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CURRENT-ADVICE   


Go to the Articles & Charts Page for weekly Updates


SUPPER CYCLES


History of supper cycles and prediction of the next one.


RSI-MACD-STOCHASTIC 


Advanced technical market indicators (Updated 10/23/2016)


MARKET-EDGE


Technical Analysis (TA) for stock selection


4YR-CYCLE   


Four year presidential cycle


VIX DEFINED


VIX is the volatility (FEAR) index for the market


JANUARY  BAROMETER 


Last January Barometer update was January 31, 2013


MARKET-LEGS


The 4 legs of a bull market


SELL-SIGNALS 


These signals help you decide when to sale


INCREASE YOUR CASH FLOW 


How to increase your investment cash flow


BOOK VALUE


Definition of book value and how to use it for investing in stocks


A/D STUDY
DdESCRIPTION OF ADVANCE/ DECLINE  AND HOW TO USE IT AS A BUY/SELL TIMING TOOL (Updated 7/17/2016)
 

BEAT NEXT BEAR MARKET

 

NEW 2017 How to BEAT the next bear market by using technical inticators. 

(FOR LONG TERM INVESTORS)

WATCH THIS WEBSITE PAGE EACH WEEK FOR A CHANGE IN THE MARKET DIRECTION

Three  Charts have been updated for 2016  More will be updated later.

Current Advice from this Service

AUGUST 7, 2013 MARKET UPDATE

 

  The following table is a summary of the important economic indicators

 

1.

The US economy expanded at an estimate  2.2% rate for the year 2012 according to a report from Big News Network.  The corrected  GDP was revised to 1.1% down from 1.8% for the 1st quarter 2013. The second quarter GDP for 2013 was  be reported at 1.7%.

2.

Consumer Sentiment Index: From the university of Michigan  was reported at 83.9 on July 31, 2013

3.

The Institute for Supply Management (ISM) estimate  reported its  index was 55.4 on July 31, 2013.

4.

The National Association of Realtors reported existing home sales were up to their highest level in five years.

Housing Starts for April = 476,000 and for May = 836,000. The median home price = $214,200.

5.

Notice the VIX went over 22 in December, 2012  and closed at 15.86 on March 28. For the full story please see Chart (8A) below. The VIX was up to 19 on the fear factor of the D.C. miss-management in February. Now it is at a very low of 11.98 on August 3, 2013.

6.

JOBS REPORT on July 5, 2013 added 195,000 jobs in June. Jobs report were revised for April at 199,000 and  for May 195,000. Unemployment rate came in at 7.4% currently compared to 8.3% one year ago. The unemployment rate at 7.4% included the people that was hired for part-time work and excluded the thousands of people the gave up looking for a job.

7.

Current 30 year fixed mortgage rate is 4.59% and the 15 year fixed rate is 3.65%.

 Several advisors look for the SP500 to rally during  the last half of 2013 and some are predicting 1675 to 1700 by December 31, 2013. Usually the summer months are slow for the market based on history.

 

The SP500 has exceeded the high mark of 1565 made in 2008 and this looks like the third leg of a bull market. The

technical indicators for this month are described in detail with the SP500 Charts # 1and #2  below. Employers have

added an average of 195,000 to 200,000 jobs for the last twelve months. The GDP estimates for the 2013 first quarter

are between 1.5 to 3.0% and it came in at 1.1%.

 

Since there is a chance that the super cycle will come into play sometime in 2014-2016  it may be a good plan to raise

some cash during the third and fourth quarters. Take advantage of the all time highs an take some profits out of the market.  Remember what happened in 1991, 2000, and 2009. (See the bubble history table below)

 


LIST OF PROBLEMS THAT WILL RESULT IN THE NEXT BEAR MARKET

report  on 12/24/2012 FROM Lombardi PUBLISHING. COM

Crisis CALLED FINANCIAL ARMAGEDDON is heading our way

1.

The devaluation of the dollar since 2009 will accelerate.

2.

