Pro Investor Coach »» M48 Timing Service Archive

Was yesterday's close a temporary bottom? Possibly, but let's wait for more confirmation in the days ahead.

This confirmation may come as early as this week. If it does, we will buy in one thirds (1/3) using the SPY (S&P 500) and the more aggressive SSO - S&P Ultra (double the ride).

If the market continues to show strength and leadership, the M48 will add other ETF's and some individual stocks.

As always, you should determine your own risk tolerance.

We will be initiating a purchase tomorrow using 33% of our portfolio to buy the SPY and/or the QQQQ.

We expect to pull-back in the days ahead at which time if price and volume holds, we will increase our percentage long. Hence the reason for the 33% at this time.

Stops to follow tomorrow Friday.

SPY (S&P 500) — So we are a little overbought (too far, too fast) which is the reason we are only stepping in with 33% of our tradable money. You may ask why jump in at all? Well, if we get a "V" shaped bottom (see video at the bottom of this e-mail) the market could run away from us as mentioned yesterday.

Ideally we want to see some selling (profit taking) next week off this recent move. We also want to see the lows hold that we put in last week. If those lows don't hold we will exit our position and take a single digit loss based on the entire account value.

Eventually this market will run so it's important when a trend is initially confirmed to take it. The trend was confirmed yesterday because one of the major indices rose more than 2% on increased volume. Increase volume means the big boys are stepping in which increases the odds of success. Remember it's a game of probabilities. We cut our losses short and let our profits flow.

The other alternative trades (small percentage of the M48 portfolio value) which consist of TBT (short bonds) and DIG (long oil) are still above their stop loss price and not yet at a profit taking point provided they get there. If the status of these positions change we will notify you.

As always, you should determine your own risk tolerance.

Let's look at the numbers:

As of today's close everything is working in the M48 which includes the SPY (S&P 500 ETF), DIG (Long Oil) and TBT (Short Bonds).

I see potential selling soon in the SPY as we approach major overhead resistance (see video below). Until then we will continue to ride this wave up with 33% of our tradable account. Ideally we want to see a retracement of roughly 25% to 50% of the move that started off the bottom back on March 7th.

A pullback here is healthy for the market vs. a move straight up with no selling (pause in momentum) is not. What is important here is that it doesn't matter what I think should happen. Instead we need to react to what is actually happening. This is what trend following is all about. We determine the trend and don't question it by letting our egos get in the way.

Happy St. Patrick's Day – Today all positions are in the green.

Let's look at the numbers:

The Feds announcement of a massive $300 Billion Bond purchase program took the market out of a daily slump sending stocks and commodities much higher while pushing Bonds yields down drastically. Today was the biggest single day move in the 10-year Bond since 1962.

So what does this mean for our M48 subscribers?

If you took the optional 5% position in the TBT (short bonds) you were stopped out for a small loss. Obviously no one saw this unprecedented move coming. As always, our disciplined approach is to cut our losses short and let our profits flow. This is the key to making big money while timing the market.

Prices for 10-year bonds spiked more than four points, sending yields down to 2.54% vs. 3% at yesterday's close. The dollar remained lower and gold recovered from a steep slump.

The good news is that volume increased which means the market is under accumulation. So when will we increase our long position? The answer is as soon as the market pauses and then resumes a continual trend up.

The DIG (Long Oil) trade is working well. At one point today it was above 23. Check to see how we have moved our stops up to lock in profit.

It's nice to have the cash to buy in to the market as opposed to buying and holding with no cash. But it's even nicer to move stops up to lock in profit.

Inflation...

It is very important now more than ever to have a traders mentality when viewing these markets. The Feds bond purchase yesterday sent the dollar into the dirt which was the reason for the spike in the metals. A sinking dollar could spell trouble ahead for the equities. If you recall, we had a position in the dollar using the ETF – UUP. We exited that position at a breakeven.

Once the trend line was about to break I concluded that based on probabilities the UUP was about to roll over. Rollover it did. (see video below) Can we play a falling Dollar? Yes we can and we have previously using the ETF – UDN (short the Dollar). Are we purchasing it now? No, let's wait for the proper pattern to show.

More good news today on our long oil postion using the ETF – DIG. DIG gapped up today. Move your stop (see table below) up tomorrow to lock in profit. Take profit on 50% of your position if we get to 24+. Some of you might ask what a mental stop is. A mental stop is a price that we have in our head to sell out of a position. We use mental stops in the event a position drops and then recovers intra-day. This explained further in the video below.

Distribution Day (down day with increased volume)...

