NOTHING NEW

LONG TERM TREND: The outlook is neutral for the time being, largely because last week was the week after a holiday, where most traders take time off. As you can see from the price bar there wasn't much movement and look where price closed again...right near the 40 week moving average.



SUGGESTION FOR 401-K: I hate to sound like a broken record, but the market needs to show some more conviction to the up side above the 40 week moving average before I get involved. I will be watching price action on a daily basis next week and will update the blog if I do anything. Have a Happy and blessed New Year!

STRONG WEEK BUT....

LONG TERM TREND: This week closed up strongly compared to the previous week but look where price stopped again (see attached image). Yes, right at the 40 week moving average.



SUGGESTION FOR 401-K: Despite the strong up week there has not yet been a decisive move above the 40 week MA. Until this happens the probabilities favor the tendency of the market to sell off once it's at this level, which it is now. Next week I'll take a look at the daily price action and see if there is any follow through to the up side. If there is and I get back into the market I'll update the blog. Until then, I wish all of you a very Merry Christmas!

THIS IS GETTING OLD

LONG TERM TREND: As most of you probably know by now, once again the market closed down from the previous week. Take a glance at the attached chart and you'll see once again that the market failed at the 40 week moving average. This is not a healthy sign for the stock market.



SUGGESTION FOR 401-K: Big surprise! I'm on the sidelines. I suspect the rest of you are about as tired as I am of not having my 401-K money work for me. This is my opportunity to rail on 401-K plans. The main problem is the fact that you are limited to investing solely in mutual funds. The problem with this is that in a sideways to down market the vast majority of mutual funds will perform similarly to the broad market. The fact of the matter is that on a long term basis the markets have become very unpredictable. So unless the market is trending up the ONLY benefits of investing in a 401-K are the tax benefits. In my own situation, I stopped years ago contributing any additional funds to my 401-K. The reason is that IRA plans allow a lot more flexibility in investment choices, including employing the use of options. Bottom line is that the above market returns you can earn with this type of flexibility outweigh any tax benefits. I plan on telling you more about what I'm doing in this area after the new year.

Be Blessed and prosper!

NOWHERE FAST

LONG TERM TREND: I wish I had something new to tell you but look at the attached chart. The market opened higher than the previous week, but then sold off, rallied and then closed just below...once again...the 40 week moving average.



SUGGESTION FOR 401-K: The market still has no conviction one way or the other. Far too risky at this point for me to put my long term funds at work. Have a great weekend everyone.

POWER OF THE WEEKLY 40

LONG TERM TREND: Just take a look at the attached chart of the weekly S&P. The first thing you'll notice is that last week was a very strong week compared to the previous week. However, take a look at where the market closed. On Thursday the market ran right up against the 40 week moving average. On Friday the market closed down from that level.



SUGGESTION FOR 401-K: I'm not dipping my toes in the water yet. Once again the 40 week moving average acts as a formidable resistance point. Until we get some bullish price action above that area we really don't have a good idea of which direction the market may go. Have a great weekend and any questions or comments are welcome!

DEAD IN IT'S TRACKS

LONG TERM TREND: As you can see from this week's S&P chart, this week closed down significantly from the previous week. This indicates a high probability move lower for the weeks to come. The 108 -110 area represents the zone most likely where prices will pause before deciding to move back higher or break lower.



SUGGESTION FOR 401-K: As long as prices fail to rise and hold above the 40 week moving average (now at 126.66) the long term trend remains neutral to slightly bearish. So my long term money remains on the sidelines for now. I hope you all had a great Thanksgiving. I remain open to any questions or suggestions.

CORRECTION

Thanks to my good friend Hubbard for pointing out a rather significant error I made in this week's post. I forgot to connect to my data feed before pulling up the chart. Consequently it was not updated with the last 5 days worth of data. Major guffaw on my part. I"ll have to put a sticky note up on my screen to remind me. Below is the correct chart which shows how weak last week was compared to the previous week. As you can see once again the 40 week moving average provided significant resistance. Nothing much changes as far as my commentary. We still need to see a strong weekly bar close above the moving average in order to change the long term outlook to bullish. Have a blessed Thanksgiving everyone.

