullish Fund and AMEX:UDN: US Dollar Index Bearish Fund.

Bonds Timing Indicator (AMEX:TLT)

how to trade bonds

Want to trade Bonds? Use our signals with Lehman?s 20 year ETF AMEX:TLT. The direction of bonds has 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 Timing Indicator (AMEX:USO)

how to trade oil

Want to trade OIL? Use our signals with AMEX:USO, the OIL ETF. We look at the price of oil as its level and direction has an impact on the stock market.


Secondary Stock Market Timing Indicator

stock market forecast

We maintain hundreds of popular and proprietary technical indicators that break down market internals, sentiment and money flow to give YOU unique insight into whether you should BUY or SELL the market. We feature at least one here each day in support of our current outlook.

As a subscriber to ANY Stock Barometer Newsletter, you also get access to all our charts and research.


Daily Stock Market Outlook

We remain in Sell Mode, looking for a move lower into 2/14.

The above shows the QQQ - SPY Rsi, which in a bullish market, you'd expect techs to outperform the SPY. The last few signals have been on short term indications. This has me cautious.

I get bearish when people get bullish and price action stalls near highs. Below we have evidence of people getting bullish and price action continuing sideways. It's not at an extreme, but a relative high.

Equity Put/Call Ratio

One of our older favortive indicators that's seemingly gone through a transition is approaching a relative high. Since 70% of the market is computer traded, these indicators can sometimes give us clues to which formula is governing the markets. This could be a sell signal, but it's not there yet.

equity to Index Option Volume Ratio

Ok, here's the very bearish call - if prices break below this consolidation, I could see a move to test the neckline of this head and shoulders pattern...

Nasdaq Yearly New Highs

So if we get more bearish action, I'll be issuing covered call advice and PUT option advice...

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If you want to participate in a discussion of some of our indicators in Social Media, please visit and "LIKE" our FaceBook page. I'll have periodic updates on there and I WANT your feedback. This will be a good way to share your views with other traders.

http://www.facebook.com/InvestmentResearchGroupInc

Here's our current positioning.

· Last Recommendation - 2/5 Short QQQ @ 67 (previous trade - 11/19 long at open at 62.97 closed 2/5 @ 67)

· Status - As with any new positions, this is where risk management is critical.

· Consideration - Always maintain stops per money management above. Once you have established a gain in a position, there is nothing wrong with taking some profits early...

If you want to learn more about some of my models and indicators, I use my blog to cover them in more detail. If you're looking for more information, please visit our blog - I'll have updates and publish other articles there. http://investmentresearchgroup.com/Blog/

 

Author: Stock Barometer

www.stockbarometer.com

Stock Barometer is completely independent. We have never and will not ever accept compensation from any company whose stock we recommend.

Our goal is to make you money. We offer you the tools and information to do so and leave it to you, the individual investor, to apply them in the best way possible.

Important Disclosure: Futures, Options, Mutual Fund, ETF and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell Futures, Options, Mutual Funds or Equities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as a lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

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