Hello
Welcome to the Stock Barometer Weekly Stock Market Update, where we discuss the future outlook for the market, what's happening in our trading services and feature an article from one of our services.
This week we’re making a special announcement regarding price increases for 3 of our services (and any packages they’re included in).
Today is your last chance to subscribe to the Daily Stock Barometer, the QQQQ Trader Alert or the Leveraged Rydex Trader Alert at the current low prices, as prices will increase tomorrow. Price increases take effect at midnight tonight.
Here’s a chart showing the old and new service pricing – click on the old price to subscribe now and lock in the low price as long as you remain a subscriber in good standing:
|
Service/Package |
Old Price |
New Price as of 2/1/06 |
|
Daily Stock Barometer |
$19.95/mo $189/yr |
$24.95/mo $239/yr |
|
QQQQ Trader Alert |
$19.95/mo $189/yr |
$24.95/mo $239/yr |
|
Leveraged Rydex Trader Alert |
$19.95/mo $189/yr |
$24.95/mo $239/yr |
|
Bi-Weekly Stock Barometer |
$9.95/mo $95/yr |
$14.95/mo $139/yr |
|
Premier Membership |
$59.95/mo $569/yr |
$69.95/mo $669/yr |
|
Daily Stock Barometer & QQQQ Trader Alert |
$31.95/mo $309/yr |
$39.95/mo $379/yr |
|
Daily Stock Barometer & Leveraged Rydex Trader Alert |
$31.95/mo $309/yr |
$39.95/mo $379/yr |
|
QQQQ Trader Alert & Leveraged Rydex Trader Alert |
$27.95/mo $269/yr |
$39.95/mo $379/yr |
|
Daily Stock Barometer, QQQQ Trader Alert & Leveraged Rydex Trader Alert |
$43.95/mo $419/yr |
$59.95/mo $569/yr |
|
Daily Stock Barometer & ETF & Fidelity Fund Advisor |
$29.95/mo $289/yr |
$34.95/mo $329/yr |
Again, I encourage you to subscribe at the prices above, as we are also making the services available for auto trading with various brokers after 2/1.
Last week we also announced new lower pricing for our stock services. Now, for only $9.95/month or $95/year, receive access to ALL 5 Stock Barometer Stock Trading Services.
This is an exceptional value – subscribe now to all 5 services for only $9.95 and begin receiving our trade recommendations today.
Or get an even better value and subscribe for annually for only $95 and get a year's worth of trading advice.
Let me tell you a little story. Some years ago, I wrote for another trading service that published a monthly newsletter. They spent most of their time hyping the 5 individual stocks in a newsletter that came out on the 15th of every month, and they never considered the timing of the individual investments. This service is similar in that we make on average 5 recommendations each month. But ours is better in that we can make those recommendations on the specific day during the month that the trade should be made. To me, timing is the most important component of trading.
As for the stock market, here’s a quick update from the Stock Barometer and our other partner services:
Daily Stock Barometer:
The Stock Barometer remains on a Sell Signal since January 12th. I’m looking for the market to move lower into 1/30. The report below discusses how we interpret the short term action as the market is in a very complex position here – and the next move should be substantial.
Regards,
Jay DeVincentis
Bi-Weekly Stock Barometer No. 130
January 28, 2006
The Barometer & Trading Futures
Dear Subscriber,
The Barometer isn't just meant for stocks, options and Rydex funds; it can work with futures as well.
Before I get into today's article, let me first say that the barometer remains in Sell Mode. I know a lot of you a chomping at the bit to go long here, but the technical landscape is very complex here.
So what prompted this article? I received the following email subject: Thanks from a subscriber:
Jay,
Since I started trading the NQ futures last Sept. using your recommendations from the Stock Barometer, my IRA is up 54%, in a little more than 4 months! Needless to say, I’m ecstatic about this level of performance. I’ve been leveraging by an average of about 3.5:1, reducing down to 3:1 currently.
I can’t even count the number of trading advisor subscriptions I’ve started and cancelled. Nobody has been able to deliver me consistently profitable recommendations, until I started doing as you do. I really appreciate your skill as a market timer and your willingness to allow me to profit from it. Also, your service is a bargain, compared to everything else I’ve tried.
Sincerely, -- B H
The point I want to make with this email is that you don't have to use the barometer signals to trade only the QQQQ or Rydex funds to make money. You can use futures or options or even day trade, as several of my readers use the direction of the barometer in establishing their day trades.
Moving on to signals, I wanted to provide this chart showing my 2005 signals:
2005 was an interesting year as the market presented some tough trading conditions early on that put us behind performance wise - but the market behaved much better after May, and that, combined with the new Nasdaq barometer, gave us some decent gains. Again, I'm looking forward to a whole year with the added parameters. That doesn't mean we won't see losses as losses are as much a part of trading as gains - it just suggests that the performance since the inclusion of a new rule in the system has been, well, exceptional.
Now let's look at our potential cycle reversal dates - as we approach 1/30.