THE WAITING GAME

LONG TERM TREND: As you can see from the attached chart of the weekly SPY, this week the market closed slightly higher than last week but STILL below the 40 week moving average. We are truly at a crossroads right now. The prudent thing to do is to wait and see which direction the market takes from here. If it breaks above and holds above the 40 week moving average the probabilities favor a resumption of the long term up trend. If it breaks lower then the probabilities favor a transition from a long term bull market to a long term bear market.



SUGGESTION FOR 401-K: Until the market shows me that it wants to go up my long term money remains on the sidelines. Be blessed and have a great weekend.

FORMIDABLE RESISTANCE

LONG TERM TREND: The attached weekly chart of the SPY, which is an exchange traded fund which mirrors the movement of the S&P 500, continues to show the market is having trouble exceeding the 40 week moving average. For the third straight week the market has closed right around the average. Until it rises above this average with some conviction IMHO there is no reason to believe that the most recent leg up is anything more than a bearish correction.



SUGGESTION FOR 401-K: For the reasons stated above I still have my longer term funds in cash. Have a great weekend and please don't hesitate to ask if you have any questions.

STUCK AT THE 40 MA

LONG TERM TREND: After closing just above the 40 week moving average last week price sold off early in the week and then recovered but never closed above the average. This week also closed below last week (see attached image).



SUGGESTION FOR 401-K: Basically a repeat of last week. It is still unclear which way prices want to go over the long term. I will watch the market on a daily basis next week and will update the blog if I see evidence that heavy professional/institutional buying will drive the market higher above this average. Have a great weekend.

ALMOST THERE

LONG TERM TREND: Remember last week I stated that in order for the long term up trend to re-assert itself, that it must close AND hold above the 40 week moving average? As you all probably know by now last week was a very strong up week and it closed slightly above this important average (see attached chart). But now the question is, will the professionals and institutions who really drive the market sell at this important juncture or buy to drive the market higher?



SUGGESTION FOR 401-K: I'll be watching the daily charts each day next week to see evidence of what the professionals are doing. If I see strong evidence of buying as the market tests this average I will get back in and will update the blog. So watch your emails. Have a great weekend everyone.

NOT TEMPTED YET

LONG TERM TREND: Last week the SPY rose for the 3rd consecutive week. But as I pointed out last week we are getting close to a very important resistance area. The marked closed at 123.97 this week and price is now very close to the 125 area and the 40 week moving average at 127.55. If the long term trend is going to reassert itself it MUST close and hold above this area on a weekly closing basis. Until then, the probabilities favor that this may simply be a bullish correction in a longer term bear market.



SUGGESTION FOR 401-K: I'm not back in yet due to reasons stated above. Have a great weekend.

SITTING PAT

LONG TERM TREND: Despite the strong week we had this week, not enough has changed to convince me that the long term trend is back up. The most important elements of a possible shift down in the long term tend are still there. Take a look at the chart below. You will notice two charts. The one on the left is a snapshot of the last bear market we had from late 2007 to March 2009. The one on the right in the current market. The first thing you should note is the 40 week moving average that I've drawn on both charts. The second thing you should notice is how similar the patterns in both markets are. In early 2008 the market dropped below this moving average, formed a double bottom and then rallied only to stop right at the now down sloping moving average. From there the market proceeded to drop over 50%. The EXACT same pattern is setting up right now.



SUGGESTION FOR 401-K: Right now we are in "no mans land". The 40 period weekly average is essentially the same as the 200 day moving average or the 12 month moving average. All of these are watched closely by institutions and professional traders and as you have seen can provide powerful support and resistance levels.

Have a great weekend and let me know if you have any questions.

PSYCHOTIC

LONG TERM TREND: As I mentioned last week the market has many of the earmarks of a long term bear market but not all. Take a look at the attached weekly chart of the SPY and let me explain. As you can see this past week was a strong week so the 110 level (our important lower "line in the sand") held. If the market is to confirm a long term bear market this level needs to be broken on a weekly closing basis. For the market to prove it is shifting back into a bull market, it MUST close above the 120-122 level (upper "line in the sand") on a weekly closing basis. So technically what we have here is a market that is range bound (between 110 - 122 with a bearish bias.



