Equity Market Comment - Something For All Time Frames!!

A very non typical day today in the markets, as Monday usually exhibits the highest volatility out of all the days of the week and today was very quiet indeed.

The market continues to exhibit signs of putting in a short term high as both of the charts below will illustrate. Short and Intermediate term swing traders should be flat at this point and upon a confirmation (Stochastics Cross) of a change in trend should look to begin their short selling operations.


Very much like the NASDAQ, the SPY is even more so showing signs of a rally that is very tired and in need of some consolidation. The tight range today, especially on a Monday is a precursor to a possible stretch of higher volatility and most likely to the downside.

Aggressive traders can look to purchase SPY Put options with the intention of a short holding period, therefore it will not be necessary to pay the extra premium for June puts, the May puts should serve our purpose just fine.

The possible decline that is on the horizon is also going to be very important for long term traders as well, as the nature of this market move is going to send a very clear message as to whether or not a new leg of the bear market is underway or if what we just completed on the upside is just the first up leg of two.

Short Term Traders Alert.

For those who swing trade, there is some early evidence of a potential short term top being put into place on the NASDAQ and the same would hold true for the S&P 500 cash index as well.

The Hourly chart below shows the markets reaction to the MACD indicator moving above 20 and then turning down. This is illustrated by the blue lines I have placed on the chart. Currently the MACD is above 20, but has yet to turn down so we have not been given a full sell signal on this model, but it is in an area that is close enough to warrant attention.

The second item to notice on this chart is the last of the downside gaps that has yet to be filled.
2590 is the Gap Fill, and this gives us a heads up as to the last level before the market will be back in balance and a major trend can find its course.

LETS TAKE A LOOK AT THE LONG TERM FOR EQUITY PRICES

BELOW IS A CLOSE-UP OF THE CHART I WILL BE DISCUSSING. AS YOU CAN SEE, WE CLEARLY ARE AT AN AREA OF MAJOR RESISTANCE.


We have reached a fairly critical juncture in the potential for stock prices to continue higher or perhaps falter and continue what continues to look like a bear market.

The rally thus far off the most recent lows has surpassed my first counter-trend rally target of 1380 and is making its way towards perhaps the most logical point for a bear market rally to conclude, the 50% retrace level at 1417. It is this level that we need to watch very closely as 50% in any market or stock is a very powerful number.

You can see also that we are testing the resistance of the 90 week moving average with has been quite an essential point of support and resistance dating all the way back to the start of the major secular bull market in 1982.

With these two key levels in hand there is no question that the market is at or very near a make or break level and while the action has looked very reassuring on the daily charts, the weekly charts show us we are at a price level that we could see a complete reversal or at least some type of correction or consolidation. Odds do favor a move to 1417 on the S&P 500 so it really is at this point that we need to pay very close attention to detail.

I remain 65% invested in equities until such a time that we either get clear cut evidence that a new leg in the bear market is about to begin, or that after a pull back of sorts, stock prices will continue to move higher. I do favor a push up to 1415-1425 on the S&P 500 followed quite quickly be a sizable decline, but able to keep the most recent lows at 1260 in tact. From there I would be looking for one final push higher going as far as or near new highs in the upper 1500's.

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The main reason I favor a pullback followed by another thrust higher is the simple fact that there simply remains far to much pessimism in the market place as the % of Bears continues to out number the % of Bulls and this bodes well for a continuation of higher stock prices.

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It will be the developments over the next few weeks that will dictate our market posture probably for the next 12 to 18 months, so for long term investors especially, this is a very crucial time in protecting their gains.

Lapse In Coverage

My apologies for the lapse in coverage of the financial markets over the last week or so.

I have been concentrating my efforts on the new Day Trading Model and it has eaten up much
of the time that I have devoted to the blog.

The model is just about complete however so I will be updating the blog this weekend and also into the foreseeable future.

Thanks very much for your understanding.

NEW 3 DAY TRADER BUY SIGNAL

The 3 day cycle gave a buy signal at the close today.
The option account is long 4 April 135 SPY calls @ 2 1/4
Stop Loss - 1 5/8

The April 135 Calls should be your option of choice, if you are to follow
the 3 day cycle.

Currently these calls are 2 1/4 by 2 5/16.

There is some strong potential for quite a sharp rally here.

Remember to always use a stop loss for protection.

Equity Market Comment - 4/8/2008

The equity markets have gone virtually nowhere over the last 5 trading days and volume has been tapering off more and more each day.

If the market had continued to work its way higher with this decrease in volume then we would have a very bearish pre-cursor to some downside action, but being as we have been in a consolidation mode, it is nothing more than a neutral reading as the market continues to digest the most recent gains.

There continues to be a very large supply of put option buyers out there and this bodes well for a continuation of the rally we are currently in. Quite possibly we could see a breakout of sorts to the upside once this consolidation phase is over. Today was one of the narrowest ranges in a very long time and this is a sure indication that there is about to be a substantial move in the offing. However, it is difficult at this juncture to determine if this move will be upwards or downwards. If you held a gun to my head I would have to answer that the next move should be sharply higher and here are a few reasons why.

1. The quiet, low volume atmosphere is indicative of a consolidation phase and typically the market will continue in the direction it was going once the consolidation is over.

2. The 3 day cycle never really gave us much to put our teeth into on this last sell we had and were stopped out of, which indicates some underlying strength.

3. There remains a fairly large audience towards the short side of the market, especially in the option pits. This continues to warrant higher stock prices.

4. The old adage "Never Short A Quiet Market" has been proven to me over and over again and I simply cannot ignore this axiom. While most of the so called conventional wisdom on wall street is pure Bunk, this particular one has stood the test of time.

