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.

Weekend Equity Comment-3/1/08

We have a change in trend date coming up March 3-4th and previous to last Thursday and Fridays market action I had anticipated it being a high coming in, but due to the small bloodbath we saw over the last 2 days of the week it more than likely will be a low.

In all probability the low may have occured on Friday as it looks like a downside washout and some strong panic selling. This selling however did not come from the institutional side, it came from the retail side which continues to enforce the premise that the small investor remains very very nervous as they wait for what they believe will be another collapse in stock prices. We can see this activity very clearly in the Put/Call ratios which are showing very prolific signs of wide spread disparity in market players as each rally attempt seems to be met by a wave of selling.

This type of action is quite common when the market is in the process of putting in a bottom of impotance and it is exactly what we are currently seeing in the market.

The market remains in a very strong period over the next 6 weeks, with this coming week being the strongest of the six. This is partially the reason I see Friday as a capitulation day as retail investors flooded out the exit gates in droves.

Therefore.
Considering all the evidence, I see no reason at all to change my outlook and I continue to look for good stocks to purchase and also having lightened up on our call options over last week, it will again be time to buy more on the call side.

Ideally what I would like to see, is a continuation of the decline on Friday early in the trading day on Monday. It will be at that point that I will begin an aggressive campaign of purchasing SPY, DIA and OEX call options for a position trade that should last 2-3 weeks.

Equity Market Comment 2/28/08

It is do or die time for the market on a short term basis and there are some very mixed signals.

The seasonal model dictates Friday as a strongly trending up day and the Wedge that we broke out of is being tested both on a closing and intra day basis.

If this test can hold the line then we could see some sharply higher prices in a very short period of time.

On the other hand we have a potential change in trend coming into play on March 3-4th and a stochastics turn down today.

So we have a little of both bullish and bearish implications and this should work its way out on Friday and tell us where equities will be headed over the next 3-6 trading days. As a cautionary measure, we took about 1/3 of the aggressive long and call option positions off the table today just in case we have seen the high for this leg up.

Equity Market Comment - 2/27/08

The seasonal model just about pegged the action today with the exception of a very small down day instead of a very small up day.

Everything remains just about in line with the current scenario I outlined yesterday and this would look for higher prices over the next two days and a short term high put into place Monday.

The final target for this high using the S&P 500 cash index is 1412 or about 35 more S&P points from here. This would imply that the next two and one half days should be quite strong and the seasonal model confirms just this scenario.

Short term traders should use the next 2 days to scale back their long positions including call options. There are some very handsome profits out there and it would be prudent to begin taking those profits.

Intermediate term traders can look as the potential pullback as an opportunity to add positions to their equity holdings as the next move after the correction has run its course should be a good one.

Change In Trend Date Correction

In todays equity comment, I stated March 4th as the change in trend date.
The correction is that the Change In Trend date will be Late March 3rd or early March 4th.
This time frame could also be off by one day, so we will call it Late of March 3rd to Early March 5th.

Gander Mountain - Protect Profit

Gander Mountain has made an impressive move from the breakout level, just a little over 25%.

We are currently nearing the $7 minimum target level and thus we want to put a stop in place to protect the profits.

A sell stop of $6.50 on a closing basis should do the trick. This will lock in a 20% return should the stock turn lower, but it is also far enough away to keep the position in place and capitalize on still higher prices.

I do anticipate higher prices for GMTN as $7 is merely the minimum target, however, it never hurts to lock in a substantial profit when one is put on the table.

Equity Market Comment 2/26/08

Today market made the breakout day on the closing basis for the wedge pattern.
If we can get some follow through on this break and send confirmation then we have some excellent upside targets.

More than likely the market will continue its uptrend as we saw some fairly decent put buying action while the market continued higher. We also are coming into the strongest day of the week with Wednesday and also the 2nd best day on the end of the month pattern.

If the S&P 500 can manage to take out todays highs at 1387.34 then the odds of an up day shoot through the roof to 81% and an average .73% return which translates into about 10.5 S&P 500 points.

While we do remain in a bullish phase both on a technical and seasonal level we do have a change in trend date late in the day on March 4th or early trading of March 5th. I anticipate this will be nothing more than a normal pullback, but dependant upon how far the market continues to rally here it could scare a few people, which is just what we need. I will address this scenario as we draw closer to the date.

Wedge on the High, Low and Close chart had its breakout yesterday.

The follow through of today made the closing chart breakout as well.

The Phase Model currently shows some modest bullishness with the following ratings:

3 Bullish

2 Bearish

1 Neutral

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Preliminary Week-End Equity Market Comment - 2/22/2008

If you will recall a post about 2 weeks ago that discussed a pattern of Investor Sentiment and the results of this pattern occuring.

For those who do not remember, the pattern has been 100% over a 10 year time frame and has returned 24% from the lows to the end of the move.
A move of this size will bring us right back to the highs on the S&P 500 at 1570-1580.

Here is more confirmation of this pattern, as the prediction model is looking for sharply higher prices over the next 2 1/2 months.

The blue bars represent the current market action and the black bars are the benchmark model.
As you can see, the black bars make quite an impressive run over the next 60 days and to top it all off, the model is calling for a 24% return from low to high just like the sentiment pattern did.

I wanted to post some preliminary comments on the equity action today as this weekend may be a very busy one and I simply may not have the time to publish a full week-end comment.

The market today staged a very impressive late day rally and once again saved itself from breaking the wedge based on closing prices. This continues to be a strong positive, especially with most market pundits expecting this pattern to break to the downside.

