An important thing to note with theserecommendations is that we are using a longer term weekly trendingstrategy - meaning that we’re not looking to exit on +/- 20% profits -we’re looking for much larger gains. That doesn’t mean if you’resatisfied with the current profits that you can’t take them - I justneed you to understand that we’re looking for more profits, so we’lllikely have to sit through another consolidation.
There’s something I call the rule of 5 thatI discuss in my teachings. All it basically means is that if youmake 5 recommendations, 2 will do well, 2 will do poorly and 1 will donothing. The use of stops will get you out of the 2 that dopoorly. You will need to eventually close the 1 that does nothingand reposition that capital in another position. And the 2 thatdo well, well, you also need to have a plan to get out of those. Our plan is to - on a weekly basis - let the ones that do well run asfar as they can. The likelihood ofgetting 2 large wins (+50%) out of 5 trades decreases. Also notethat we may give up these short term gains to see if we have a bigwinner. Stay with me through this process and you’ll see how itplays out.
These charts arrow the entry day- and weuse the open price as our entry price. The nice thing about CNEis that it is paying a 14.5% dividend. I would have no problem ifthat dividend drops in relationship to stock price, since that wouldmean the stock price has increased. The best thing about tradingdividend stocks is that they pay you while you hold on to them. Sort of a double bonus...
Stock trading is both science and art -the ability to recognize good trades takes hard work and muchpractice. There is no secret to trading in the market - just hardwork and lots of learning - about yourself and about the market. Learning about yourself is critical to understanding what and how youshould trade.
TECH is our worst performer, especiallysince it dropped shortly after we entered it. I actually receivedan email on the day it reversed - right before it reversed higher,complaining about the pick. It’s amazing to me how emotionsinteract with trading - getting a negative email just when this stockwas about to move higher.
Of course the next question is how highwill our current picks go? A lot of that will depend on themarket. Also note that 2 have thrusted sharply higher and are duefor a pull back. Sometimes pullbacks set up the next advance andsometimes that pull back is the initiation of a top and a reversallower. We’ll monitor these picks, get out of picks when theyunderperform and make new recommendations as we see fit.
Let me know if you have any questions and I’ll address them in future updates.
Regards,
Jay DeVincentis, Editor
Message From The Markets
Marketaction is ruled by sentiment and by monitoring market internals andstudying sentiment; you can gain reasonably predict future marketmovements. The basis of the Stock Barometersystem is overlaying extremes in sentiment with sound technicalanalysis to predict the likelihood of future price movement. Each indicator and chart measures the hope, fear and greed of investors and traders from different angles. Followalong with my charts and over time, you'll also learn to understand howto read the markets, which is essential prior to setting up each andevery trade.
STOCK BAROMETER CHART
The Daily
EQUITY PUT CALL RATIO CHART
The CBOE put/call ratio is comprised of two sets of data; equity options and index options. Theindex component contains items that are used as a hedge, therebydistorting the correlation and interpretation of the indicator. I use the equity put/call ratio. This is one of the most accurate read of investor's fear and complacency.
TRIN/ARMS CHART
Richard Arms developed the arms index. It is also referred to the Trading Index or TRIN for short. It is a measure of the ratio of up stocks and down stocks divided by the ratio of up volume and down volume. Our Spread Chart converts the arms index data into momentum Buy and Sell Signals.
TICK CHART
Thetick index is represents the sum of all stocks ticking higher minus allstocks ticking lower (a stock is said to be trading on an up tick whenit trades at a higher price than the last sale). It's utilized as a day trading tool as it gives you an up to the second read of the intensity of buying and selling.
BREADTH (ADVANCE - DECLINE) CHART
Each day several thousand stocks either advance, decline or remain unchanged. The number of advances and declines normally ranges from +2500 to -2500. A high number of advancing stocks normally marks a top just as a high number of declining stocks normally marks a bottom. Monitoring the 5 and 13-day moving averages of this allows us to better predict future prices.
VXO CHART
The VIX is a measure of volatility on options pricing. We use the old VIX, which is now called the VXO. Thehigher the volatility, the more likely the market is close to a bottom,as traders are willing to pay more premium for puts, which act asInsurance on their long positions.