Gold prices will continue to rise after the current correction. One TA advisor has the support level at

 1200/ OZ and several advisors are now saying that the main support is 1,000/ OZ. One very bearish advisor predicted the bottom for gold is $700/ OZ.

3.

The  EU is in a recession

4.

Inflation will become the real problem which will be the driver for the gold and silver sectors up trend.

5.

The stock market will ultimately test its March lows of March 2009 during the next bear market

6.

The government is leading us to Greece by going over their credit limit and printing trillions of dollars.

 In order to pay off the current federal debt every USA taxpayer will have to give 100% of our income to the IRS.

7.

The next recession 'X crash day'  is coming sometime in 2014 -2016 (See the Fed Crash Indicator below)


report FROM THE LAST EXPOVEST MEETING

 

NOTE the chart for 2009 to 2016 was added on 4/25/16

These charts includes major bear markets in 2000 and 2009 It also shows that the current bull market has formed a major long term triple top. Notice that the slopes of all three bull markets are close to 30 degrees. During the discussions at the meeting the slope of the 2000 bear market was equivalent to a 'XX Expert Ski Slope' and the slope of the 2009 bear market was equivalent to a cliff and the skier would need a parachute to survive. The question was asked when will the next bear market occur and how many degrees will be assigned to its slope.  Use the TA indicators included on this page to determine the best time to get completely out of the stock market. Notice the slopes of the RSI & MACD during the bear markets indicated  the relative strength and momentum oscillator were in a downward slope. The slope was reversed during the bull markets.


Global Currency Wars

1.  Mewsmax reported that Russia and China are now trading oil based on the Chinese currency and predicted that  other

     oil producing countries will soon follow. It was also reported that some countries will no longer accept the dollar.

     This is why China is building its gold reserves to double that of the US Gold reserves.


2. Paper money is a confidence game . Based on history it always becomes worthless . The federal government is spending

    it into oblivion by running the printing presses in overtime and borrowing money from other countries to pay debts, There are

    currently 16 nations uniting to bury the US dollar as part of the currency wars.


3. Excessive US Federal Debt with little or no spending cuts will result in another US credit rating reduction Current debt

    is estimated at 16 trillion see the chart below.


4. Excessive money creation by the Fed called QE1. QE2, Operation Twist and now QE3 to infinity. Dr. Ben says if it does

    not work the first,  second, third or forth time I will  try QE until it does  work   Take a look at the charts below on the

    current value of the dollar. The result of the  massive  money printing is making the dollar worthless. The Fed plans to

    continue QE3 until the unemployment rate drops to 6.5% from the current level of 7.6%.


5. There is over a 300% increase in the  US money supply with much of it sitting in excess reserves at the Fed and banks.

    When these funds make it into the markets and the economy, it is a mathematical certainty that inflation will surge and

    the price of gold will go up.

History of  bubbles

1.

1634

Tulip Mania

2.

1720

South Sea Bubble

3.

1840

Railway Mania

4.

1929

Roaring 20'S Bubble which led to the Great 1930's Depression

5.

1990-1991

S&L bubble

6.

1099-2000

Dot Com bubble

7.

2007

Housing-financial bubble which led to the Great 2000's Recession

8.

20XX

Excessive Global debt bubble sometime between 2013-2016

"Warren Buffett calls it the bond bubble".

 

Current total federal debt is estimated at $20 trillion USD.

TABLE FROM THE WHITE HOUSE'S WEBSITE

PUBLISHED BY: www.AGORAFINANCIAL.com/reports

FISCAL

YEAR

GROSS FEDERAL DEBT

      % OF GDP

2007

$8,950,744,000

65%

2008

$9,986.082,000

70%

2009

$11,875.851,000

85%

2010

$13,528,807,000

94%

2011

$14,764,222.000

99%

2012

$16,350,885,000

105%

H2013

$17,547,936,000

107%

2017 $20,547,936,000  

 

 

4. The dollar was taken off the gold standard in 1971 and it became the oil standard called the Petrol-dollar since oil  has been priced on the dollar. The Petrol-dollar is now in the process of being replaced.