I remain 60% allocated towards equities pending more evidence of the health of this rally and until proven otherwise this rally is nothing more than a bear market rally at best. However as I have stated before, it still has potential to move back into the 1500's on the S&P 500.

Lets listen to the market and make our next move from there.

I will be updating the 3 cycle either tonight or early tomorrow morning.
We were stopped out of out last Put option position for a loss.
Currently we are right on the line for entering call options and this could come as early
as Wednesday Morning so stay tuned.

NEW TRADE FOR THE 3 DAY CYCLE

Equity Market Comment - 4/3/2008

A rather directionless day today in quite a tight range.

It really was not even a good day for daytrading as the moves were very hard to gague and the consolidations were very unpredictable.

I did get a signal to buy Put options for the 3 day cycle account and that was done at the close today. I purchased the April 138 puts at 2.80.

Take a look also at the hourly chart below and you can see that the odds are really starting to favor a pullback of some sorts.

Really no change in my equity market opinion as we continue to wait in order to increase our exposure to stocks.

Broker Dealers Look Like They Are On The Verge of A Monster Rally

Below is the predictive price model of the Broker Dealer index and as you can see by the black bars, the model is calling for a very hefty move higher over the next 3 months.

It is no secret that these stocks have been beaten to a bloody pulp and some of them to levels that simply were not justified. Well the market has ways of fixing these pricing discrepancies and in this case it should be higher prices.

I am trading this with call options and not the actual stock.
I am buying Merrill Lynch call options as it seems to have the best odds of performance.
I am looking at the July 45 calls, which are trading at 6.70 right now. Therefore it will cost you $670 to control 100 shares of the stock as opposed to $4500 to buy the stock outright.
I will be purchasing 10 contracts in order to control 1000 shares and based upon my fill price I will be placing a protective stop order at 25% under my execution.

With the 3 day cycle starting to roll over I may wait until a small corrective move takes place, but I will keep you informed.

Equity Market Comment - 4/2/2008

The lack of follow through today, while not exactly what I wanted to see, still was not a huge negative. This is because there really was not much downward pressure today and actually as I watched the futures trade today there was some fairly aggressive accumulation going on.

Now the chart pattern that we currently have is a crossroads pattern, in other words, the market could go one way or the other from here. I am favoring a small continuation of the rally for a couple of reasons.

First, the major momentum models actually ticked up today and kept the upside inertia in tact.

Secondly, Thursday is very typically a decent day for higher stock prices and even more so when Wednesday is a down day.

Remain with the conservative 60% allocation and for those of you who are trading the 3 day cycle with me, we can look for a place to buy in the money SPY puts tomorrow if we see higher stock prices.

Equity Market Comment - 4/1/2008

All you really can say about the price action today is WOW!
I had anticipated a counter trend rally, but I would be amiss if I was to say that I expected a move of such magnitude.

However, I wish I could say the same thing about the volume.
We remain in a period of slow volume and this, while not an all out negative factor is also
not one that we can chalk up into the plus column.

The pattern we have been getting into lately is finally what the norm is when the market is in a healthy phase and that is follow through in prices the next day after a move like this. We had this pattern over the last short term rally we had and if we can muster this same type of market action tomorrow then it will be a very optimistic sign for the intermediate term.

We have strong resistance on the S&P 500 at the following levels:
1379
1416/1415
1454
1482
1507

From here we need to see how the market behaves with the potential follow through and should we get this follow through then we can expect a consolidation of 1-2% over the next 3-5 days.

Remain 60% invested in stocks and after the next pullback we will assess if our allocation is going to increase or not.

Equity Market Comment - 3/31/2008 - End Of The Quarter

The ultra short term counter trend rally seems to be right on time as the market moved modestly higher today on once again diminished activity.

The movement today may have taken care of 2 out of the possible three legs of the move higher.
Therefore I will be looking for one more push higher somewhere in the area of 1336 to 1341.
From these levels I anticipate the final leg of the corrective phase and a return to the rally phase that quite possible could test the old S&P 500 highs in the Mid to Upper 1500's.

Currently I remain with a very cautious 60% allocation to equities and will begin to increase that exposure upwards should the market follow a general outline of health.

I did get a 3 Day Cycle Buy Signal today, but being this far into the cycle simply does not justify the risk when measured against the reward. This account remains flat and awaits the next Sell Signal which could come as soon as Tuesday.

Weekend Equity Market Comment - 3/29/08

The end to a fairly volatile week came to a close Friday with a very strange grinding down day that could not really be classified in any measurable.

It is days like these that many times are a pre-cursor to a shift in the short term trend.
Because of this market action on Friday, I took my profits on the put options we had purchased for a little better than a 20% return in 2 days. I have yet to get any type of signal to buy call options so I remain flat in that account.

So far, the decline we have seen is quite normal and nothing that would give the impression that the market is on the threshold of another sharp push lower. However, we need to get the complete picture of this correction in full and as of now we are about 1/3 through it.

It would not surprise me to see 2-3 days of higher prices followed by the ultimate low for the correction really not very far from the current levels.

I remain with a very defensive 50% allocation to equities, but should this correction turn out to show signs of another push higher after completion, I will be bumping my stock allocation up to 75% for quite possibly a counter trend rally that in essence could test the highs of the S&P 500 at the Mid to Upper 1500's.

Time is going to be the teller of the markets next move, but I am preparing to capitalize on what I feel is a high probability of a strong rally off these deeply oversold conditions we have just experienced.

Take Profit On 3 Day Cycle Put Option

We exited our SPY 134 Put Options at the close Friday for a 20% return in two days.

Not a bad return, but less than I thought would come our way.

