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November 12, 2006 Sell Signal |
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11/12/2006 8:52:36 AM As the market tries to break out of this consolidation, the system gives a secondary sell signal. WEEKLY WRAP-UP Dear Speculators, Welcome new readers! We have a free weekly newsletter on our site where we provide free samples to our various trading services. Click here to sign up as we'll be publishing my 3 hour trading video for free around the beginning of 2007. We also offer free 4-week trials to all our services, from the $9.95/month 5 stock trading service to the $149/month Dynamic Options service. Please click the links if you're interested. With the elections in the rear view mirror and the only real casualty so far being the republicans and health care, all eyes are set on the rest of the year. As seasonality goes, we're in a positive seasonal period until the beginning of December, where the market usually consolidates into options expiration and then makes the famed 'Santa Clause Rally'. But that's not what always happens. Seasonal tendencies are simply another form of a cycle and as I've said in the past, there are so many cycles that some are bound to be right and some are bound to be wrong. The key is to follow one and only one. System trading is akin to solving for an equation and in solving an equation, you fix as many variables as possible. Of course, if you have any additional questions, please feel free to email me at jay@stockbarometer.com. Dynamic Trading Signals are based on a series of Oscillators tuned to the short and intermediate term movement of the market. Our goal is to be in the market at all times and switch from bearish to bullish positions in line with the markets movements (except for the Options service, which is subject to greater volatility and time decay). Periodically we will go to cash and await the next system trade. DYNAMIC TRADING OSCILLATOR
Discussion: Here we're taking a look at two of our indicators combined to form one. They form the basis of our signals. 10/20/40 WEEK CYCLE The following chart shows our 10/20/40 week cycles. The 40 week is also referred to as the 9-month cycle. Cycles are not short term tools for determining precise entry and exit points, they're primarily used for intermediate or longer term positioning and forecasting.
INVESTOR'S INTELLIGENCE BULL BEAR SPREAD Each week, Investor's Intelligence polls a number of newsletter writers. The poll results in a number of bullish advisors and a number of bearish advisors. The difference between those two numbers produces the following chart. It's believed, that when a majority of newsletter writers (like us) are bullish, that the market is near a top, and vice versa. The direction of this line is as critical as the level.
EQUITY INDEX OPTION VOLUME RATIO The market is all about risk, and there are two primary classes of participants in the market, the individual investors and the institutions. Individuals primarily trade equity options and institutions primarily trade index options. So the relationship between the two gives us an idea of how much risk the individual is willing to take on. At tops, the individual tends to take on too much risk, making this indicator rise. At bottoms, the individual is usually washed out of the market, making this indicator fall.
QQQQ v. SPY RELATIVE STRENGTH Risk tells us a lot about the market. This indicator looks at risk from another perspective. When market participants overall increase their willingness to take on risk, it's bullish for the market. That risk shift is shown on the above chart as a shift in relative strength from the Nasdaq to the NYSE. Note when we refer to Nasdaq, we're primarily looking at the QQQQ - since that's the focus of our service. And when we say NYSE, we look at the SPY.
MONEY FLOW This indicator looks at the flow of money in and out of various investment vehicles. For the most part, when money flow reaches an extreme, in either buying or selling, the market is at a top or a bottom, respectively.
NDX CHART
In summary: Dynamic Trading remains on its current SELL SIGNAL. Friday's bounce came on decreased volume and while that's not what you want to see if you're bullish, it is also not what you want to see if you're bearish, as we've been looking for some sort of follow through to Thursday's weakness. Technically, Thursday's trade broke the previous high on decreased volume. Think of it as less people going into your store and you trying to charge higher prices - it's just not going to work as a matter of supply and demand. This supply and demand relationship is a good way to interpret volume action of the market. But it isn't a precise timing relationship, as prices can remain going higher on decreasing volume for some time. However, it's the previous highest volume day that you should look for next. On the Qs, that's the 8th and the 1st of November. Since those days occurred in the current consolidation, they're not as significant no until prices move away from the current price level. If prices move higher, then they'll act as support - if prices move higher, then this level will act as resistance. How does that work into a longer term forecast? 11/28 has been a focal point of our cycle work. It's the last remaining reversal point of the year, so a reversal into that date would set up a nice year end rally. However, continued strength means we plan for a bullish move into 11/28 and follow seasonal tendencies from there. Best regards and good trading!
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Jay DeVincentis Trading involves high risk. Past results are not indicative of future returns. Stockbarometer.com and all individuals affiliated with Stockbarometer.com assume no responsibilities for your trading and investment results. Patrice V. Johnson's - J.E.D.I. Trader Explosive Stock Trader Stock Options Speculator Angelo Campione's Advantage Credit Spreads Lynn T's 1-2-3 PLUS Alert ETF Advisor Fundamental Trader Alert Daily Stock Barometer QQQQ Trader and Rydex Trader: issued by 10pm in the evening when the Barometer system issues a Buy or Sell Signal. Stock Barometer Premier Membership Click Here to visit our subscribe page learn more about any of our services. Earn Money referring us to your friends, family and other traders. Click here for details: http://www.stockbarometer.com/affiliate.aspx To ensure delivery and prevent this e-mail from being delivered to your bulk mail folder, please add our 'From' e-mail address, info@stockbarometer.com, to your address book. 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. Investment Research Group and all individuals affiliated with Investment Research Group assume no responsibilities for your trading and investment results. Investment Research Group (IRG), as a publisher of a financial newsletter of general and regular circulation, cannot tender individual investment advice. Only a registered broker or investment adviser may advise you individually on the suitability and performance of your portfolio or specific investments. In making any investment decision, you will rely solely on your own review and examination of the fact and records relating to such investments. Past performance of our recommendations is not an indication of future performance. The publisher shall have no liability of whatever nature in respect of any claims, damages, loss, or expense arising out of or in connection with the reliance by you on the contents of our Web site, any promotion, published material, alert, or update. For a complete understanding of the risks associated with trading, see our Risk Disclosure. Copyright © 2004-2008 Investment Research
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