Market Timing – Weekly Stock Market Strategy – June 2010

Weekly stock market strategy updates that went out to subscribers during June 2010. To receive current weekly update sent to your email, click on the FREE TRIAL link at the top of the page.

Weekly Stock Market Strategy Update 6/5/10

Well my rare but reliable ADX signal is not looking so good. Maybe you were fortunate enough to wait until the final hour of trading on Thursday. If so, you may not have taken the trade. That is usually how I place the trades but since I had back tested this ADX system with a buy stop that is how I placed the trade. Since I suggested this only as a more aggressive trade, hopefully most of you did not take it. I will exit this trade at 104.25 on a stop.

So much for a cascade of buy signals following the ADX buy signal. The buy stop was barely breached on Thursday morning before the selling began. A weak afternoon rally could not even reach the stop level. Friday’s weak employment report was all that was needed to start the sell off. It appears the 104-105 level on the SPY will have to be tested a third time. The more the market sells off the more bullish I am getting. It just becomes a matter of waiting for the market to stabilize and start generating some buy signals. However, just because sentiment has declined and the market has sold off, does not mean we can’t see a prolonged decline.

Weekly Stock Market Strategy Update 6/12/10

The market has found a range that it is comfortable in. Until the SPY has two consecutive closes above 111.50 or below 104.00, it is not entirely possible to no which direction this market will trade in the intermediate term. I think the odds are slightly in favor of a bullish move out of this range. Currently however, it is to early to make a trade based on that assumption. We will have to watch and wait.

Weekly Stock Market Strategy Update 6/20/10

Thursday and Friday the SPY managed to close above 111.50, which I had pegged as resistance. The market is now overbought and looks like it needs to take a breather or sell off a little before it can work its way higher. I have not seen any new buy signals but they could come when the SPY takes out the high of 111.73. There is nothing else to report this week. If signals are generated I will send out a midweek update.

Weekly Stock Market Strategy Update 6/27/10

The SPY traded down Monday thru Thursday. The sell off was a little more than I had anticipated. Now the SPY is oversold and Friday’s consolidating price action indicates that a close above Fridays high could be at least a decent short term buying opportunity. Looking at the charts this week, the possibility of breaking support near 104 on the SPY, needs to be considered. The weekly chart looks as if a Head and Shoulders formation might be in the making. If we do manage multiple closes below support at 104 the target would be around 87. That is quite a sell off from current levels and is by no means what I expect to happen. However since there is such strong support at 104 and the SPY closed near 108, the downside risk is somewhat limited at 4%. If you’re wrong you risked 4%. If you’re right this may be the best buying opportunity for the next three months. This suggestion is based purely on technicals and is not generated by any systems that I watch. For that reason I will not track this as an official buy signal.

Market Timing – Weekly Stock Market Strategy – May 2010

Weekly stock market updates that went out to subscribers during May 2010. To receive current weekly update sent to your email, click on the FREE TRIAL link at the top of the page.

Weekly Market Update 5/2/10

Some volatility has found its way back into the market. We have not seen two large down days this close since the decline that lead to the February low. Momentum is waning; the market has basically been flat over the past three weeks. Where it goes from here is anybodies guess but with market sentiment at bullish extremes this is probably not a bad time to tighten stops.

It appears Greece is close to a bailout from the EU and IMF. The question is how will the markets react. Will they see it as bandage when a tourniquet is needed? There is a troubling trend I am starting to see emerge as it is occurring in Greece and here in the U.S. As governments struggle to balance their budgets during this prolonged recession, they are starting to get resistance from labor groups and those reluctant to seeing a cut in wages or benefits. Those with the biggest budget problems could face financing issues just has Greece has.

Midweek Update for 5/6/10

In case you have not heard the market took a serious drop today. At one point the DJIA was down 1000 points, before closing down 347 points, or –3.20%. The jury is still out on what caused the sell off, but two primary factors are the Greece bailout and error in a Proctor and Gamble trade. I am sorry but something is seriously wrong when a trade error can cause a 1000-point decline.

I am glad that I have been 75% cash for the time being but questioning whether I should have had stops on my Quarterly ETF portfolio. I think in the long run the quarterly rotation will keep us out of any prolonged declines, and that is why I am hesitant to place any stops on this portfolio. The portfolio is down 6 percent for the quarter, with most of the damage in SCZ, which is of 10%.

The charts look pretty scary. Today’s price action basically even if it was a result of trade error is a bit bothersome. On more than one occasion I have seen the markets trade back down to the trade error lows. I am not sure why, maybe the markets feel a need to test that level again. Anyway if that happen the DJIA will have to trade down another 600 points before it can stabilize.