The main reason I have decided to take profits on the puts, in what may seem like an early
exit is that the odds of a snap back rally have gotten very high and I would much rather sell out of the position and buy it back cheaper then watch it go back to breakeven.

Presently I do not see a trade with call options to play the snap back rally as the risk level remains too high to purchase call options. What I will be looking to do is to get back into the April 134 SPY call options on any strength we may see over the next 1-3 days.

Therefore, the 3 Day Cycle Option Account is Flat.

Keep The Analysis Coming Your Way

CAST YOUR VOTE!!

THANKS FOR STOPPING BY AND READING WHAT I HOPE IS INFORMATIVE AND ENLIGHTENING.IN RETURN, I WISH ONLY YOUR ASSISTANCE IN VOTING FOR THIS BLOG AT BLOG ELITES. NOTICE THE LINK AT THE TOP RIGHT OF THE BLOG. SIMPLY CLICK THE LINK, THEN CLICK ENTER AND VOTE AND CLICK ON THE TREND ANALYSIS LLC LINK.YOU HAVE NOW VOTED FOR MY BLOG AND ALSO HAVE BEEN BROUGHT BACK TO THE BLOG TO CONTINUE YOUR READING.THANKS VERY MUCH AND LETS SEE IF WE CAN BREAK BACK INTO THE TOP THREE SITES AGAIN

Equity Market Comment - 3/27/2008

Today gave us some confirmation on the shift of the short term trend from up to down.

The turn down of this model is just one of those confirmations.

The NASDAQ gave a short term sell signal today with the stochastics crossing.

Volume pick up a little as well which also shows some very short term weakness should be ahead of us.

Like the NASDAQ, the S&P 500 also confirmed the short term trend shift to down from up and as you can see on this chart the confirmation came from a multitude of time frames.

On the ultra short term, the action today looks like we may have completed the first leg of this trend shift and from here we might see a little temporary move up and then a final push lower.

As I have stated recently, This potential pullback is going to tell us much about the intermediate term health of this market and what we should be able to expect over the next few weeks.

I continue to support the idea that we have put in a major intermediate term low and upon the completion of this first pullback in prices, I will begin to bump the allocation up to 75% with good quality stocks that look priced to outperform the market over the intermediate term.

I also made the investment into the Chinese ETF's today, so I currently have a 25% stake of the funds segregated for foreign investments in the Chinese Market. I will also be bumping this allocation up also in the very near future.

Many Thanks

CAST YOUR VOTE!!

THANKS FOR STOPPING BY AND READING WHAT I HOPE IS INFORMATIVE AND ENLIGHTENING.IN RETURN, I WISH ONLY YOUR ASSISTANCE IN VOTING FOR THIS BLOG AT BLOG ELITES. NOTICE THE LINK AT THE TOP RIGHT OF THE BLOG. SIMPLY CLICK THE LINK, THEN CLICK ENTER AND VOTE AND CLICK ON THE TREND ANALYSIS LLC LINK.YOU HAVE NOW VOTED FOR MY BLOG AND ALSO HAVE BEEN BROUGHT BACK TO THE BLOG TO CONTINUE YOUR READING.THANKS VERY MUCH AND LETS SEE IF WE CAN BREAK BACK INTO THE TOP THREE SITES AGAIN

Brief Equity Market Update - 3/26/2008

My apologies for the update being so late this evening and how brief it is going to be as time is of the essence right now.

It appears that we have put in a short term high and we should be looking for some lower prices over the next 3 or so days. It is important to keep in mind that this correction we may be entering needs to be rather shallow in order for the market to remain intermediate term healthy.

I have exited all of my short term long positions and will await an erosion in prices before I bump the main equity allocation up to 75% from the current 50% level.

There are also some opportunities here for the Chinese market and some very strong ETF's are how I will play this sector. FXI and PGJ are two of the best to own. I will be putting 35% of my dollars allocated to foreign investments to work in these Chinese ETF's. Currently my foreign exposure is zero, so this will bring the total allocation up to 35%.

On another note, we are officially out of Gander Mountain with a 20% gain in less than a week, so I am quite happy about that. Also, for the aggressive minded, the Three Day Trend Just purchased put options at the close today so take a look at the sidebar for more details about which options I purchased.

So we wait to see exactly the personality of this potential correction and from there we will get a fairly strong idea as to what to do next.

Three Day Trader

The Three Day Trader purchased Put Options at the close of trading today.

Please look to the sidebar under Three Day Trader for specifics.

Vote For Me and I'll Make You Green!!!

CAST YOUR VOTE!!
THANKS FOR STOPPING BY AND READING WHAT I HOPE IS INFORMATIVE AND ENLIGHTENING.IN RETURN, I WISH ONLY YOUR ASSISTANCE IN VOTING FOR THIS BLOG AT BLOG ELITES. NOTICE THE LINK AT THE TOP RIGHT OF THE BLOG. SIMPLY CLICK THE LINK, THEN CLICK ENTER AND VOTE AND CLICK ON THE TREND ANALYSIS LLC LINK.YOU HAVE NOW VOTED FOR MY BLOG AND ALSO HAVE BEEN BROUGHT BACK TO THE BLOG TO CONTINUE YOUR READING.THANKS VERY MUCH AND LETS SEE IF WE CAN BREAK BACK INTO THE TOP THREE SITES AGAIN

The 3 Day Trader - New Feature

I have gotten quite a bit of feedback regarding the need for a more short term approach to the trading portion of the blog and in answer to these requests I added the 3 Day Trader.

The 3 Day Trader looks to capitalize on the ever present, but sometimes elusive 3 day cycle in the equity markets. If you look to the right on the sidebar you will see the 3 Day Trader and the instructions thereof.