I think the main reason you saw such a sharp reversal was their short covering as the market moved a but higher. Many of the shorts put their positions in place early in anticipation of some sharp downside follow through on a break of the wedge and when this did not materialize and the market began to stabilize and push a bit higher there was a mini buying panic as more and more shorts got covered.

The good news about getting today out of the way is that we are now out of the seasonal weakness pattern and breaking into a strong seasonal upside pattern. This pattern officially goes into effect on Tuesday and runs all the way through March 16 or perhaps even stringing out all the way to March 20th. The nature of the potential rally will dictate its life cycle so we will address that once we have enough data under our belts.

For Monday we have a Neutral to Very Slightly Bearish Tendancies for the day.
The Models Outcome is as Follows:

Bullish - 3 components
Bearish - 3 components
Neutral - 2 components

This translates into a coin toss either way, but should not be a big increase or decrease when the close finally occurs. Expect the volatility to continue though as there are simply to many positions out there that need to be squared.

As I said, I am going to try and post more of a week-end comment later in the week-end, but in the event I do not manage to squeeze it in, then this will have to do.

I hope you all had a very profitable week in the markets as there were some great opportunities presented to us and the good news is that looking forward, new opportunities should flourish.

Gander Mountain Breaks Out

Gander Mountain broke above heavy resistance today on decent volume.
Not superb volume, but decent.
There are a couple of options here as to how to play this.

1. Buy half your position in this area and wait to but the second half if and when the stock comes back to the trendline and tests.

2. Conservative investors can wait until it pulls back to the trendline and has a successful test before putting a line together,

Equity Market Comment - 2/21/2008

A down day was what I was looking for today, but not quite as sharp as we were delivered.
The market managed to stay within the wedge on the S&P 500 and the 30 minute Nasdaq as well. The two charts show both of these occurences.

The seasonal model calls for a moderate up day Friday as the model scored
6 Neutral
4 Bullish
0 Bearish

Friday also is the early start to a strong period in the market.

We will know very shortly if equities can stay in their positive rally mode as we should begin to move up starting tomorrow.

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EQUITY MARKET COMMENT FOR 2/20/2008

Today was right along the lines of expectation with the exception of the extreme range we saw.
The market is marching right along with what our work dictates and the next stop on the upside is a break of the upper boundry on the wedge as shown in the chart below.

Tomorrow brings to a close the negative seasonal influence and next week should usher in a very strong upward seasonal draft that could very well carry prices sharply higher. This period of strength also has life until mid March where we should see some weakness for the last half of the month.

The Probibility Model for Thursday shows us 6 Neutral and 4 Bearish, so we anticipate a down day, but only modestly so, with the lows of today remaining untouched.

Things are starting to shape up on the intermediate term picture, however, after we complete this negative seasonality tomorrow, we need to really see the market make a move upward that will take investors my surprise and also begin to bring some of the sidelines money back into the game.

Here is the breakdown of the Seasonal Probability Model.

Day of the Year - UP 47% Neutral

Day of the Month - UP 47% Neutral

Return for Day of the Month - (-0.08)% - Neutral

Day of the Week - UP 55% Neutral

Day of the Week Returns - +0.04% Neutral

Post Option Expiration - UP 42% and worst of the week - Bearish

Post Option Expiration Return - (-0.16)% and 2nd worst of the week - Bearish

Post Presidents Day - UP 42% - Bearish

Post Presidents Day Return - (-0.02)% - Neutral

Inside Pattern - UP 43% - Bearish

Overall - 6 Neutral and 4 Bearish

Comment - Look for a modest pullback Thursday

Equity Market Comment - 2/19/08

The negative seasonal pattern played its part to a tee today as a fairly decent rally could not hold with the downward seasonal pressure.

Today was marked as the worst day of the 3 day seasonal weakness pattern and could be the lowest point of the weakness we see.

The market tried to break out of its wedge today, but the pressure lower would not let it hold.
The second day in this weakness pattern calls for a modest increase in prices, so we could see a break on the upside out of the wedge tomorrow. You can plainly see on the chart that we are getting very close to a break one way or the other and Wednesday should rectify prices in either direction, with the probibility leaning towards a break higher.

The Third and last day in the seasonal weakness pattern calls for only modestly lower prices so should we get a break out of the wedge in an upward thrust tomorrow then we will look for a small pullback of that move for Thursday.

After this pattern works its way through, the market should enter a period of unusual strength all the way until March 19th. Of course we need one thing to happen at a time and the first is an upside breakout of the wedge.

For those of you keeping score, here is how the seasonal patterns work out for tomorrow.

DAY OF THE MONTH - 52% CHANCE OF AN UP DAY (INSIGNIFICANT) - NEUTRAL

DAY OF THE MONTH RETURN - NEUTRAL

DAY OF THE WEEK - 59% CHANCE OF AN UP DAY - BULLISH

DAY OF THE WEEK RETURN - BEST OF ALL DAYS - BULLISH

POST OPTIONS EXPIRATION - 54% UP DAY AND BEST OF ALL DAYS - BULLISH

POST OPTION EXPIRATION RETURN - HIGHEST OF ALL DAYS - BULLISH

POST PRESIDENTS DAY - 40% CHANCE OF AN UP DAY - BEARISH

POST PRESIDENTS DAY RETURN - INSIGNIFICANT - NEUTRAL

TOTALS

4 BULLISH

3 NEUTRAL

1 BEARISH

OUTPUT - MILDLY POSITIVE DAY EXPECTED