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Double Negative

9/22/2011 10:09:32 AM

Dollar and Bonds Reaction Is Bad For Stocks, But...

First, let me say, I would be a buyer of today's lows. That being said, it's not a trade for the weak of heart. But the selling at the close, combined with the gap down this morning (well, futures traded lower). It's set up a potential bounce.

Dollar and Bonds higher are about as bad as it gets for stocks. We'll need to see both of those stop.

Here's a wierd one for you. Today is the Autumnal Equinox. Which often aligns with reversals. We also have a key reversal date of 9/25. I was hoping for a top on 9/25. We may still be there, but with this action, we're close to a bottom unless we really see selling break down.

The Nasdaq Futures remain in an uptrend:

Nasdaq Futures

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Here's a look at the global markets:

cnn world 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

The barometer has moved technically into Sell Mode, but with the Q's remaining in an uptrend, we're remaining in Buy (TREND) Mode. We believe this pattern in price is bullish and could be a day away from a strong tradeable bottom.

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, 9/4, 9/25, 10/21, 10/25. We publish dates up to 2 months in advance.

We're now seeing a sell off into our 9/25 date. This suggests we're closer to a bottom than many think. Watch for a rally today (or starting around 9/26) into Month end.

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 trading

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 trading

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)

usd dollar trading

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 trading tlt

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 trading uso

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

advancers

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. Email Carl@stockbarometer.com to upgrade and also save 20% on your subscription.


Daily Stock Market Outlook

We are going to remain in Buy Mode here, but very cautious, meaning we're watching the market for something further, but expect lows to be established soon resulting in a bounce. This will adjust our views for October, but first things first, let's watch for the markets to hold here and possible even close flat, which would be a win for the bulls.

Technically, Wednesday's sell off gave us a short term buy signal. Following a fed day, I'm still more bullish and see this action as bottom setting, not initiating a new phase lower. There may still be some short term weakness to get through, but with so many bets being made for continued downside, using the rubber band analogy, the force pulling back on the markets is very strong.

Also note we're in a high volatitlity period, meaning that market moves will be larger than expected. In both directions.

If the markets bottom here, we could now see a bounce into 10/18 to 10/21. I think I'm the only one out there saying that. Call me crazy...

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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