The maiden voyage of this new section was very successful with a clean double in our option in just 4 days. Currently the model is flat, but is leaning towards the Buy Puts side. The model will work best if you use at the money or just in the money options. I trade the Diamonds and the SPY options. They are very liquid and have very small bid ask spreads.

Keep in mind that index option trading is a very aggressive undertaking and only true risk capital should be allocated to these signals. We carry a flat 25% stop loss on all the option trades, which means if you get filled on your options at $3 you will put a stop loss in at $2.25 in order to limit your potential risk.

I will also try my best to give intra-day price levels to look for in order to complete the trades, but more than likely these will come near the end of the cycle.

It is going to be your responsibility to determine which options you are going to trade, which as I said before should be right at the money or 1 to 2 strikes in the money.

I will start with a $10,000 account and allocate no more than 10% of the account value on each trade. With the most recent trade that was just completed, our account balance is now $11,000.

Lets see what we can do with this baby!

The Bear Market In The Grains

The first leg of the bear market in the grain complex looks to have completed last Thursday.

There is telling confirmation all over the place that this most recent decline was not simply a corrective move, but in fact the start of a major bear market with the hardest hit to be wheat.

The two largest signs of this being a blow off top in the grains is:
1. The Commercial Traders Have Been Massive and I Mean Massive Sellers of the Grains
2. The Small Investor is Jumping Into The Grains With Both Feet, Just In Time To Get Slaughtered.

So now we look at how to capitalize on this secular shift in these markets.

What I am going to do is let the grains rally from here and look to sell them short on the next indication of running out of gas.

Some prices of interest in the grains are as follows:

Wheat - Sell Short 11.63 , 12.07 with a stop loss at 12.75
Soybeans - Sell Short 13.96, 14.41 with a stop loss at 15.06
Corn - Sell Short 5.43, 5.52 with a stop loss at 5.66

Now obviously as these reach the preliminary targets (lower price targets), I will assess the market and determine if in fact the odds face a reversal in trend. I am not simply going to sell these short at the prices I have listed. The reason for this is quite simple also. With the power of the bull market the grains just went through and the always present possibility that anything can happen, we do not want to be sitting ducks for the bulls just in case they are not done running the prices.

So keep the grains on your watch list, because if in fact the bull is over, we stand to make a mountain of money in a very short period of time with the bear market. Bear markets in the grains, especially the Soybeans, have a tendency to get very ugly on the downside.

Gander Mountain - Tighten the Stop

Gander Mountain has made a very nice move of 30% from our entry at $5 based on the close today.

I am moving my stop up to 5 7/8 to lock in 20%, as we had a bearish close on the stock today.

Moving the stop up will do 2 things for us.
1. Lock in a very nice 20% return in a very short period of time.
2. Allow us to continue gaining on the stock should it prove to work even higher from here.

Equity Market Comment - 3/25/2008

Today could have been nothing more than a consolidation day after some very impressive gains in the market over the last few sessions.

However, with the declining volume as the market has moved sharply higher, coupled with the inside day and an up close, we are starting to get signals of a tired rally and a possible short term decline.

You will notice also that the 3 day cycle mode for option players went flat today from being long calls. We had a very nice double in the call options, but did not want to wear out our welcome and give any of that back. The model did not give a signal to enter puts just yet, but is very close to giving such a signal.

If we are to be greeted by some type of decline here, it is going to tell us quite a bit about the health of this market and whether or not we can label the most recent low as an intermediate term low. Right now all systems remain on green for this past low being a very trade able bottom and until I get a signal otherwise I will be moving the equity allocation up as the market retreats.

Right now, stay with the 50-60% allocation, but prepare your stock, ETF or LEAP option picks for a potential secondary low.

More Evidence Of An Upcoming Rally

The chart below is yet another example of why I believe the market has reached a major intermediate term low and why equities offer very little risk right here.

Gander Mountain - Move Stop

Gander Mountain made a large enough move Thursday to warrant us to move the stop to break even. This will in effect make it a risk free trade.

The other reason I want to move the stop to break even is the long black candle it made Thursday. The stock may have been up 6% at the close, but it was unable to sustain much better gains earlier in the day. This may be a warning signal and it may not be, but it is always better to be safe than sorry.

Weekend Equity Market Comment 3/21/08

This weekend, I wanted to focus on the large amounts of bearish sentiment that we currently are mired with and also typically calls for a major low being put into place.

The chart below is a net difference between the bull and bears using the Investors Intelligence survey as the benchmark. Investors Intelligence is my favorite survey, not just because they are one of the pioneers, but also the fact that their index seems very hard to move in one direction or the other. Therefore, when you do finally see an extreme on this index it has extremely high odds of telling you exactly what either bullish or bearish sentiment has the true hold on the market. If we are bullish and looking for a bottom, then we are looking for a large amount of bearish sentiment and this is exactly what we have here.

Keep in mind that the rally we will see should be nothing more than a bear market rally, but DO NOT underestimate the power of bear market rallies. They tend to offer some of the strongest returns in a brief amount of time. This is one of the reasons that we will be bumping our allocation up in the coming days as we get more confirmation of a major low being put in place.


The Predictive model for the NASDAQ continues to show some moderate rally in stock prices over the next 7-10 days, followed after a brief pull back by a potentially lethal rally. I don't typically like to look anymore than 2 weeks out, but we cannot ignore this model as it has been very accurate and it tells us that the major low has been put into place.

The M.O. model is also in very sold territory and has traveled far enough from its lows to confirm an intermediate term buy signal. This remains very bullish and at extremes such as this the M.O. is very accurate.