 5. Based on the predictions from the advisors the current cyclical  bull market will come to an end some time  in

     2014-2016 and long term investors are advised to become defensive by buying gold stocks & ETF's, gold and silver

     coins and only stocks in high quality companies that have a track record of increasing dividends such as  the  SP500

     HIGH YIELD DIVIDEND ARISTOCRATS and utility companies on the MAX_ROI Page.


6. The FED easy money policy and by holding interest rates close to zero are the main reasons for the current illusion

     bull market.

     As the old market rule goes:

 ("Don't fight the Fed or the Tape")

Both are indicating a bull market at the present time.

 

Technical advice

Watch the moving averages and the  TA indicators: Death Cross (DC), Triple Top, RSI & MACD very closely for overbought conditions. The bubbles are occurring closer together now and the next one may occur within the next couple years. Dr. Martin E. Weiss thinks that the next bubble will be caused by the excessive debt and currency wars generated by countries around the world. Warren Buffett calls it the U.S. Treasury Bond Bubble. If one country goes into default it may cause a chain reaction like an atom bomb going off and  cause all of the global markets to crash.


The only warning will be that smart investors will be selling in advance of the default and the TA indicators will go negative. Usually there is a triple top during a cyclical bull market which represents market distribution when the professional investors are selling their stock holdings. The triple top is also called the HEAD AND SHOULDERS TOP FORMATION. (see Chart #2 below)


The next indicator will be the Death Cross (DC) when the 50 DMA crosses the 100 DMA on the downside. ( See chart #2 below) That will be the last indicator to sell all of your non-dividend paying stocks and gold investments. Some advisors are predicting that the next stock market crash will start between 2014 -2016.


Also invest in  companies with overseas income that pay solid dividends, Barron's recommended  T. Rowe Price International Stock Fund

(PRITX) at $14.88 Y= 1.31% Morningstar = 3 stars,  our neighbor Canada (EWC), gold and silver stocks like CDE . The Sp500 ARISTOCRATS (forever stocksjust in case Dr. Martin Weiss and Newsmax advisors are correct.

Consider investing in stocks on the MAX-ROI Page 'black gold oil stocks' or oil & natural gas service companies and pipe lines including  (KMP, COP  &  SLB).


No longer will the USD be the world reserve currency.

When that happens invest in the gold, black gold and pipe line companies listed above and collect  their dividends.

 

Please take a look at chart #2 below for a

four step  illustration PRIOR TO A MARKET CRASH


NEW WAY TO INCREASE YOUR INVESTMENT CASH FLOW

 

When is the best time to sell  covered calls or puts.

Based on statistics  80% of all options expire worthless generating

cash flow for the investors who sell options rather than buy them.

 

Warren Buffett  sells covered calls and puts to increase cash flow for his company.

Gazelle Global Gold & Natural Resources Income Trust (GGN) also sells covered

calls and puts to increase cash flow and to maintain the 14.7 % dividend rate

 

1. How to sell Covered calls

Use the RSI and the MACD  for your stock to determine the best time to put the odds in your favor for selling a covered call. Wait until the RSI is in the 70 zone and the MACD is in the 20+ zone before placing your order. Your stock will be in the technical overbought zone at this time and this will increase your odds that it will correct to neutral or oversold zones and you will be able to cover the call at a lower price or it will expire worthless.

 

 2 . How to sell PUTS

Use the RSI and the MACD  for your stock to determine the best time to put the odds in your favor for selling a put. Wait until the RSI is in the  30 or below zone and the MACD is in the -10.0 or below zone before placing your order. Your stock will be in the technical oversold zone at this time and this will increase your odds that  it will correct to neutral and you will be able to cover the put or it will expire worthless.