Actually, I don't want to put too much emphasis on these dates, as they're almost as likely to be wrong as they are to be right. And also, with their 2 day +/- accuracy makes them much more accurate in hind sight. And I can spend a day teaching you how hindsight can ruin your ability to trade - as most traders don't have the ability to separate hindsight from their thinking process and sometimes think they can interpret things only because they're evident in hindsight.
Point is, as we approach this 1/30 date, that we're all focused on because I think it can just as likely mark a top in the market as it can mark a bottom - and that won't be clear until a few days after we pass that date - especially with the fed decision entering the mix - and how that normally sets up a strong counter trend trade. How the dates work in the system, is that they can influence our decision when to issue a signal. First of all, the barometer is 99% mechanical - and the 1% subjective component comes down to the precise timing of when we issue a signal as we can choose to remain in buy or sell mode a bit longer for a variety of reasons, 1) if a trend isn't violated (trend mode), 2) we can also chose to issue a signal on a change of direction in the 5-day line or 3) do it when the daily line crosses the 5-day line.
So - to answer the question that you're most interested in, we remain in SELL MODE and still expect the market to move down into 1/30. However, a continuation of the move lower could take the market down for a good part of February. The action of the next few days is critical to this read - so if you're playing along at home, pay extra attention. Before I get too far into my outlook, it's important to run through some technical indicators and get a better feel for the market. So let's look at what our charts say.
Message From The Markets
Market action is ruled by sentiment and by monitoring market internals and studying sentiment; you can gain reasonably predict future market movements. The basis of the Stock Barometer system is overlaying extremes in sentiment with sound technical analysis 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. Follow along with my charts and over time, you'll also learn to understand how to read the markets, which is essential prior to setting up each and every trade.
STOCK BAROMETER CHART
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 is a holiday again. Tuesday is day 11 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
2006 potential reversal dates: 1/15, 1/30 & 2/27. We publish dates 2 months out.
OK, it always seems the next week is huge, and this coming week is no different as the action into 1/30 should counter the action into 2/27.
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.
2005 Potential reversal dates based on 'other' cycle work were 12/27, 1/25, 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).
- 1/30 Projected Next BOTTOM Due (11 days)
- 1/12 TOP (6 days)
- 1/04 BOTTOM (31 days)
- 11/29 TOP (28 days)
- 10/19 BOTTOM (10 days)
- 10/5 TOP (4 days)
- 9/29 BOTTOM (8 days)
- 9/19 TOP (14 days)
- 8/29 BOTTOM (21 days)
- 7/30 TOP (18 days)
- 7/5 BOTTOM (21 days)
- 6/3 TOP (22 days)
- 5/3 BOTTOM (3 days)
- 4/28 TOP (5 days)
- 4/21 BOTTOM (5 days)
- 4/14 TOP (11 days)
- 3/30 BOTTOM (21 days)
- 2/28 TOP (1 day)
- 2/25-3/1 BOTTOM (5 days)
- 2/17 TOP (1 day)
- 2/16 BOTTOM (5 days)
- 2/9 TOP (10 days)
- (all historical dates are published on the home page of my site)
The following work is based on my price based spread/momentum indicators for the USD$, XAU, GLD and TLT. They are tuned to deliver signals in line with the Stock Barometer. Combined with up/down indicators and you have a powerful tool for pinpointing market reversals.
Gold (GLD:AMEX & INDEX:XAU.X)
I monitor Gold in the form of GLD and the XAU as well as the US Dollar Index as a general guide to the overall health of the US Economy and the markets, as well as to assist us in the entry of positions in our Gold Stock Service.
Bonds (Amex:TLT)
I include bonds in our studies and use Lehman’s 20 year ETF, as the direction 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
We remain in Sell Mode looking for the markets to move lower into 1/30.
I see the following situation setting up. The markets move sideways on Monday, maybe drift a little higher or lower as the big money (not me) sits on the sidelines ahead of this decision. Technically, the candle from Friday is almost a shooting star - which just suggests that the high will get tested before prices retrace. This is a 2 day Fed meeting starting on Monday. So the Fed won't give his decision on rates until 2/1. And the president is giving his state of the union address on Tuesday night - which shouldn't really move the market unless he says something goofy (and there's always that potential). So if the market moves lower into 1/30 to 2/1, we could still be set up to rally. So don't interpret that we're remaining in Sell Mode as me being totally bearish. I'm not. In fact, I would love nothing more for the market to take off to the upside here.
But we also talked about the potential for this cycle to invert, i.e. 1/30 to mark a top. And with the market bouncing on Friday it increases that likelihood. But it's important to understand that we're not there yet. There are a few more pieces to this puzzle that need to play out before we have a good handle on the next move. First and foremost is the barometer changing direction and the market breaking out of this down trend.
So while I hate to talk out of both sides of my mouth, but we could either see a bottom similar to what we saw in October - with one huge sharp down move before the advance. Or we could see a top similar to what we had in the middle of last January. We just need a few days to be sure. I wish the market could give us a clearer outlook, especially when I'm writing my weekend update - but markets don't always accommodate us and turn on the weekends J
As always, if you have any questions or comments, feel free to email me here at jay@stockbarometer.com.
Regards,
Jay DeVincentis
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