Our old Sentiment Friend the 3 line break has also confirmed an intermediate term low and actually has added some extra strength to its signal with a bullish divergence, much the way many of the models have been doing. This model also remains a big plus.

While we have gotten full confirmation that a Bear Market has indeed begun, we can take some solace in a couple of things.

1. We had a very bearish allocation to equities of only 50% to 60% and thus it has taken a considerable amount of sting out of this decline already.

2. We are getting very strong indications that the market has reached a point of major support and a potentially very strong rally is on the way. This is a plus in a couple of ways. It will afford us with some very nice short term trading opportunities and also, it will allow those who remain heavily allocated to equities of say 80% to 100% the chance to either lighten up on these positions or begin to hedge their equities for the next leg down.

Of course I will keep close tabs on the market to make sure that indeed the coming rally is a bear market rally or not. Because as we all know, with the financial markets, anything can happen and probably will. It is just up to us to try and find an edge of sorts and exploit that edge.

I wish all of you a great Easter Holiday and I will be back in the trenches bright and early Monday Morning.

CAST YOUR VOTE!!

THANKS FOR STOPPING BY AND READING WHAT I HOPE IS INFORMATIVE AND ENLIGHTENING.IN RETURN, I WISH ONLY YOUR ASSISTANCE IN VOTING FOR THIS BLOG AT BLOG ELITES. NOTICE THE LINK AT THE TOP RIGHT OF THE BLOG. SIMPLY CLICK THE LINK, THEN CLICK ENTER AND VOTE AND CLICK ON THE TREND ANALYSIS LLC LINK.YOU HAVE NOW VOTED FOR MY BLOG AND ALSO HAVE BEEN BROUGHT BACK TO THE BLOG TO CONTINUE YOUR READING.THANKS VERY MUCH AND LETS SEE IF WE CAN BREAK BACK INTO THE TOP THREE SITES AGAIN

Terra Nitrogen Breaks Down

We had talked earlier about TNH and how it was starting to look very weak.

The decline today put it into a breakdown phase on the weekly chart and a weekly close in this area will bring in a downside target of $50. This target while seeming quite a ways away is more logical than you might think, given the start of a major decline in commodity based companies.

If you own any Corn, Wheat, Coal, Oil or many of the other commodity based companies you may want to take a look at their positions and think about either hedging the position, scaling it back or selling completely out.

Gander Mountain (GMTN)

We have officially gone long Gander Mountain with our limit order being filled at $5.

Currently we are brushing up against the 39 day moving average which is strong overhead resistance. Closing over this level will be a big plus for the long side.

One concern I do have is that this breakout move has been on very light volume and typically it is hard for a stock to hold its higher levels with no volume behind it. Because of the light volume I am running a very tight stop on the trade at $4.70.

Equity Market Comment 3/19/2008

The action we saw today was nothing that took us by surprise as it seems to be a running trend now to have exceptionally strong days followed by periods of weakness. We also need to keep in mind that Futures and Option expiration is here and there certainly was some unwinding of those positions today.

The key at this point, in order for us to label the most recent lows as a major intermediate term low is for this trend of weakness following strong days to no longer occur. As I said previously, keeping these lows in place is key to confirmation of a potential monster rally in the offing.

So, we wait and see if in fact we can snap back from today's decline.

We have a few things on our side which include the strength in and around Easter and we are also nearing the end of the month bump up in stock prices.

So, remain with the very conservative 50% equity allocation I have recommended and we will wait and see if in fact these most recent lows can take hold. There certainly is an abundance of technical and psychological indications that a low of major proportions has been put into place.

Equity Market Comment - 3/18/2008

The turn up in the 9 day moving average of this momentum model is a real plus. Although it needs a bit more follow through to confirm an intermediate term bottom, a move higher in the model such as today is a good start.

The S&P 500 cash index found support at the lower channel line as we talked about yesterday. The move today also enabled the stochastics to not cross at such a low level and remain in an upward trend.

Sentiment on all of the major surveys is right at and in some cases below the 2003 levels when the major low of the tech bubble was finally put into place.

Things seem to be coming together for an intermediate term rally, but the lows on Monday must remain intact.



The NASDAQ produced the most bullish pattern an index or a stock can generate.
The chart below will explain the pattern.

Look for the NASDAQ to lead if we have indeed put in an intermediate term low.



While there still needs to be more confirmation of a major low being put into place, the rally today was very constructive and broad.

I remain with my conservative 50% allocation to equities until we get more constructive confirmations of the low being solid.

CAST A VOTE ON BLOG ELITES FOR MY BLOG

THANKS FOR STOPPING BY AND READING WHAT I HOPE IS INFORMATIVE AND ENLIGHTENING.

IN RETURN, I WISH ONLY YOUR ASSISTANCE IN VOTING FOR THIS BLOG AT BLOG ELITES. NOTICE THE LINK AT THE TOP RIGHT OF THE BLOG. SIMPLY CLICK THE LINK, THEN CLICK ENTER AND VOTE AND CLICK ON THE TREND ANALYSIS LLC LINK.

YOU HAVE NOW VOTED FOR MY BLOG AND ALSO HAVE BEEN BROUGHT BACK TO THE BLOG TO CONTINUE YOUR READING.

THANKS VERY MUCH AND LETS SEE IF WE CAN BREAK BACK INTO THE TOP THREE SITES AGAIN.

China....China......China.... Where Has The Luster Gone

Many of us have been so concerned with the developments in our stock market, that we have begun to overlook some of the opportunities that are beginning to take shape overseas.

Once such opportunity is the Chinese Stock Market, which is going through a major bear market, 40% and counting. If this had been our market, we would be looking at a DOW of 8400.