Weekly Market Update 5/9/10

Friday came and went and there still does not seem to be a consensus as to what the hell happened on Thursday. In November 2007 the NYSE ended trading curbs, which limited program trading. Prior to that date program sales could not be placed on a down tick if the curbs were in affect. Now only circuit breakers remain and they do not kick in until the DJIA has dropped 10% or 1050 points. Today a lot more trading occurs off the floor of the major exchanges and on the electronic exchanges. There are no consensus rules, between the various exchanges, that handle an event such as the one that occurred on Thursday. In my personal opinion some sort of circuit breaker at -5% and program trading limits at -3% would be more appropriate. Sometimes things happen in the market that no one can explain and, a temporary halt to trading to figure out what is going on, is not a bad idea. Another possibility is that sense market sentiment was so high; there were probably a lot of stops in place that started getting triggered, as the market began its fall. Something like yelling, “fire!” in a crowded theatre. I would like to think that the SEC would come out, before the end of the week, with some safeguards to prevent this from happening again. This is a real blow to the confidence that people have in the markets something will have to be done ASAP.

Until there is some stability to the markets I do not think I will be recommending any trades. The charts are just plain ugly. There is a void between the Friday lows and Thursday lows and it will be hard for me to put faith in any attempts the market makes at forming a bottom until the Thursday lows are tested.

Weekly Market Update 5/16/10

The week came and went and still there is no consensus, on what caused the May 6th sell off. I find that somewhat disturbing. What I find even more disturbing however is, that the SEC has not come up with any plans for trading halts to prevent future declines of a similar magnitude.

From a technical standpoint the averages managed to rally through Wednesday but rolled over on Thursday and Friday. The high this week provide a price level that when breached to the upside will begin to give some comfort to some stabilization in the market. I am not saying that is what I expect. However, until The May 6th lows are tested or the market can make a series of higher highs, we are kind of in a no mans land, with no clear intermediate term direction.

Weekly Market Update 5/23/10

The SEC is still investigating the May 6th “flash crash.” Several factors appear to have contributed to the sell off. The factors appear to be, inconsistent rules among the various exchanges, speculation in the futures market and, the lack of participation by market makers. It appears that the market makers were not able to step in and be the buyer of last resort. Maybe that is because so many went out of business as the electronic exchanges took volume from the physical exchanges.

The markets took another big hit this week. But as I have been saying the last few weekends I felt there was a good chance the May 6th low would need to be revisited. The markets tested that low during Friday’s open then proceed to make a very strong rally to close up 1.5% for the day. If the markets have worked out there issue with the Euro, I think there is a very good chance this is a tradable low. Most of the trading strategies I watch will require a decent bounce from this level before triggering a buy signal. But the more aggressive subscribers could look to go long the SPY if in the final hour of trading the SPY is trading over 110. The market should be able to manage at least a two-week rally from these levels. I will have to wait for more signals to come in before I can get more confident about a longer-term scenario.

Weekly Market Update 5/30/10

A rare but reliable technical signal has set up this week. This signal is 9 for 9 dating back to 2000. Simply put when the 14 period ADX goes over 40 buy at a price of 2 times the 21 day average true range added to the 5 day low, then hold for 15 trade days. The buy price would be 110.90 on the SPY. Keep in mind this is a short-term signal and I would not recommend it for your 401k or retirement account.

We did not get the close over 110 on Monday I was hoping for. As bullish as sentiment was last month it has done almost a complete reversal. This could mean we are getting close to some buy setups. The market has sold off but now it will have to show some strength over a period longer than a couple days. If we have seen the worst of the selling, the ADX signal could start a cascade of buy signals. Only time will tell.

Market Timing – Weekly Stock Market Strategy – April 2010

Weekly stock market updates that went out to subscribers during April 2010. To receive current weekly update sent to your email, click on the FREE TRIAL link at the top of the page.

Weekly Market Update 4/4/10

Most of the markets finished up just shy of 1% for the week. Not
much else has changed. I think the upside from her is limited and
risk of entry from this point is to great.

Weekly Market Update 4/11/10

The markets have continued to rise and more sentiment indicators are
reaching extremes. Long entries at this point carry additional risk.
That being said, Barron’s Quarterly mutual fund report is out this
week. So, if you plan on following the Quarterly ETF Strategy, Monday
will be the day to place your trades. Based on the system I sent to
you in the Quarterly ETF Strategy email here is the allocations for
this quarter:

Quarterly ETF Strategy Allocation

25% IJT-iShares S&P Small Cap 600 Growth
25% IJS-iShares S&P Small Cap 600 Value
25%. EWJ-iShares MSCI Japan Index
25% SCZ-iShares MSCI EAFE Small Cap

I am allocating 25% of my total portfolio to this strategy so I will
be putting 1/16 of my total portfolio into each of the four ETF’s
listed above. By the way, as of Fridays close, this strategy was up
5.11% for the first quarter.

