Saturday, February 9, 2008


I wanted to send this chart out again, not as bragging rights, but simply to show you how some of the most simplistic tools can have incredible results.

This was nothing more than us looking at something that has occured in the past (Double Tops) and finding a consistent pattern that it follows. In this case, the monthly trend in interest rates had been profoundly impated by the double top pattern and thus lead us to our forecast of much lower rates.

By the way, this forecast was made in the face of all the so called experts talking about sharply higher rates for the future, so once again by taking the low road with some technical confirmation of course, we were able to make a fairly good forecast.

So keep this pattern in mind for interest rates and don't be afraid of monthly charts either.
It is from the monthly charts that all other analysis follows so don't think they are far to long term.

With all of thaat being said, tell me where rates have the greatest odds of trending over the next 12-18 months based upon this monthly chart.

I am posting the Fear Index (RED CHART) again as I realize there are many long term investors who only check the blog on the weekends.
This chart, just this week, confirmed the most recent S&P 500 lows at 1270 as a major intermediate term low, so once again our buy weakness model gets more confirmation of being correct.
As you can also see, the downside action of this past week had no impact on this models call of a confirmed bottom.
This is a long term sentiment chart I keep and I post it from time to time in order to illustrate how most stock investors have continued to climb a wall of worry since the tech meldown in 2001.
Most continue to expect the other shoe to drop at any moment and thus create a long term enviroment that is safe for stock investment.
This model is also one of the reasons I have not and will not jump onto the Big Bad Bear market band wagon that seems so popular right now. Now, if I was to see other clear evidence of a bear market, then perhaps I would give this model a little less weight, but I see a buying point here, not a bear market.

Below is a cummulative chart of NASDAQ momentum and this too has confirmed an intermediate term bottom. It even through in some positive divergences for good measure.

So, while the weekly chart shows the great week we had followed by this past week. It is most likely that this past week was the test of the lows that is not only very common after extensive declines, but also very healthy.
Granted, the weekly MACD has yet to confirm a new trend being in place, it really is to early in this phase to expect a lagging indicator like the MACD to give such an impression. If we continue higher I would expect the MACD to confirm within the next couple of weeks.

Friday we had one of our favorite patterns!
An inside day with a down close. Add to this the fact that Thursday was a ned 10 day low and you have the makings of a very positive pattern, not only the next day but also 21 days later.
This tells us that we should move higher from here and perhaps in a sharp manner.

So while we continue to get bombarded with all the bear market camp analysts and more come out each day.
Our work dictates 2 things.
1) We are NOT in a bear market and more than likely will not enter one
2) The buying weakness mode remains the most prudent course of action.
I realize it is a little nerve shattering to purchase equities after the decline we just experienced.
I also realize it is difficult to ignore all the doom and gloom that seems to get louder by the second.
However, all of our models are calling this move lower nothing more than a sharp correction within the confines of a continued bull market.
Lets all have a profitable week coming up and if you have not checked it out yet, swing on by my Day Trading site
We have been doing quite well and our audience continues to grow.
Have a great Weekend and please don't forget to vote the BlogElites link at the top of this blog each and every time you visit the blog.
For those of you who subscribe to the blog, if you would be so kind as to visit the blog each day and simply put your vote in I would really appreciate it.
One more thing.
The spell check has not been working on the editor and I am a horrific speller, so I apologize ahead of time for any misspellings.

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