While there remains a decent amount of risk in Chinese Equities, there is certainly some fairly reliable technical signals that warrant the aggressive investor to begin an allocation process towards the better ETF's that invest in solid Chinese growth.

Currently I am only going to allocate 15% of the monies I have segregated for international investing to the Chinese market, but as we get more confirmation of a major low being put into place in China, this allocation will increase substantially.

It is definitely worth a look and perhaps even an investment.

10 Year Note Trend Shift

Today market the time and price objective for our forecast in the 10 year note.

Notice also that it happened to coincide with a touch on the lower end of the trading channel, which should signify at the very least a leveling off in interest rates, if not an increase of sorts.

The rally in the 10 year note has been quite impressive, as at the time of the forecast I myself thought it to be a bit of a stretch to reach the levels the market was indicating it may well achieve, but lo and behold, here we are.

This area, all the way down to 3% even, may well end the cyclical bull market in the bond market that has been living now since 1981, yes 1981! The bond market has enjoyed a 27 year bull market as rates have moved from a high in 1981 of 15.68% all the way down to present levels under 3.5%. No question that this bull move in bonds will go down in the record books as not only the longest, but quite possible the largest move we have ever seen. Granted, the bond market was caught in a long term trading range from 1993 to 1998 and their returns paled in comparison to that of equities, but it remains impressive just the same.

So, what to do now, with the bonds being at or very near their lows for the cycle.
Do nothing for now as the potential for a continuation in eroding stock prices continues to offer them as a safe have to whether the storm.

The only real reason that I make mention of this milestone and the fact that rates could begin to creep back up from here is the fact that it also coincides with a potential intermediate term low in stock prices. Therefore we could very easily see the monies that have sought the safety and liquidity of the bond market begin to make their way back towards equities. This of course will more than likely be a temporary shift, but one that you need to be made aware of just the same. As there are bound to be very violent rallies in stock prices during bear market rallies, this movement will also be felt in the bond market in the opposite direction.

This potential decline in bond prices as equities move higher will provide those who still have a strong allocation to stocks (80% or more) an opportunity to get into safety once the counter trend rally has run its course and bond prices have settled back a bit.

There is a lot going on right now as we see some serious money shifting from different sectors of the markets. With these shifts will come many opportunities including the collapse in oil prices that is not only a possibility, but a question of when and how far.

A Homebulder Stock That Has Confirmed it's Bottom

As we have been talking about the premise that both the NASDAQ and the S&P 500 have confirmed their transformation from bull to bear markets, it is important to remember that this certainly does not mean there will be no opportunities on the long side of the market.

As this bear market moves forward, there will be periods of counter trend rallies that typically can be very lucrative on the long side because they travel large distances higher in a very short period of time. This allows us to garner some fairly beefed up investment returns, but tie our capital up for a short period of time.

With this preface behind us, I wanted to bring to light a fairly aggressive play, but also one that has the probability edge on our side.

There are 3 very big positives to note on this weekly chart.

1. The price retraced 62% of the most recent advance and bounced.
2. The price is finding solid support on a previous down trending line. (Mega-Bullish)
3. The entire structure of this monster decline has completed a very reliable symmetrical pattern.

While I emphasise that this is a rather aggressive play, I should point out that through the use of risk management, we can turn a risk event into a conservative venture simply by limiting our risk.

Once we get further confirmation of the general market putting into place an intermediate term low, I will be looking at some call options on this particular issue.

Stay Tuned!!

GMTN - Keep it on your Radar

We continue to monitor Gander Mountain for a move back above its long term trend line, which on the second thrust should send the stock sharply higher.

We have out Limit Orders in to Buy at $5, which is about 3/8 above the break out point.
As the trend line moves lower and if the stock still has yet to make its move, we will adjust that limit price to stay 3/8 above the trend line.

Terra Nitrogen - TNH

TNH is on the verge of making a move one way or the other as it breaks out of the triangle pattern it has been tied up in for the last 9 months or so.

While patterns like this are hard to get a handle on which way price will break, the OBV sheds some clues as to what the odds of the break should be and that is down.

So we wait patiently for the stock to perhaps make a test of the lows at $62 and upon what technical shape the stock is in at that point will dictate whether we accumulate shares or not.

No question we have taken a mountain of money out of TNH with our original purchase at $17 and then selling a bit on the early side at $97. Another purchase was then made upon our $62 target being achieved and we scored another double when we parted company with the stock at $140. So we seem to be very in tune with this stocks behavior and another move lower should put us back into the long side.

Keep this one on your radar as when it moves, It Moves!

Equity Market Comment 03/17/2008

Don't even get me started on the Bear Sterns garbage can that was approved today.
I cannot believe how this situation is being handled and I don't even own any of the stock.
I know if I did I would be more irritated then I already am, which right now borders on a loss
of respect for not our markets, but the blatant disregard by the Federal Reserve to even think they had some type of say in the matter. Uncle Ben's respect meter for me has just reached a new low and the size of the negative number is not even measurable.

Wait a minute. Didn't I just say don't get me started and here I am getting myself started.

So lets leave all this behind us now and get into the nuts and bolts of things.
How to make money in the markets.

Today, as noted by the chart of the S&P 500 below, brought the index into the bear market camp with the NASDAQ as we clearly have 5 waves down now with the breaking of the 1272 level. Notice also that the stochastics were unable to reach even a respectable 50 on the last push higher which is yet another sign of a very negative market.

The silver lining here, other than our very light allocation to equities, is the signs of some type of bottom forming in here. We saw a fairly nice reversal today and Tuesday is going to be the tell tale sign as to whether or not we have reached an equilibrium point in equity prices.

