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[TTHQ Staff]

 

The Daily Stock Barometer is a proprietary measure of market energy.  The direction of the stock barometer determines our short-term outlook on the market's direction.  A BUY or SELL signal is triggered when the indicator clearly changes direction. If the line is moving up, we are in BUY MODE and if it's moving down, we are in SELL MODE.  The black line is a 5-day moving average that we use to confirm changes in direction. 

 

EQUITY PUT CALL RATIO CHART

 

 

 

The CBOE put/call ratio is comprised of two sets of data; equity options and index options.  The index component contains items that are used as a hedge, thereby distorting 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

 

 

 

The tick index is represents the sum of all stocks ticking higher minus all stocks ticking lower (a stock is said to be trading on an up tick when it 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.  The higher the volatility, the more likely the market is close to a bottom, as traders are willing to pay more premium for puts, which act as Insurance on their long positions.

 

Cycle Time

 

Monday will be day 8 in our DOWN cycle. 

 

The Stock Barometer signals tend to follow a 5, 8 and 13 and sometimes 21 day Fibonacci cycle that balance with 'normal' market cycles.  Knowing where you are in the current market cycle is important in deciding how long you expect to maintain a position.

 

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, 6/15, 8/29, 10/19, 11/29.  We publish these dates up to 2 months in advance.

 

Here we go again.  Friday was 10/19, a key reversal date and the market tanked - we'll the Nasdaq tested the lows from 10/11.  Let's take a look at what these look like:

 



 

And the SPY broke the previous swing low.  That suggests we're entering a down trend.  But we're also approaching support (on the S&P).  Monday should be interesting.

 

Our next key reversal date isn't for a while. 

 

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.  2005 Potential 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.

 

Stock Barometer Buy And Sell Signals

 

QQQQ or SPY Chart: A chart is provided in every bi-weekly report and shows the barometer Buy and Sell Signals (which are provided in my morning updates) 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 Stock Barometer over the past year.  They're marked on the QQQQ chart with red and blue lines (or red and blue arrows).  Note we recently changed bottom and top to read buy and sell.  

 

• 10/24    Projected BUY Signal (11 days from last signal) 
• 10/10    SELL (3 days) 
• 10/5     BUY (2 days) 
• 10/3     SELL (2 days) 
• 10/1     BUY (1 days) 
• 9/28     SELL (12 days) 
• 9/12     BUY (4 days) 
• 9/06     SELL (3 days) 
• 8/31     BUY (3 days) 
• 8/29     SELL (7 days) 
• 8/17     BUY (3 days) 
• 8/14     SELL (4 days) 
• 8/8   BUY (16 days) 
• 7/17     SELL (3 days) 
• 7/12 BUY (15 days)
• 6/20 SELL (4 days)
• 6/14 BUY (20 days)
• 5/15 SELL (27 days)
• 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)
•  (historical reversal dates and performance figures are published at the Performance Page on the home page and updated at least  annually)
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  The following work is based on my spread/momentum indicators for 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'. 
  
   
  
  Gold Spread Indicator (AMEX:GLD)
  
   
  
   
  
   
  
  To trade Gold, utilize the Gold ETF AMEX:GLD.  This gives us a general gage to the overall health of the US Economy and the markets, as well as to assists us in the entry of positions in our stock trading service.
  
   
  
  US Dollar Index Spread Indicator (INDEX:DXY)
  
   
  
   
  
   
  
  To trade the US Dollar, I'd utilize the Power Shares AMEX:UUP: US Dollar Index Bullish Fund and AMEX:UDN: US Dollar Index Bearish Fund.
  
   
  
  Bonds Spread Indicator (AMEX:TLT)
  
   
  
   
  
   
  
  To trade Bonds, I recommend Lehman’s 20 year ETF AMEX:TLT.  Note that the direction of bonds can have 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 Spread Indicator (AMEX:USO)   [color= red;]*NEW*[/color]
  
   
  
   
  
   
  
  To trade OIL, utilize AMEX:USO, the OIL ETF.  We look at the price of oil as its level and direction can have an impact on the stock market.
  
   
  
  Summary & Outlook
  
   
  
  The barometer is in Sell Mode, we're expecting the market to continue lower into Tuesday and then bounce.  That'll be 11 days in the current mode.  The height of the bounce will set up the next move, whether it is a retest of the highs or a move to a lower fib level, which would suggest a weaker market. 
  
   
  
  On the weekly charts, we also have a sell signal in the form of a bearish candlestick pattern.   These are generally pretty accurate.
  
   
  
  In addition, the II bull bear ratio is at an extreme in bullishness, which on a contrarian basis is bearish.  Although this indicator can remain in at this level for an extended period as stocks reach further highs.  However, seasonality during this time of year is not something to fight.  In the rock, scissor, paper relationship that rules the market (seasonality, sentiment, technicals) you never know which one will rule.  Obviously the price action is the key - as that's the only one you can profit from. (unless you want to take an option play on the vix - it's amazing what you can bet on nowadays.)
  
   
  
  To follow our daily signals and trades and learn more about our system, click here and sign up for a free trial.  Sign up for our free weekly TRADE TUTOR newsletter to get up to date advice from our Pro Traders. 
  
   
  
  Hope you had a great weekend. 
  
  As always, if you have any questions or comments, feel free to email me here at jay@stockbarometer.com. 
  
   
  
  Regards,
  
   
  
  Jay DeVincentis
  
   
  
  Trading involves high risk.  Past results are not indicative of future returns.  Stockbarometer.com and all individuals affiliated with Stockbarometer.com assume no responsibilities for your trading and investment results. [color= black;][/color]