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Pull Back Remains Bullishly Shallow

7/19/2011 8:25:28 AM

Keeping Us Bullish...

Welcome to Lynn T's 1-2-3 PLUS Alert. To try my Partial Leverage Utilization System, click here.

SPDR S&P500 Trust

The selling in the markets over the past 2 weeks has resulted in a shallow retracement following a sharp rally in the markets. That's bullish. And accordingly, we will retain our bullish posture - expecting the markets to move higher, to the top of the consolidation.

We'recontinue to hold on to some significant gains from our long term buy signal issued back in September 2010.

Accordingly;

MAINTAIN A FULLY LEVERAGED 3/3 bullish position (see weighting below).

Current Weighting Suggestion:

3/3 in Bullish Leverage
0/3 Cash

What does it mean to go to full bullish leverage? Here's an image of what I mean about leverage:

In this example above, we take a $100k portfolio and leverage it to 1.75x. You can use any combination of Funds, ETFs, and Leverage and achieve up to a 2.5x to a market move. How do you apply that to the 1/3, 2/3, 3/3? Easy. If your target is 2.5x, then 1/3 leverage would be around 83%, your 2/3 leverage would be about 166% and obviously your 3/3 position would be 250% (or 2.5x). So you could take a 10k portfolio and get the performance of a 25k portfolio.

But just remember, that works in both directions, so when we're fully leveraged, I would be quick to sell off or back off on leverage if the markets move against us.


Long Term Investor Buy Signal Alert

Over the past several years, this indicator has predicted several 100-point or more moves in the S&P. There are only 2 to 3 of these signals every year, so they're worth paying attention to. This is an ideal signal for investors to put cash to work following a down move in the market.

There is no long term investor buy signal at present. We're still working off the 9/13/2010 signal and it's about as good as it gets. To be honest, I was susprised at this last bottom that the indicator didn't get more bearish and give us a signal. We'll be patient here. These signals offer great opportunity.

Past Long Term Investor Buy Signals

September 13, 2010 - currently active
July 26, 2010 - resulted in an advance of around 20 points over 1 week.

March 18, 2009 - resulted in an advance of around 235 points over 4 months.
October 29, 2008 - resulted in an advance of 76 points over 4 days.
July 23, 2008 - resulted in an advance of 34 points over 3 weeks.

Have a great week!

 


Earn money: refer us to friends and family.

Long Term Investor Crash Warning Indicator

This indicator is a variation of the widely published Hindenburg Omen. We'll let you know when we're seeing indications of a potential crash to come. This would be a good time for long term investors to take some money off the table.

This indicator is not coming into play at this point in time. There are several components that come into play - we'll advise you as we see them come in. If/when we see them come in.

You can email me with any questions at plus@stockbarometer.com.

To follow our blog, click here: Stock Market Blog

 

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