If we do get this indication, then we will prepare for the inevitable counter trend rally, which could be quite extensive considering it will be the first counter rally since the inception of the bear market. This potential rally will afford us one lat hurrah in our equity positions, before we put on a 100% hedged position, so make sure you stay tuned.


The Put/Call ratio has reached a point where we typically can expect some type of snap back rally. While there is always the possibility of a back and filling motion over the next few days, this indicator is telling us that for the intermediate term, the worst should be behind us and we should be looking for some signs of a bottom to take advantage of a bear market rally.

Make no mistake.

We are in a bear market and the real blood bath may still be in the offing after the first counter trend rally has run its course.

History has shown us time and time again that with bear markets, we get the initial decline that gets the masses very worried, followed by a very impressive counter trend rally that causes the masses to proclaim the bear market dead. After this proclamation is clearly wide spread we will see typically another decline that is about 162% as large as the first decline. I don't have those numbers in front of me right now, but I am sure you can get some type of mental picture here.

So, for now, remain with the extremely light asset allocation and start to prepare for a potentially strong bear market rally. Don't start buying yet as we still do not have the all clear, but keep that powder dry.

Equity Market Comment - 3/13/2008

Reliable models are starting to show signs of life after death which is always a good short term indication of a possible resting spot.

Option activity continues to show signs of a market overdue for some type of rally or at the very least a 4-7% bounce.

We continue to make some upside progress as the market was able to come back from some very strong overnight selling pressure. This type of move takes more than just short covering to sustain and finish where it did. This action today helps to negate the lack of follow through warning we got yesterday after stock prices could not keep a head of steam off the monster rally Tuesday.

We have some genuine possibilities of higher prices yet again on Friday. The main catalyst of direction tomorrow is going to be the inflation numbers that are to be released. If we see these numbers come in better than expected then we could really get a head of steam behind stock prices. However, the other side of the coin is the complete polar opposite should the numbers come in higher than anticipated.

The Put/Call ratio continues to show very large pockets of traders negative sentiment and thus should help the indexes to roll higher.

The question here for the NASDAQ is whether or not it will continue to follow this predictive model. As of right now, it is almost 95% accurate, which is pretty darn good and we are nearing a point where we should expect some type of counter trend rally.

This question will be answered over the next 3 days and should we see the next 3 days come in very close to this model, then there is without question some pretty strong indications that we may just start a fairly strong counter rally. Keep this in your mind over the next few days.

Daily Equity Market Comment 3/12/2008

The rally yesterday was very impressive to say the least, however, the lack of follow through today confirms the fact that most of that move was Uncle Ben and the FED trying to prop the market up.

Typically these interventions do more harm than good and while I do expect a bit more on the upside, we need to be very careful in here.

The S&P has not completed its 5 wave down structure as the NASDAQ has and remains very vulnerable to any downside pressure that may be exerted. The move off the lows is clearly counter trend and should have a very limited life with an upside target of about 50 more S&P 500 points. This would put the S&P at 1356 basis the cash index.

Should we see the 1356 area coupled with a pre-mature turn down in the stochastics, then we will have a set up to purchase puts and portfolio protection if you wish for the last leg lower before the market finds its first long term level of support. Expect the first level of solid support to come in at the 1226 level on the S&P 500 cash index. From this level and the right environment, it should be the time to increase our exposure to equities for the coming counter trend rally which could be quite strong.

Aggressive traders can look to capitalize on the decline by purchasing the April 128 SPY puts in the .80 to .85 area. Currently they are trading at right about 3 bucks.

5 Waves Down On The NASDAQ

Here is a visual of the 5 waves down on the NASDAQ.

The S&P 500 still has more on the downside to take out its lows at 1265 basis the futures contract, but it seems inevitable that it will.

As I stated, there is a silver lining to all of this and that is the fact that the first leg down is very close to completion. This will afford us the luxury of getting our equity allocation up from 50% to 85-95% for the always lucrative first bear market rally.

The first rally after the initial leg down in a bear market will appear to be a new leg upward and should begin to curb the massive bearish sentiment we currently have. We also should retrace at the very least 50% of the first decline, if not 62% to 79%. This translates into a move of 17%, 20% and 26% respectively. We look for the bleeding to stop on the NASDAQ in the 2160-2120 area.

Equity Market Comment - 3/10/2008

Currently I am unable to post charts so I will do the update today without the benefit of visual aids.

The market continues lower and the volume continues to dwindle, which is a plus for the bulls.

The NASDAQ has taken out its lows and this is definitely a bearish event, as it signifies a 5 wave structure down from its highs in November of 2007. This event officially places the NASDAQ Composite in the bear market category, but all is not lost here. The good news is that with the 5 wave structure down we can now be looking for a bottom to come into place at which time a substantial rally will begin and allow us the window to hedge our already light equity exposure.

I have downside targets for the NASDAQ at 2160, 2140 and 2120 Maximum.

It is at these levels that I will begin to load up on equities for the inevitable rally in stock prices.

The other good news is with our very light 50% allocation to equities, the sting from this decline has been very minimal and upon taking advantage of the up coming snap back rally, we should be in an excellent position to begin our protective hedge process.

So for now, remain with the very conservative 50% allocation, but be ready to bump this allocation up considerably as we draw very close to an intermediate term low!

Equity Market Comment - 3/6/2008

Today was certainly about as far away as what I had anticipated that it was actually the complete opposite of what the models dictated.

However, given some of the characteristics of the decline today, it remains very difficult for me on a technical basis to march into the bearish camp and surrender.

