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#1 TTHQ Staff

TTHQ Staff

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Posted 04 August 2011 - 03:57 PM

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S&P 500 (SPX) & Nasdaq 100 (NDX) Timing
Aggressive - Both Bullish, Bearish & Cash Positions

For Sunday, July 31, 2011


Current Strategy Positions
Current Positions
results are all realtime
SmallCap
S&P 500
REIT Timing
Gold Timing
International + 39.8 %
+ 28.2 %
+ 50.2 %
+ 18.4 %
+ 11.5 %
FibTimer currently has 12 successful strategies

S&P 500 Position - BEARISH
Nasdaq 100 Position - BULLISH
Gold Stocks Position - BULLISH
SmallCaps Position - BEARISH
U.S. Dollar Position - BEARISH
Bond Fund Position - BULLISH

These positions were started over previous weeks. You need a paid subscription for real time signals. Sector Funds, ETF and Stock positions are not included above.
S&P 500 Index (SPX) Chart Analysis

Last week we wrote:

"In the face of constant negative news regarding the August 2nd debt crisis and the inability of Congress and the White House to come to an agreement, the stock market rallied this week. The S&P 500 Index - SPX gained some 2.2% while the country agonized over the approaching debt ceiling. Importantly, the Nasdaq 100 Index broke out to new 2011 highs on Friday. We discuss this in the NDX analysis below."

This week:

Last week the S&P 500 Index - SPX, closed only 1.3% percent below its 2011 highs and the Nasdaq 100 Index - NDX did close at new 2011 highs.

This week those highs are history and the big question is; have we just seen the end of the potential for any 2011 gains, or is this just another temporary dip?

A look at the daily chart (below) shows that we have had four previous dips since February that all reversed and turned higher. This would be the fifth. All the rest ended and the stock market rallied.

We have drawn a resistance line (horizontal red line) at the SPX highs and a support line (horizontal green line) at the SPX lows since February. This marks the wide trading band that most traders would call "trading hell." The rallies never last and the declines never continue either.

The declines this week were directly caused by our government’s inability to do their job. No one wants an ever rising debt ceiling but there is no choice at this time and both Republicans and Democrats know it. They have known it for some time.

But each, for their own reasons, refuses to do what is best for the country and instead is playing politics with our economy. A solution could have avoided this entire mess if they had sat down and compromised months or at least weeks ago.


The financial markets expected some sanity and held steady through last week, but this week the markets are getting nervous. Traders and investors are exiting positions to the safety of fixed income markets which resulted in a bond market rally, and a stock market decline.

We still expect a solution, but not until the very last moment. And we admit that even our already skeptical minds have been surprised at the inability of congress to working this out.

So, no one knows for certain what will happen next week. And even if a solution is passed and the debt ceiling hiked, has it gone too far? Will the stock market be unable to recover this time?

All we can promise is that if the market continues lower we will exit and protect capital. If they rise we will either stay bullish or return to bullish positions as needed. Sideways markets such as we are currently in are terrible to endure, but they "always" end. A look at historical charts shows this one has already lasted longer than most.

Whether we decline from here or advance, this strategy will follow the trend.

The daily chart (below) shows the SPX declined to its 200-day moving average this week and then moved up a bit before the close on Friday. The close was below the support line at SPX 1305.32 (which is also the center line for the sideways market).

The 200-day average, currently at SPX 1284.84 is important support but the lows of the trading range are even more important. That low is at SPX 1256.88.

The weekly chart shows an ominous bearish head-and-shoulders pattern developing. These patterns tend to form before major declines. We have labeled this pattern with S,H,S on the weekly chart.

We will know soon enough if that is the case this time because this next week is likely to tell us where we are headed over the coming weeks and months. Tuesday in particular is a day to watch with the debt crisis scheduled to be in the news.

One bullish chart is that of the CBOE Volatility Index - VIX which has rallied to extremes (closing at 25.25 Friday). When it hits such highs we are typically close to a rally.

Last week we were on the verge of a breakout. This week we are back in the trading range and next week we could see the start of a major decline or another rally to the top of the trading range.

We will follow where the market takes us. Be patient. This is a difficult market but it will end.

The SPX position in the strategy is headed for the sidelines. A cash (money market funds) position will be taken on Monday to protect capital.

The much stronger Nasdaq 100 Index (analysis below) remains bullish for now.

Last minute note: The credit rating company Moody’s has stated, "The United States will likely keep its top-notch credit rating from Moody's for now, despite the "limited magnitude" of the deficit reduction plans being discussed in Washington, the ratings agency said on Friday."

Conclusion:

The SPX is below its 50-day moving average. The 200-day average has held as the bottom for this correction.

News events are dominating the markets.

Support is at the 200-day average.

The SPX portion of this strategy is BEARISH and in a CASH (money market funds) position.

S&P 500 Index (SPX) Daily Chart

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S&P 500 Index (SPX), Weekly Chart

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Nasdaq 100 Index (NDX) Chart Analysis

Last week we wrote:

"The Nasdaq 100 Index - NDX had a great week, breaking out to new 2011 highs. The NDX did this three weeks ago but it did not hold. This time the breakout was more substantial and looking at the daily chart below, it appears we have higher highs ahead with initial resistance at NDX 2458.55 and then NDX 2531.89."

This week:

The Nasdaq 100 Index - NDX is easily the strongest index in the market. Not only did it reach a new breakout high only last week, but the declines this week, in very bearish conditions, were mild in comparison to the big cap indexes.

The NDX remains well above its 50-day moving average as well as support levels at 2298.25 and 2270.56. The 200-day moving average is at NDX 2280.67 and rising.

The odds favor, in our opinion, a resolution (just in time for added effect) of this current debt crisis and the financial markets should rally on that agreement. But will the rally hold? Has there been too much bad economic news?

GDP for the first half of this year came in much lower than expected. The first quarter was revised to a 0.4% rise. It does not take much to go from there to a negative number.

Support is at the 50-day moving average at NDX 2317.75 and the 50% retracement of the current advance at NDX 2298.25.

Conclusion:

The NDX is above its 50-day moving average. The NDX is well above its rising 200-day moving average.

The NDX has posted a new breakout high as of the close last Friday and has declined less than other stock indexes in the current weakness.

The NDX portion of this strategy is BULLISH and in the Rydex NDX 100 Fund - RYOCX (or other bullish NDX 100 index fund). The exchanged traded fund QQQ can be used.


Nasdaq 100 Index (NDX), Daily Chart

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