10/18/2011 9:30:41 AM
Here's an interesting exchange...
There was a great conversation on CNBC this morning between Jim Cramer and crew. Jim was complaining that someone was suggesting shorting Salesforce.com because of the chart... And he asks David Faber - have you ever seen a market that is so derived from looking at a chart?
David Faber - "What are you going to look at. At the end of the day it goes back to how difficult it is to figure out how things really stand. Between dealing with Europe and trying to figure out if the economy is truly slowing."
Melissa Lee chimes in "at the end of the day Jim, how many times do we say 1220/1230 the upper end of the range of the S&P 500. So why not apply that same reverence for the charts to stocks..."
Point is, this is exactly what my presentation in Chicago is all about. What moves the market, what doesn't and how do you use that information to your advantage. Point is, if you were going to trade, and you had to chose between looking at a news stream only, or a chart only, which would you pick? No brainer...
Then Jim chimes in with a quote that Leon Cooperman told him Michael Steinhart, legendary hedge fund manager used to say that "the charts aren't worth 2 nickels because everyone can look at them."
But can't the same thing be said about the news? Or was he getting information that the public didn't get? Granted, this quote was back from 1987, and things have changed a bit since then.
And sure the merits of that argument can be debated, I like charts because it's like looking at the results of an election. It shows you how people are voting - and better yet, you can make money off it. But it's more than the charts. It's the psychology behind the charts that's also important.
And that's where we find ourselves now. Back at the top of a range, but the markets preloaded with more bullish potential than it's had in some time. To me that's bullish. I saw Monday's action as necessary. I still see us in a consolidation.
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Here's a look at the global 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.
On to the charts:
Stock Barometer Analysis
The barometer is in Buy Mode and we expect higher prices into the middle of this month (around the next options expiration this Friday).
Monday's sell off suggests we could see a consolidating move lower into expiration to around the 25th. This would set up the next leg higher into Thanksgiving in traditional seasonal action.
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.
- 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, 11/25, 12/26. We publish dates up to 2 months in advance.
I've added the rest of the dates for 2011.
Seasonality and cycles are bullish into year end. If we get a consolidation into our next key reversal date, I would get more bullish.
Starting to look at 2012 - and seeing two large moves in the market. As I dig in, I'll share some of my findings. Annual subscribers will see my charts in process for my 2012 view...
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.
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)
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)
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)
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)
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)
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
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 remain in Buy Mode here, expecting a bounce into mid October, around 10/21 to 10/25.
Above is the Investor's Intelligence's bulls minus bears. It's one of the reasons I'm leaning more bullish and expecting a year end rally. If you watch CNBC, they talk about how we're just remaining in a range. And while that's true, we've also built up energy for a longer term rally. That energy will get released eventually.
And note, bullish advances are tough to hold on to, it's like riding a bull. The bull will try to get you to get off. But if you hang on, it can be quite a ride.
Heading to Chicago tomorrow. If you're local, hope to see you there.
I'll be moderating a panel of Natural Resource company execs in Chicago next week. So if you have any questions you would like me to ask the following companies, feel free to let me know:
Sandspring Resources Limited
Passport Potash, Inc.
Northern Superior Resources, Inc.
The topic is "Digging For Opportunities In Natural Resources".
And again, if you're out in the Chicago area and want to meet up during the show, feel free to email me at firstname.lastname@example.org and we'll set something up. If you're looking for more information, please visit our blog - I'll have updates and publish other articles there. http://investmentresearchgroup.com/Blog/