The volume on the decline today was hardly what most supposed bear markets would put out on a decline of this magnitude. The sentiment both on a short term and intermediate term remains very bearish, which is a very strong bullish vote in our corner. The most recent polls amongst all of the monitoring services show a large degree of disparity among the ranks of investors. The levels that these ratios are achieving are the same if not worse than the 2003 low in the market. These levels are not bear market levels and are indicative of a market that is in the process of putting in a major low.

As you know, I have subscribed to the notion that the 1270 low on the S&P 500 was the ultimate low for this recent move lower and that it should stand up to any test we may encounter. Nothing so far has changed that outlook. If we have entered a period of the market making a test of these lows, which we knew would come at some time, then the action we saw today is encouraging for our outlook. The key to this entire re-test will be the amount of volume we will see and today was right along the lines of what you can expect on the volume front.

So, in a nutshell, the market may be in the process of a re-test of the lows, but with the vast amount of negative sentiment currently in the market place we should look at any pull back in stock prices as an opportunity and not a curse. The always present bottom test was exactly why I did not go full throttle with the allocation to equities and currently we remain with our cautious 50% to 60% allocation towards equities. As I have stated in the past this allocation will increase as the technical work dictates.

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Equity Market Comment - 3/5/2008

Quite a day traders dream market today with the volatility.

In the end, the bulls won the battle, but the war is far from over.

The Trading Model calls for higher prices yet again for Thursday and should there be weakness in the first hour of trading, it is also saying short term traders should buy the dip.

Not really much has changed since the analysis of yesterday.
I continue to look for short term and intermediate term higher stock prices.

The only real change from yesterday is the indication that Friday should see a corrective move on Friday.

The reason I bring this up is the effect this call has on Thursday. In order for this Friday model call to remain strong, it will require a strong to very strong Thursday. So, should you see a 0.75% or higher move to the upside tomorrow use this as an opportunity to take short term profits.



The Nasdaq has been pretty much following the line we thought it would as it shows more strength than the S&P 500. Look for this trend to continue as the battered tech stocks come back to life.

One more quick note is that the Airlines Index is starting to get bullish again, so aggressive short term traders can look for some opportunity here. We took a very nice profit out of it about 3 weeks ago and should things progress as we see them, then this next move up in XAL could be even better. This is a risk play however and thus is intended for aggressive risk adverse traders only.

Gander Mountain Update

No real progress in GMTN as we had a very narrow ranged day.
Days like this do tell us something. They tell us that the stock is about to make a sizeable move in one direction or the other.

Remain flat until it tips its hand on which way it wants to move and then climb on board.

Equity Market Comment - 3/4/2008

Sentiment, both short term as the chart below demonstrates and long term remain on our bullish side with some wide spread disparity and some readings that have not been seen since the bear market termination in 2003

The 1 minute chart below shows the S&P 500 (Blue) and the CBOE Put/Call ratio for today.
Notice the heavy put buying from 2pm on and the market began to recover. This is an ongoing event just about in every instance and clearly demonstrates the very high level of bearishness amongst investors.

When does a down day become an up day?

When the market is in the process of a mini bloodbath and it manages to close well off those lows and actually show signs of buying outpacing selling for the day.

This was what happened today, and it is because of the very strong seasonal time frame we are in that it was even able to occur. While the action today was not what I had anticipated and certainly not what my models had suggested, it remains a fairly strong plus just the same.

The model for tomorrow is even more bullish then it was for today with all 9 components squarely in the bullish camp. This at the very least makes the suggestion that any downward pressure we might see on stock prices will be very limited and in all probability with the action today, Wednesday should be a fairly strong day for equities.

I remain attached to my theory of higher stock prices and not a new bear market. It seems as of late that I am just about the only bull left out here and that my comrades is a very very good thing.

I continue to hold a fairly conservative allocation to stocks as there are still quite a few benchmarks the market must clear before I can justify a more aggressive stance, take comfort in the very high probability that any downward pressure on stocks from here should be very limited and the path of least resistance is very close to turning up.

Continue to look for good solid bargains in the market, and there are quite a few right now, but remain conservative in your allocation with perhaps a 50% to 60% total allocation to equities.

Gander Mountain Knocks On The Door Again

It appears the decision to lock in profits on the Gander Mountain trade was a good one as the stock has move all the way back down to the breakout point and currently is resting on the long term trend line.

This offers some potential for yet another long trade.
If GMTN can bounce from here and close back above the trendline, then we will have potential for a very bullish move higher.

This trade also offers some very limited risk as we are right at the trendline and a bounce off of this line will be the trigger to purchase the stock, with a very close stop loss just under the trendline. Risk should be no more than 5%, but it is important that you have the stop loss in place once you are long the stock as a failure of this pattern may lead to a re-test of the $4 area.

Equity Market Comment - 3/3/2008

The market action today followed fairly well with what the probability model predicted, with a lower open to be followed by a late day rally and a neutral close.
It is also quite bullish that after a more than 300 point down day the previous session, the market was able to level off and not have downside follow through on the close.

The seasonal model calls for Tuesday to be a very good day on the upside and it is this exact type of day that the market desperately needs in order to keep the intermediate term trend from turning negative.

The Models Components are as follows:
6 Bullish
2 Neutral
0 Bearish

Today was also in the time window for the change in trend date, so there is a very high probability that a low was put into place today.

The great thing about all of this is that if a strong Tuesday should come to pass, it will take the probability model into very bullish territory and we could finally see a breakout of this trading range we have been in for quite some time now.

No question that there are some real short term concerns here, but sentiment remains very bearish and the market remains in a very favorable time for higher stock prices.

Currently the long term allocation remains at 60% invested and this reflects some of the concerns I have for this market. However, as we continue to get favorable signs for higher stock prices, this allocation level will move up.