Cycle Time
Monday will be day 1 in our up cycle.
The
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Potential Cycle Reversal Dates
2007 Potential Reversal Dates: 1/10, 1/14, 1/27, 1/31, 2/3, 2/17, 3/10, 3/24, 4/21, 5/6. We publish these dates up to 2 months in advance.
The latest action in the market has me looking at 4/21 as a top.
My timing work is based on numerous cycles and has resulted in the above potential reversal dates. They're predictive and have nothing to do with the barometer cycle times. However, due to their accuracy in the past, I post the dates here.
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. 2005Potential reversal dates based on 'other' cycle work were 12/27/04,1/25/05, 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.
QQQQor SPY Chart: A chart is provided in every bi-weekly report and showsthe barometer Buy and Sell Signals (which are provided in my morningupdates) as well as showing the next highlighted 'reversal' window. The numbers adjacent to the buy and sell signals are the number of days between signal (cycle time).
Here's one years of our end-of-day buy and sell signals for the
- 4/5 BUY (7 days)
- 3/27 SELL (13 Days)
- 3/8 BUY (34 Days)
- 1/18 SELL (4 Days)
- 1/11 BUY (17 Days)
- 12/22 SELL (6 Days)
- 12/14 BUY (0 days)
- 11/24 SELL (0 days)
- 11/14 EXIT/CLOSE/CASH (9 days)
- 11/01 SELL (18 days)
- 10/26 BUY (18 days)
- 10/2 SELL (4 days)
- 9/26 BUY (14 days)
- 9/6 SELL (15 days)
- 8/15 BUY (4 days)
- 8/9 SELL (12 days)
- 7/24 BUY (10 days)
- 7/10 SELL (29 days)
- 5/26 BUY (33 days)
- 4/10 SELL (8 days)
- 3/29 BUY (6 days)
- 3/21 SELL (5 days)
- 3/14 BUY (10 days)
- 2/28 SELL (8 days)
- 2/15 BUY (23 days)
- 1/12 SELL (6 days)
- 1/04 BUY (31 days)
- 11/29 SELL (28 days)
- (historical reversal dates and performance figures are published at the bottom of the
[/list]
The following work is based on my price based spread/momentum indicators for the USD$, XAU, GLD and TLT. Theyare tuned to deliver signals in line with the Stock Barometer. Combinedwith up/down indicators and you have a powerful tool for pinpointingmarket reversals.
Gold (GLD:AMEX & INDEX:XAU.X)
Imonitor Gold in the form of GLD and the XAU as well as the US DollarIndex as a general guide to the overall health of the US Economy andthe markets, as well as to assist us in the entry of positions in ourGold Stock Service.
Bonds (Amex:TLT)
Iinclude bonds in our studies and use Lehman’s 20 year ETF, as thedirection of bonds can have an inverse impact on the stock market. Normally, as bonds go down, stocks will go up and as bonds go up, stocks will go down.
Summary & Outlook
The barometer has issued a Buy Signal, placing us into Buy Mode. The next key reversal date is 4/21, which is about two weeks from today. Giventhe positioning of the indicators, other than the likelihood of a shortterm pullback at the beginning of this week, I believe that the marketwill move higher into 4/21 - which also aligns with Options Expiration.
Again, if you're new to the biweekly stock barometer, welcome. This article comes out every 2 weeks and gives a big picture view of the market and our recent activities. If you're interested in following our signals and learning more about our system, then [color= red;]I invite you to click here and subscribe to the daily service[/color] - since the market can turn on a dime and so to can our interpretation as the market gives its daily clues to the future. Or sign up for our[color= red;] free weekly newsletter[/color], where we provide up to date articles from our various trading services. We're also going to be releasing a free trading video in 2007 - so sign up today.
Have a great rest of the weekend.
As always, if you have any questions or comments, feel free to email me here at
Regards,
Jay DeVincentis
Trading involves high risk. Past results are not indicative of future returns. Stockbarometer.comand all individuals affiliated with Stockbarometer.com assume noresponsibilities for your trading and investment results.
