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.

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.

What I have done with this is applied a 14 period RSI to a weekly chart of the SPY. SPY is ETF of the S&P 500. A long signal is generated when the RSI closes above 60 for the week. We will remain long until the RSI closes below 40 for the week. Signals are generated on Friday and trades were taken at the open on Monday. I realize that in most 401k accounts trades are done on the close. This should not significantly change the results.

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SPY CHART W/ RSI Trend Following System

 Trend Following System Trade Dates 

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