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Stock Barometer

Stock Barometer

Stock Barometer

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Expiration Week

7/9/2011 8:44:52 AM

The next week will set up the next move.

As a heads up, I will be on vacation next week. Not sure if I'll have internet access as I'll be out on the Vinyard, or as we call it, Vinyahd. Either way, I'll try to get short term updates out - as it's a critical week.

In addition, I will be one of the speakers at the upcoming World Money Show in Chicago, October 20-22. I'll have more details and a link in upcoming articles if you're going to be in the area and would like to register. Plus I'll be out there the whole time, so if you want to meet up and say hi, let me know.

Markets periodically pause to set up the next move. I think that's what we'll get this week coming up - as we have a bunch of reversal dates coming in and it's an expiration week - and I'm a big believer in markets holding up into expirations.

So that suggests to me that the markets will consolidate symmetrically this week. And what happens to the internals will set up the next move, which I am guessing will be a move lower into 8/1. But I'm getting ahead of myself.

Since I'm sending this article on a Saturday, we'll look at the global markets when we return to our normal publication schedule.

On the economic front, here is the schedule for this week. Note Friday Jobs is this week.

Economic Calendar

On to the charts:

Daily Stock Barometer


Stock Barometer Analysis

We continue to remain in Buy Mode, I'm am now looking for the markets to consolidate for expirations week in a symmetrical fashion and set up the next move, which will be lower.

Next week also has the FOMC minutes. I believe they'll play into the consolidation, but the real move lower shouldn't start until the end of the week or the following week.

I also don't believe this move lower into 8/1 will be a significant one. But I don't like to project my thoughts too far ahead, as that can be an exercize in futility. What matters most is the short term and being positioned for the next major move.

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

2011 Potential Reversal Dates: 1/15, 1/29, 2/16, 3/10, 3/18, 4/6, 5/21, 5/31, 6/13, 6/24, 7/16, 8/1, 8/19. We publish dates up to 2 months in advance.

7/11 is a 35 day trading cycle reversal date. FOMC minutes are 7/13. There is a key vote in Greece on July 15th. And 7/15 is options expiration. Seasonality remains strong into 7/20. And we have a 20 week cycle top coming in on 7/27.

I believe the top will be set next week and we'll move lower into 8/1.

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.

2010 Potential Reversal Dates: 1/19, 1/28, 3/2, 3/23, 4/7, 5/30, 6/10, 6/28, 7/10, 8/13, 9/7, 10/2, 10/27, 11/21, 12/19. We publish dates up to 2 months in advance. 2009 Published Reversal Dates: 1/20, 2/11, 3/7, 3/15, 4/8, 4/16, 4/27, 5/7, 6/8, 7/2, 7/17, 9/14, 10/10, 10/24, 11/12, 11/30, 12/9, 12/21, 12/29. 2008 Potential Reversal Dates: 12/31, 1/11, 2/1, 2/13, 3/6, 4/5, 4/22, 5/23, 6/6, 6/27, 7/13, 9/2, 10/3, 10/22, 11/10, 12/11. 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, 12/31, 1/11/08. 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: 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.


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'.

QQQQ Timing Indicator (NASDAQ:QQQQ)

QQQQ Timing Indicator

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 (AMEX:GLD)

Gold Timing Indicator

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)

Bond Timing Indicator

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)

Oil Timing Indicator

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

ECRI Weekly Leading Index

We daily monitor hundreds of popular and proprietary technical indicators that break down market internals, sentiment and money flow to give us unique insight into the market. We feature at least one here each day in support of our current outlook. As an annual subscriber to any of our services, you will get access to all our charts and research.


Daily Stock Market Outlook

We remain in Buy Mode, expecting the markets to continue higher into 7/16. It now appears that the markets may pull back into 8/1. Looking a little further out, a pull back into 8/1 would be bullish, and set up a move up into 8/19.

Friday's action showed the market's strength. On the SPY, we have an evening star, which is generally bearish, but there are 3 directions the market can move - up, down and sideways. So it may just be signaling a move into a sideways market.

Oil is acting as we were looking for - move up to the 200 day, and a pull back. But that's the easy move as my trader Mark McMillan always says, stocks tend to always reverse at their initial touch of the 200 dma. The key to oil will be the dollar. Next week should confirm the direction.

If you're looking for more information, please visit our blog - I'll have updates and publish other articles there. http://investmentresearchgroup.com/Blog/ I've been laying out an oil short trade for a while now. Oil should bounce in the short term but longer term, I see it setting up to head lower.

Regards,

 

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