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Significant Low?

9/30/2014 6:16:14 AM

Good morning Traders,

Every day the stock market doesn't break down, means the potential for an advance increases significantly. Thinking back to some of the best bull market rallies from 10/1 through year end - you have to prepare that the potential exists.

Talking about potential, let's look at potential returns from here:

Expected One Month Future Return Chart

The above just takes the forward 1 month return based on the level of the barometer. So we're in the 10% range. This is one reason we didn't position for downside in our Stock Options Speculator service. Now we may position for upside and some calls on the next Buy Signal from the barometer.

But if stocks rally - who needs gold? I would expect gold to crash - significantly:

Gold Volatility Chart

That being said, I'm not alone in that assertion:

Gold Put/Call Ratio Chart

As you know, I am not a big fan of being part of the crowd. So the potential for a rapid advance in gold also exists. We're in gold puts, but if gold can hold these lows, I'd have no problem pocketing our profits (>100%) and trading the upside until the put buying resolves.

As for the barometer, we remain in Sell Mode, but the Qs have remained strong, holding on to the 50day.

Daily Stock Barometer

Longer term though, we could see a flip in the nature of the market:

Cumulative New Highs and New Lows Chart

We'll look at our longer term indicators over the coming weeks and months for a similar turn down in cumulative money flows and breadth - as this will be a sign that the underlying bullishness of the market has changed.



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