Pro Investor Coach »» M48 Timing Service Archive

Closing At The Lows...

A worse than expected decrease in jobs started the selling today as stocks tanked, sending the S&P to a third straight weekly drop. The S&P has closed below the 50 day but above the 200 day. The Dow has closed below both the 50 and 200 as of today.

I'd like to see a little more sideways action on the SPY holding roughly 93.25 as resistance and 88.50 as support.

Then I'd like to see it break down to 850 or even 800 over the next several weeks (see video.)

Whatever happens we will be prepared.

Check out this illuminating article in USA Today earlier this week which underscores, once and again (and what I have preached for YEARS), why 'BUY AND HOLD' IS DEAD.

New Trades:

None

New Symbols to Watch:

POT
SKF

The "Charts of the Day" are RIMM and DXD.

Bounce Off Support...

Oil plunges and the major indices bounce off support and moving averages.

The bulls will continue to defend support at roughly 875. If we break 875, then 850 would be the next level of support.

Today the S&P bounced off the 200 day.

New Trades:

DIG
POT

New Symbols to Watch:

MSFT

The "Chart of the Day" is AAPL.

Earnings...

Alcoa (AA) kicks off earnings season tomorrow with the S&P closing just below the 200 day average today. Just like yesterday, if we break 875, then 850 would be the next level of support.

Today the S&P closed near the lows of the day at 881.

I anticipate a bounce tomorrow, however, AA could sink the market further.

New Trades:

SDS (Only if you're a new subscriber)

New Symbols to Watch:

None

The "Chart of the Day" is DXD (Ultra short Dow)

Bouncer...

For now cash is king: Today we traded below support on the S&P and then rallied (if you want to call it that) in the last 25 minutes to close above the 875 support level at 880.

So we should get a bounce before the end of the week possibly taking us up to the 50 day moving average (see video) soon.

If we get to that level of roughly 92.25 on the SPY (see gap) and then head lower, we will increase our short position.

Commodities continue to sell off hard and are in the news. Therefore, let's re-enter energy using XLE.

New Trades:

XLE (Energy ETF)
DBA (Agg. ETF)

New Symbols to Watch:

None

The "Chart of the Day" is DBA (Agg. ETF)

Three Top Picks...

Another down week for the indices, which is healthy for the market. And, I prefer more weakness, much more.

However, I don't know if we will receive it on this corrective wave. No crystal ball here.

So as of today's close we continue to trade in a range between 875 and 950 on the S&P.

The overall trend is north since the March 9th lows. The trend is your friend, so unless, and/or until, we break the March lows we will continue to maintain a percentage long in the SPY (S&P 500 ETF) while simultaneously hedging w/ a short position, SDS.

Let's recap: We originally bought the SPY on March 12th (March 9th was a multi year low) for the first time in '09 at 75+. We recently took some off the table at 91.17. Today the market closed just south of 88.

The SPY (our biggest position besides cash) may fall further to levels of support at 85, 80 and possibly 75. Hence, the reason for using stops and hedging w/ the SDS in the event the SPY does first test 85, 80 or 75.

A bounce (possibly dead cat) is due next week (earnings) since this is the fourth week in a row down. I'd like to see this potential bounce run up to 92.25 (fill a gap) to only then head down again (see video.) And this would increase the odds of the market going lower short term.

Again, this type of short term correction is healthy for a future advance. Short term pain in acceptable. Long term is not.

Now, the SPY could hold here at 87.50 (initial support) and begin the next leg up to 105 before visiting 85, 80 or 75. This is the technical reasoning behind maintaining a buy and hold percentage in the SPY. As stated, the trend is our friend so lets not buck it entirely.

If we stop falling here and break above roughly 94 on the SPY we will remove the short and add to the long side. Remember folks, we are trend followers. The trend can last for two days, two months or two years. We must always adjust knowing that 'Mr. Market' is trying to knock us around and out.

In summary; We will continue to cut our losses short and quick – and let our profits flow – to preserve capital. Any 'Buy and Hold' investor can make money when the market is trending up. The key is to preserve capital (cut losses short) and/or make money when the market drops (shorting). I'm confident that this will be the case for many years to come (big moves in both directions).

'Buy and Hold' is clearly dead.

Words from Wall Street are not to be trusted. We are technicians and the charts don't lie!

Highly probable pattern recognition along with disciplined money management is our edge.

As we move forward it will not be uncommon for us to re-enter previously held stocks and ETF's that were both winners and losers at some point. Sometimes we will re-enter these positions at higher prices than previous sold because of the increased profit probabilities technically.

FYI – out of the last 22 positions that we have exited (winners and certainly losers), 19 out of 22 have closed lower as of today.

The trends in the broad based ETF's and individual stocks will dictate the length of our stay.

While I'm on a roll; The Five Fatal Flaws of Investing and Trading – by Elliott Wave International are:

Lack of Methodology

Lack of Discipline

Unrealistic Expectations

Lack of Patience

Lack of Money Management

Finally, the three top picks this week are: Cash, Cash and Cash.

New Trades:

None

New Symbols to Watch:

PEP
EMC
KO

The "Chart of the Day" is POT

Volume Increase With Market Bounce...

Not a bad way to start the week with a over a 2% bounce.

As we mentioned in Friday's post, the market was due for a bounce with four straight weeks in a row of selling and also running into initial support at 875 on the S&P.

Technical analysis is a beautiful thing.

The price of oil was down again but oil stocks and ETF's were up. So far in after hours, Dell is down.

The plan remains the same; Is this just a bounce into near term resistance (915-930) to only go lower, or is this the start of another leg up beyond 950? To early to tell so let's maintain our biggest position, cash.

New Trades:

None

New Symbols to Watch:

AAPL
AMZN
NFLX

The "Chart of the Day" is NFLX (Netflix, Inc.)

Trade What You See...

Big INTC (Intel) news after the close yesterday set the markets up for a big move today. Our bearish insurance play using a small percentage of the SDS is a tick or two from losing that right shoulder for now. Check the table below for your stop.

Picking the overall market trend is what will enable us to crush the 'Buy and Hold' returns over the next several years. So we must trade based on what we see in the charts. In other words, if the charts tell us (based on probabilities) that we're going higher, we have to add as previously discussed in order to participate in the next potential leg up.

Cost average w/ a good percentage over the next two days into the Q's.

New Trades:

QQQQ (NASDAQ 100)

New Symbols to Watch:

None

The "Chart of the Day" is... you guessed it: SPY.