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Stock Barometer

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De Ja Vu

7/22/2011 7:50:47 AM

We've been here before, why expect something different now?

This is the third time the markets have been up testing this level. A single top in February, a double top in late April, early May and here we are now, in July, testing the exact same levels.

One of my forecast indicators actually suggests this action of testing highs and lows is going to continue for the rest of the year. It suggested that the action wasn't going to start until 8/1. But it looks to ohave started earlier. Note - if you're an annual subscriber, you can access this in the NYSE charts, "F11" - meaning Forecast 2011...

As a trader, one of my basic rules is - if you make it, take it. The common story that's told to reinforce this is if you ask people that have made money trading in the stock market how they did it, they'll say they always sold too early... It's actually pretty painful to sell early and see the market continue higher. But the markets job is to suck you in. So by selling early, under your terms, it puts you in the right place both mentally and financially...

So never ever have a problem with taking some money off the table early. It's what I do...

So here we are, coming into a summer Friday with the markets testing highs. No debt deal in sight. And the markets a little cautious this morning on some weak earnings reports. The odds on play is to sell here and expect downside action. But we'll let the indicators tell us that.

Be my guest at this year's World MoneyShow Chicago, October 20-22, 2011, at the Hilton Chicago Hotel. Don't miss out...register FREE and be sure to mention Priority code 023768! Click here to see more details about when my session will be and what it is about.

Here's a look at the global markets:

Global Markets

On the economic front, here is the schedule for this week. Nothing scheduled for today!!!

Economic Calendar

On to the charts:

Daily Stock Barometer


Stock Barometer Analysis

We remain in Buy Mode, expecting the markets to move back towards previous highs - and higher into 8/1.

Word of caution, the markets are at highs, if they fail to break out here, there could be a pull back into 8/1 - setting up another move higher in Mid-August...

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.

Seasonality remains strong into 7/20. And we have a 20 week cycle top coming in on 7/27. And a key reversal date of 8/1. I expect the markets to move higher into 8/1.

Note my comments above about the potential of a pull back into 8/1 on the debt talks. That would set up another 2 week move higher into 8/19. And we'll start looking further out next week...

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

Equity Fund Money Flows

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 8/1. Getting a little cautious of a pull back into 8/1, but noting that it would set up a move higher into 8/19.

The rally still has energy here, but as you watch cnbc, most people talk about how confident they are that the markets will rally here. That's flashing a warning sign to me.

In looking at new highs, we can judge the health of a move. Here's where they are:

NASDAQ Yearly New Highs

A turn lower here would be bearish. And it would create a bearish divergence. But a bearish divergence is a hindsight indicator, meaning it's a conclusion you can make only way after you needed to make the decision :) Point is, we'll be on the look out as to how the markets close here - as I am a big believer that the close is way more important than the open...

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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