For the week the Dow was up 0.8%. The S&P 500 climbed 1.6%, the NASDAQ +1.8%. Volume was heavier today as the market shed some recent gains just as we expected. A pull-back is healthy and increases the odds of further gains. For the day the S&P dropped 2%, NASDAQ sank 1.8%, and the Dow dove 1.7%. Small caps took the biggest hit with the S&P 600 down 3.2%.

You should've been stopped out of your DIG (Oil) trade with at least a 10% profit. This will be discussed in tonights video along with AAPL (Apple, Inc.)

With inflation ahead, commodities will continue to be part of our M48 model. Diversification and timing powered by technical pattern recognition is our edge. Next week should be an interesting week for technical patterns in the S&P, QQQQ (NASDAQ 100) and the metals GLD and SLV.

Let's talk 50's.

Best performance year to date with a strong move into the close.

The SPY closed above the 50 day and above resistance at $80 per share. Over the next two or three days we will be increasing our percentage long to 55% up from 33% on the SPY. I would like to see some profit taking Tuesday or Wednesday so we can purchase below today's close. All the major indexes pushed above their 50-day moving averages for the first time since early January.

Once this market pulls in we will determine a hard stop. We may also take profit on half the S&P position provided we make it to the next area of resistance.
GLD (Gold) is holding up and can be purchased with 5% of your tradable capital here if you so choose. If you prefer you can wait for a definitive buy signal which we will post. GLD will make up a total of 10% of our total trading capital when we enter (see video for explanation.)

We have run too far too fast. But we can run even further so we need to ride the trend. When the trend slows or stops we will re-evaluate.

Expected Profit Taking...

Not much news today as evidenced by the lower volume. I was glad to see selling into the close for those of you who chose to add additional shares of the SPY today. Institutional decisions are often made in the last thirty minutes into the close. Most of today's selling was led by the banks.

Remember yesterday I said I prefer to stay away from the banks for now. At this time we want no direct exposure to the banks. GLD dropped sharply today (see video) as the long Dollar ETF - UUP rallied into the close. The market may get tired soon especially since I see investor sentiment becoming less negative. As always the charts will map our course of action.

Auction Boost...

Impressive bidding on Thursday's auction of 7-year notes was all the market needed to extend its rally.

Best Buy was impressive as were the Solar stocks. The breadth of the market (advancing issues) improves even though volume on the SPY was lighter than Thursday. The M48's edge is pattern recognition incorporating both price and volume. Everyone's risk tolerance is different. Therefore it's probably not a bad idea to take a little profit here especially if we open higher Friday.

We should have a hard stop price next week for the SPY and SSO. DLTR broke out above our buy price (see table below.) Do not enter if the price is extended more than 5% from the buy point. If you are already in, you should check out your stop price below.

We continue to monitor the metals (see video) and crude oil.

So far so good.

50 Day Moving Average and Trendlines Hold...

All major indexes remained above their respective 50-day moving average.

Volume was weak which implies the big boys did not rush in to push the sell button.

This week the Dow gained 6.8%, the S&P 500 6.2%, NASDAQ 6% and the NYSE composite 5.5%.

Therefore some profit taking before the weekend was highly probable.

This month may end up being the third best month since 1950. Next week the positive trend will be tested with Friday's unemployment report along with quarterly earnings and housing data just ahead.

We will be keeping an eye on crude next week with inventories out on 4/1. Remember, it's not the news that concerns us. It's is how the market reacts to the news. All of which is found on our charts.

How about them Banks and Autos...

The recent rally gets hit as further bankruptcy issues for General Motors and fears that various big name banks may not be able to absorb additional stress. The Dow Jones Industrial Average fell 254.16 points, or 3.27%, to close at 7522.02, cutting its gains for March to 6.5%. The Dow is still 16% above its closing low on March 9.

The broad Standard & Poor's 500 index fell 28.41, or 3.48%, to 787.53, yet it's still up 7.1% for March. The NASDAQ Composite fell 43.4, or 2.81%, to 1501.8.

The decision to take some profit in the SPY (S&P 500) last week has paid off so far. Our one and only individual stock, DLTR (Dollar Tree Inc.) gained 2.49% today.

The market has yet to show great leadership in individual stocks. Hence, the reason for one individual stock in the M48 at this time. I believe it will be a wait and see mode this week as we look for various technical patterns to form.

Decent Gains But At The Low End Of The Days Range...

Friday should be the big decision day once the unemployment numbers are released. Let us see if we hold the 50 day until then.

Today was end of quarter window dressing and technically a potential fill of a gap put in yesterday (see video).

We have removed the metals; gold and silver along with any oil (buy) positions from the table. We will add them back in when and if they become highly probable again. As of this week we are however watching very closely the short oil play by using DUG.

Before the week is out we will cover each stock or ETF below in video form.