Weekly Market Update 4/18/10

The markets finally took a 1% hit on Friday when the SEC brought
fraud charges against Goldman Sachs. I would like to see some of the
Wall Street firms pay for bringing our economy to the brink of
financial disaster. Usually when they make a mistake the damage is
limited. This time they almost brought down the entire system. That
being said it doesn’t sound like the SEC has much of a case.
Brokerage houses quite frequently act as the middleman, and that
seems to be what they were doing this time. The timing of the
charges is quite suspect. Bank of America and Chase both reported
quarterly profits over $3 billion, while the senate is getting ready
to vote on a Financial Reform bill. I think this bill is virtually
guaranteed to pass. Even though all the republicans are apposed to
it, I don’t think this is the hot button topic that Health Care was,
and most Americans are probably not apposed to it.

From a technical perspective this could be the catalyst for at least
a minor retracement in the markets. The markets have been overbought
from both a technical and sentiment perspective for the past few
weeks. It is possible that the profit taking could continue this
week.

Weekly Market Update 4/25/10

Well the Goldman Sachs charges do not appear to be the catalyst I
was hoping they might be. The market shrugged of the news and
performed strongly this week and nothing much else has changed.
Market sentiment is still extremely bullish. The small cap portion
of the quarterly ETF portfolio was up over 4% this week.

Market Timing – Weekly Stock Market Strategy – March 2010

Weekly stock market updates that went out to subscribers during March 2010. To receive current weekly update sent to your email, click on the FREE TRIAL link at the top of the page.

Weekly Market Update 3/7/10

It was a very good week for the markets. The SPY broke through 111.60
on Monday, and finished the week within 1% of the highs for 2010. As
I said last week once 111.60 was taken out the next logical target
would be the highs made in January. I was surprised the move came as
quickly as it did. It pains me to be on the sideline during a week
like this. I think the upside this week is probably limited. The SPY
is extremely overbought. The VIX has reached a level that has not
been seen since May 2008, shortly before the market peaked. The rally
this week came on lower than average volume. I think the rally this
past week was more likely desperate short covering than aggressive
new buyers.

Weekly Market Update 3/14/10

Another good week for the markets and I am on the sidelines. I got a
buy signal on March 4th. Unfortunately I had gotten used to being
able to get in on a retracement after this particular signal is given.
We have yet to see that retracement. My bad and I am sorry we have
missed this move.

This does bring up a good point regarding diversification. It is
never a good idea to have all your eggs in one basket. We usually
think of diversification in terms of having multiple stocks instead
of just a few. This is why I trade ETF’s like the SPY. It can quickly
become a daunting task trying to keep up with enough stocks to get a
fair amount of diversification. However there is another form of
diversification I want to discuss with you and, that is system
diversification. The SPY system I follow did an excellent job of
being out of the markets when things got ugly. But it is one system
and no one system is right 100% of the time. That is why I think it
is best to diversify with multiple systems that have worked well over
time and are not overly optimized.

I have finished the research on a quarterly ETF system that over the
last 10 years would have doubled your money. I will be adding this at
the end of the quarter for some added diversification.

Not much to say on the markets this week. Unfortunately, I cannot in
good conscience recommend buying the market when it is this overbought.
I will be waiting for something to upset this trend. If congress
manages some resolution on health care reform, that could be the
trigger. I will keep you posted.

Weekly Market Update 3/21/10

Well the market finally ended, on a daily basis, its streak of
consecutive up closes. It was a very impressive run. Bullish market
sentiment has reached a level that should limit any advance from
here. The market should be sideways or down over the next few weeks.
If we get a pullback it could give us a buy setup.

The potential market reaction from any health care reform passed is
the real wild card here. Typically the market seems to know all that
is knowable. The exception would be natural and man-made disasters.
The “buy the rumor sell the fact” saying is what keeps coming to
mind. What I mean is the market has rallied to this point. I think
any sense of finality in regards to the healthcare reform, could be
a turning point.