SUGGESTION FOR 401-K: Until the 122 level is broken I'm not interested in committing any long term money to the market. Have a great weekend everyone.

UGLY

LONG TERM TREND: Ugly can be the only word to describe the events of the last four months. MANY of the earmarks of a major bear market are now in place. Take a look at the attached monthly chart of the SPY. There are three things I want to point out:



1) For the last four months prices have dropped and have now closed below the mid line of the price channel. The last time the market did something similar was in January, 2008 when the market fell three months and closed below the channel.

2) Notice how heavy the volume was in the months during those declines.

3) The ONLY thing preventing this market right now from the 13 month decline after January 2008 is the 100 level on the SPY. This is not only an important psychological number but is also the level where the last major decline stopped...In July 2010. If this level is broken, there is a high probability that the decline will continue to test the lows made at the end of the last major bear market in March, 2009.

SUGGESTION FOR 401-K: Obviously this is not a good time to be in the market. In my view the only thing that will convince me that there is a possibility of another leg up is if the market can stay above the 100 level and have a weekly close above the 120 level. I'll keep watching. Have a blessed week.

OUCH!

LONG TERM TREND: Believe it or not, even after last week's price action, the long term trend is technically still up. BUT...time is running out. Unless the market substantially rallies next week, one of the important conditions I look at to confirm a long term bear market will be in place.

SUGGESTIONS FOR 401-K: The market closed down 6.5% from last Friday (see chart). This, after a VERY bullish week the previous week. In a "normal" market the kind of week we had last week suggested a high probability move to the up side. But obviously the market is sending a message. The 110 level in the SPY now becomes a very important "line in the sand". If it is not broken on a weekly closing basis we could see a long term trading range similar to last year (17 weeks before it broke out to the up side). If it is broken, then the probabilities favor a further move down to test the low made last summer around the 102 level. In my own 401-K I'm going to hang in and watch what happens next week. But if I weren't in the market already, there is no way I would buy in after last week's price action.



ONE FINAL THING: I've been putting a lot of thought and research lately into simple hedging strategies that can greatly reduce the drawdowns one experiences when staying long the market in their retirement accounts. In the coming weeks I'll reveal some research that I think you'll find exciting. I"ll also reveal an option strategy I've finished testing on that takes advantage of the shorter term up and down moves in the market.

Be Blessed this week

What A Difference A Week Makes

LONG TERM TREND: The long term trend is still up.

SUGGESTION FOR 401-K: The title of today's article says it all. Just take a look at the attached image. Not only did the week finish MUCH stronger than last week, but the volume was much higher as well. This suggests a very high probability of a higher move over the next several weeks. The last time the market experienced a week of this kind of strength after a major correction was on 9/4/2010, just a little over a year ago. Is this a guarantee that the market will move higher? Obviously not. But the probabilities favor it. I will be moving my long term funds back into the market again.



Have a great weekend everyone. Any questions, comments or feedback are welcome!

Waiting Game

LONG TERM TREND: Not much new to report. Technically the trend is still up.

SUGGESTION FOR 401-K: This week closed lower than last week, which shouldn't come as any surprise since the week before, the week closed down after testing the mid line of the price channel. The next likely course of action is a high probability test of the 1100 area. This is a very important area. If it does get tested and we get a very bullish weekly price bar, this could set up a very high probability rally that would result in a continuation of the long term bull market. In any event, this is NO TIME to get back into the market in my opinion.

Weekly Update -- Patience!

LONG TERM TREND: The long term trend is still up as August did not give a sell signal. That is the only good news.

SUGGESTION FOR 401-K: I'm staying in the sidelines. Last week I stated that the market still has a lot of work to do to convince me that the long term trend may resume to the up side. Remember a couple of weeks ago I stated that once a decline of this magnitude takes place, it can take quite a bit of time for the weekly chart to tell us the long term trend up is ready to resume? Well, take a look at the attached chart. After the market rallied last week, it stopped dead in it's tracks at the mid channel line and closed lower this week.



