Can't Wait for Wednesday

I received a funny email today. You get them all the time, too. Sales pitches from "gurus". This one was titled "Is the Market Rally Over?" I turned to Steve and laughed out loud.

Of course the rally was over--last week. Before the market opened Friday, Steve indicated as much in the Commentary. After Monday's triple-digit loss, we saw another 100 point drop in the Dow today. The NASDAQ was off 20 points. Both indexes are down more than 3% since the opening bell Monday morning.

So what's next?

The long-term indicator is still rising. The intermediate indicator is in the upper reversal zone. Both the short-term and momentum lines have been in phase, lock-stepping deep into the lower reversal zone.

The new chart Steve included in the website shows our 3 critical moving averages (5, 30 and 50) along with volume. This should be VERY useful in helping us visualize the written recommendations:

Today the market closed down just below the 30-day moving average. Will the short-term and momentum cycles set up for a nice bounce? I'm looking forward to the market open. It should be a great trading day Wednesday.

New Chart

Steve just added an awesome new chart to the Commentary page.  Check it out.

Steve Calls It

The Dow Jones Industrial Average and the NASDAQ were each down more than 2% on Monday. If you've been following Steve's Market Forecast Commentary, you saw the pullback coming. 

In his Commentary before the market opened Friday morning, Steve wrote, "I'm expecting to see another pullback to the 30 DMA [30 day moving average] in this next short term cycle decline. That is likely to develop next week after the short term cycle peaks in the next session or two." 

And following up in Monday's Commentary he said, "Short term cycles were topping out on Friday and will begin rolling over this week...Don't be surprised by a pullback that resembles 6/11."

"Therefore, continue to use stops on intermediate term trades underneath a 21 or 30 day moving average. You can also continue to trade for bearish profits short term by watching the intra-day ETF's using the 8/8 crossover averages which have been very effective in these faster momentum/short term moves."

Hope you weren't on the sidelines during this opportunity. Use the DXD and QID, which are inverse ETFs we use to trade the Dow and NASDAQ, respectively, on down moves. At the close on Monday the DXD was up over 3% from its Thursday closing price. And the QID was up almost 5% from its Thursday close.

Steve put it this way in today's Commentary:  "Cycle analysis is the one tool in our technical arsenal that is designed to measure 'time', and the one tool that lets us predict when turns are coming due."

Update

With our main servers down in California, I am posting here for end of day Monday. Steve

The Times They Are A Changin'

At The Market Forecast we advocate and teach that any person who is educated and committed to trading properly with the right information can generate market-beating results. Unfortunately, most of the investing world has simply taught individual investors to settle for whatever results a professional money manager gives them. Worse, "buy-and-hold" investing has left many in financial ruins during the most recent bear market.

When the S&P 500 loses money over a 10-year timeframe, it's time to question old assumptions. A long-time advocate of buy-and-hold investing, The Motley Fool's Tom Gardner recently wrote:

The Motley Fool has been associated with long-term, buy-and-hold investing since our founding in 1993. And as co-founder and CEO, I'm writing to say that, for many people, long-term investing simply doesn't work. You read that right. Many investors today are wrong to anchor their stocks to an average holding period of three to five years or more.

from "Long-Term Investing Doesn't Work" June 5, 2009

And over at the Wall Street Journal, these two items describe the changes shaping the investor world:

The ups and downs of the market are prompting more retail investors to abandon buy-and-hold strategies in favor of opportunistic trading.

"The problem I have with the buy-and-hold strategy is that it's a bull-market strategy," says Matthew Tuttle, a financial advisor in Stamford, Connecticut. "In the bust, you give all your profits back."

from "More Investors Say Bye-Bye to Buy-and-Hold" April 8, 2009

Buffeted by steep declines in stocks, many bonds, commodities and real estate, many advisers are questioning their faith in long-standing investment principles.

Two prominent networks of financial advisors--the National Association of Personal Financial Advisors and the Financial Planning Association--are sponsoring panels at conferences this year on the subject of rethinking conventional approaches to investing and building client portfolios.

"There's a seismic change in the market," says Will Hepburn, president of the National Association of Active Investment Managers. "The people who were buy-and-hold-oriented lost a lot of money, and they don't want to do it again."

from "Advisers Ditch 'Buy and Hold' For New Tactics" April 29, 2009

Welcome from Steve

Welcome to our brand new blog!

Technology marches on, and in an effort to keep pace with it (though no twitter yet - I do really trade, and prefer a non-digital life as well), and to keep everyone who may or may not yet be members of our website http://www.themarketforecast.com/ informed, I plan on posting some great stuff that may not fit perfectly into all that we provide on our member site.

We'll be joined here by Chuck Warner, a friend and new contributor who comes with a wealth of background and experience in the markets. He loves what we're doing and will make a great addition to our editorial team.

First, let me provide a link I use all the time. It adds some very important perspective into underlying market conditions that most investors never consider. Those who have been members on our site for some time, and those who have attended any of my seminars or webinars know this one well: http://stockcharts.com/symsearch/index.html?$

It is a very long list, but here are some of my favorites: $SPXA50R, $SPXHILO, $NYHL

As an example, here is the $SPXHILO showing how in both bull and bear, the number of new highs and lows channel up or down, and why when looking at the far right side of the graph (current), you might not be so quick to call the bear market over for 2009!

Note, we are only reaching the top of that downward channel right now, and once we have reached it again, a reversal could catch a lot of investors by surprise.

Best of trades,
Steve

Welcome

Welcome to The Market Forecast Blog!  

The blog is not intended to take the place of The Market Forecast.com, but will be an on-the-fly supplement to information our readers have come to rely on to make great investing decisions. We will post when we believe there is something of value you should read, a web resource you should know about, or breaking insights that we feel might help clarify your decision-making.

Come here regularly for insights, links to resources and occasional commentary on today's market activity.

Ed.