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A Bounce, Then Cautious

10/5/2014 11:27:14 PM

Good evening Traders,

If you're not a subscriber of our free weekly newsletter, we periodically put out updates on the stock market and introduce new traders. Here's this week's free weekly newsletter.

We often write of that point in time when a market needs to recover, or things are going to get real ugly. And where at one of those points.

It's one of the reason we're bringing in a new group of stock traders that can help you profit in all types of markets. The first is a gap trading specialist. Gaps have a predictable pattern, regardless of market conditions. But before I tell you about him, let's talk more about the markets and what we're seeing. As we always do, let's go to the research with 5 charts to set up the week ahead...

Cumulative Equity Money Flows

Every Friday we get the weekly update of our money flow data. And the past couple of weeks, we have the first sign of liquidity drying up in the markets. The market is so elevated here that any liquidity that comes out, could cause a strong decline.

Next, we have our view of the economy - this is the only indicator I trust:

ECRI Growth Rate of Change

The direction and level of this indicator are very important. A downward move means a weakening market. Sometimes, the market can sustain itself as the economy weakens, and sometimes it cannot. Now we have the indicator moving lower, and crossing zero. So unless it turns around soon, things could be weaker than anyone thinks... Ebola fears slowing the economy?

What about market sentiment? The below chart looks at two entirely different measures of sentiment, that are both moving lower off highs.

AAII Bulls minus Bears

This can be bearish, but lately nothing has been able to hit this resilient bull market. It's a matter of liquidity. So where are we with liquidity?

Bonds are the key to market liquidity. And bond volatility is coming in right with it's seasonality. But if you look at the below chart, we're about to see a period where bonds sell off and potentially support stocks.

Bonds Seasonality

But is that the whole story?

SPY versus Bonds Relative Strength

The above chart shows the relationship between stocks and bonds. So you can see how we are at that point where stock need to rally and bonds need to sell off for the market to hold on here. If that relationship breaks down, we could see a similar move that we saw back in 2011. At least that's what our research shows us...

Regards,

 


On to how you're going to profit from the coming market? Let me introduce you to Damon Verial, editor of our Price Gap Stock Trader. Damon's done some work with hedge funds on the predictability of trading stocks that make price gaps and his last 3 stock trades have returned over 39%.

Click here if you're interested in learning more about his service and to receive a special deal.

Or you can subscribe here for only $1 and try his service for 4 weeks. Just use PGS1 as a discount code when signing up to get your $1 trial.

Click here to subscribe.

We're excited to be offering this service to you. And this is a service where Damon will get you into trades and follow those trades and let you know precisely when to get out. This is a service you can follow with any amount of money, and the goal is to compound those returns through trading predictable price gaps.

Damon also lets you in on the black box - there's no secret sauce here - it's a system and he shows you how to identify trades and follow the system. It's as educational as it is profitable...

In addition, the most resent recommendation is playing just as he predicted. There's still time to get in on the trade.

Again, to learn more about the service, click here.

PS - Again, Click Here To Subscribe, just don't forget to use DISCOUNT CODE, PGS1 to get your 4 week trial for only $1...

 

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