Have a great holiday weekend and don't forget to fly your flag!

Weekly Update -- Waiting

LONG TERM TREND: Not much new to report this week. The positive news is that for the 2nd week out of the last three, the market finished higher. So at least for now things appear to have stabilized a bit. As I said before the market still has a bit of downside to go in order for the long term trend to shift down.

SUGGESTION FOR 401-K: Despite the fact the market closed up for two out of the last three weeks, it still has a lot of work to do to convince me the long term trend will start another up leg. Take a look at the attached chart and the commentary on it. Bottom line is that although last week closed up, it looked rather weak when compared to the previous down week. My long term money remains on the sidelines for now.



Have a blessed day everyone. I'm off to go fishing! As always, your comments, feedback, suggestions are welcome.

Weekly Update -- Trouble Ahead?

LONG TERM TREND: Today is a good time to give you a glimpse of what's happening on the monthly chart (see attached). As you can see the market so far in August is down about 18% from the high made in July. There are two comparisons I want to draw your attention to: 1) Notice how this month price has declined below the mid channel line. This last happened on January, 2008 (1st down arrow on left) to help facilitate the last major bear market. 2) The 2nd down arrow from the left is when the month of July 2008 broke below the lower channel line, which absolutely confirmed a long term bear market. This is why the current lower channel line around the 1000 area is so important. If that level is broken the probabilities highly favor another major bear market.



SUGGESTION FOR 401-K: Obviously now is no time to get back in even though technically the long term trend is still up. Due to this there is still the potential to get back in if but I must see some strong weekly strength to consider this.

Have a great week and as always, your thoughts, feedback and questions are welcome!

Weekly Update

LONG TERM SIGNAL: First, the good news...the long term trend is still up and there was some encouraging price action to support that last week. Take a look at the attached weekly chart of the SPY. The market sold off early in the week but then rebounded substantially to close higher.



SUGGESTION FOR 401-K: The bad news is that last week was not enough to convince me that we've reached a market bottom. What typically happens after the type of sell off we've recently experienced is what happened last summer (see chart). This was the last time there was a large weekly sell off below the mid line of the price channel (dashed line). As you can see the market drifted lower for several weeks and didn't establish a new buy signal in the long term direction for 17 weeks. In my opinion there is not enough to suggest a market bottom has occurred. My 401-K money stays out for the time being.

Hope you all have a great week. As always, any feedback is appreciated.

Weekly Update

LONG TERM SIGNAL: The long term trend is still up but weakening significantly. More on this later.

SUGGESTION FOR 401-K: WOW, I suspected that this week the 1250 level could be penetrated but so was the 1200 level on the S&P 500. The weekly bar actually closed just below 1200 this weak. This is obviously very bearish. My money was out last week before this decline. I hope you did likewise.

MORE ON THE LONG TERM TREND: Believe it or not, while things look pretty grim right now, technically the long term trend remains up. Take a look at the attached monthly S&P 500 chart. You'll notice a Zig Zag line which will plot up when the market rallies 10% or more from an important low and down when the market rallies 10% or more from an important high. There are two reasons I believe this bull market MAY not be over yet:



1) Notice how during the 2003-2007 bull market the S&P had three rallies of 10% or more before the final top. During the 2007-early 2009 bear market had three declines of 10% or more before the final bottom. Since March 2009 there have only been TWO rallies of 10% or more. Probabilities favor at least one more push of 10% before a final top.

2) Notice that in 2007 the third rally of 10% only made a marginal new high before the market sold off and the bear market began. In 2009 the third decline of 10% only made a marginal new low before the market rallied and the bull market began. Now in 2011 notice how much higher the second rally went than the first. The point is that most of the time the market will make some sort of double top before a bear market begins in earnest.

I'll be watching the market closely during the ensuing weeks to see how this plays out. Just a reminder to check your emails during the week as I plan looking for short term option opportunities. Be blessed!