Weekly Market Update 3/28/10

Well the market continued its climb this week. Not even major
healthcare legislation could stop it. Well if I had not been out of
the market yet I would now be looking for an exit. Momentum has
definitely slowed and we are starting to see technical indicators
set up for a sell signal. The MACD has turned negative for the first
time since February 16th. The RSI indicator is showing a bearish
divergence. More and more sentiment indicators are reaching bullish
extremes. I know last week I said the market should be sideways to
down over the coming weeks. Going into this past week I would have
given the market no more than 2% on the upside. I would be very
surprised if the market is up over 1% at any point this coming week,
and I think we will see negative returns for the week.

Market Timing – Weekly Stock Market Strategy – February 2010

Weekly stock market updates that went out to subscribers during February 2010. To receive current weekly update sent to your email, click on the FREE TRIAL link at the top of the page.

Weekly Market Update 2/6/10

I recommend going 60% long on
the open Monday if the SPY is trading above 106.66 but below 107.73.
Once filled place stop at 104.25.

My thoughts on this week’s market

As expected the market managed a modest bounce early in the week. For
those inclined it set up a nice opportunity to sell on Thursday. That,
however, is not the purpose of this newsletter. The market continued
to sell-off until the final hours of the week. The sell-off that
began on Thursday seemed to be brought on by fears of possible debt
defaults by a few of the smaller members of the European Union, and
fear about pending jobs data. What brought the market from -1.75% to
close with a modest gain on Friday, is a little less certain. It
appears that the rebound was technical in nature. Be that as it may,
it is a positive sign that investors became less fearful of holding
stocks over the weekend. I think the lows put in on Friday could
possibly be at least an intermediate term low, that should hold for
a least a month.

In previous emails I have mentioned my use of the 3-period RSI on
daily charts. I like to use it on the weekly charts as well. The
3-period RSI closed below 20 on Friday. This sets up what I believe
is a good point to buy on the intermediate time frame. The last such
opportunity came in July of last year. I am recommending a buy on
Monday morning if the SPY is trading above Fridays close at 106.66.
There is a real possibility the market could gap open significantly
higher. If the gap up is over 1% or 107.73, I would recommend
waiting for a better entry. Friday’s low of 104.58 should hold if
this pullback is over.

Midweek update 2/8/2010

The follow through I was anticipating has not materialized. If you
place your trades for the close, do not place your trade today. If
you did buy this morning as the SPY traded briefly above 106.66,
exit the trade on your first profitable close.

I apologize I was expecting more follow through on the open. A lack
of follow through changes my outlook.

Weekly Market Update 2/14/10

I had recommended going long
last Monday but the opening was not as strong as I had anticipated.
For that reason I sent out an email Monday suggesting no entry or
getting out on the first profitable close. The first profitable close
would have been Tuesday, so thankfully nobody should have taken a loss.

My thoughts on this week’s market

As you know I had expected some follow through from the market
activity of Friday February 5th. When the Mondays open looked as
though the open would be unchanged to modestly higher, I became
suspect. If the market couldn’t pick up any more believers over the
weekend I figured the upside this week would be limited. That is
exactly what we got. The market has seen some serious technical
damage over the last few weeks. At the very least we should see a
test of the February 5th lows and we could possibly see a move lower.
For that reason I think it is best we sit on the sidelines and wait
for a better entry.

Weekly Market Update 2/20/10

The markets had a good week this week. Even though it looks as
though we may have seen a tradable low, I am not convinced. I don’t
know about you, but I am hearing “trillion dollars,” with a little
too much frequency. This week’s edition came in the form of the Pew
Report. I will some it up for you, our states have a trillion dollar
gap in pension liabilities. The states can’t print money, so they
will have to raise taxes, reduce liabilities or both. Raising taxes
and reducing expenditures do not sound like ways to get out of a
recession.
From a technical standpoint the markets are now overbought. The
question is, is the market in a trading range, overbought in a new
down leg, or still in an uptrend? I think it is one of the first two.
If we are in a trading range it is most probably bound by January
19th high and the February 5th low, and the market would probably be
stuck in that range for 4 to 6 months. I however think it might be a
little more likely that we are currently overbought in a new down
leg. If I am correct we probably won’t see the markets trade much
higher than Fridays close this coming week.

Weekly Market Update 2/27/10

It was a relatively tame week. The SPY’s range for the whole week
was slightly more than the 2%. The highs from last Friday did hold
as predicted. The market has come off overbought levels and where it
goes this week is a little less certain. There is resistance at
111.60; we could test that this week. If we see a close over 111.60
then the January highs near 115.15 would probably be the next target.
On the other hand if the market is unable to close over 111.60 this
week, the February lows are probably going to be the next target.
Overall it is a bit less clear how things will pan out this week.
With a unemployment report coming Friday, it is possible to have
another tame week.