EXAMPLE

To sell puts on stocks that you would like to own anyway. Look at ABX which is trading at $13.65 on July 5, 2013 with a 5.54% dividend and  forward P/E of 4.96. Maybe you would love to own it at an even $13.00 per share. The January, 2014 put strike $13.00 sales for $1.95 each. If you sale 3 contracts you will receive $585.00 less commissions. If ABX trades at $13.00 or below in January, 2014 you will have to buy 300 shares of ABX at $13.00. which you were planning to do anyway. If it makes a correction and sells above $13.00 per share  you just made a profit of $585.00 to add to your cash flow. (Look at the ABX chart on the MAX-ROI Page it is trading at a 21 year low at 13.65 on 7/5/2013)

 

 

HOW TO BEAT THE NEXT BEAR MARKET USING TECHNICAL INDICATORS "UPDATE 2017 from the Charts & Articles Page"

 

charts of the important indexes

 

CHARTS TELL WHAT IS GOING ON WITH THE STOCK MARKET

 

DEFINITION OF TECHNICAL INDICATORS

INDICATORS

Distribution triple top and up/down volume pattern indicates the market is under distribution

2.

The early warning  Death Cross Signal (DC) when the 50 DMA crosses the 200 DMA on the downside. The Life Cross signal is when the 50 DMA crosses the 200 DMA on the upside.

3.

The slope of the SP500 200 DMA turns negative

4.

Moving Average Convergence/Divergence (MACD) indicates a bearish trend.

5.

Relative Strength Index (RSI) is bearish and reaches or exceeds the 30 line on the chart below

6.

Click for the definition of  RSI-MACD  

***CHART  update April 25, 2016**

 The 2016 update for the S&P 500 is that this market is setting records as being the longest bull market in history.

It is beginning to look top heavy and the several major sell signals have occurred.

 

1. A triple top (3X-TOP

2. Two Death Crosses (DC)

3. So far the current high did not go higher than the previous highs.


The good news is the index is holding above the 50 & 200 DMA'S  which will keep that index in an up trend.  It has  closed above the 1470 resistance level which was the high in September 2012 and last week it exceeded its all time

high of 1565  made in 2008 and it is now making new all time highs above 1650. The correction that crossed the 50 DMA to the downside was healthy because the market was over extended.


The RSI and MACD indicators are in the overbought zone.  The three legs of a bull market are shown on the chart. Notice that both the RSI and the MACD traded in the overbought zone during the tops of  LEG 1 and LEG 2 and now

LEG 3.


A distribution period is where professional traders take  profits before the technical indicators turn to a negative slope.

Based on TA the overbought zone is where stocks should be sold.

 If you are into options, sell covered calls at the tops (Over-bought) zone shown in  Legs 1, 2 and 3.

You can buy back  your covered call when the RSI index hits 30.


For long term investors wait for the 50 and 200 DMA's to the turn to a negative slope and the DC occurs before

selling. December has a history of being the strong month and usually the rally continues through April which

leads to the wall street rule 'Sell in May and go away'.

***CHART  #2 update AUGUST 3,  2013***

The SP500 10 year shows what happened in 2008 and 2009

Table of Technical indicators that warned of the coming market crash in 2008-2009

1.

Period of distribution when the professional traders were taking profits at the top in 2008 and creating the

HEAD AND SHOULDERS TOP FORMATION.

2.

The slope of the 50 DMA turned negative and crossed the 100 DMA on the downside which gave the 'DC'

3.

The slope of the 100 and 200 DMA's turned negative.

4.

Both the RSI and the MACD went from 'overbought' to 'neutral' and to 'oversold at 20 & -80'

***CHART  #3 ***

SP500 three year chart dated March 30, 2012

 

 This chart shows that the bottom of the October correction was higher than the correction in June 2010. All of the TA indicators in the chart above are positive. If we get a bull market third leg, the SP500 will go above the 1550 level. The index was trading above the 50 & 200 DMA's and the (LC) occurred in February Notice the huge up slopes of the RSI (A & B) & MACD (G & H) which indicates this rally has huge strength & momentum. Also notice the inverse triple bottoms which are another bullish technical indicators. This looks like one of the counter-trend cyclical rallies or cyclical bull market within the  long-term secular supper cycle

***CHART  #4 ***July 31, 2012 update = 2,939.52

NEW FEBRUARY 6/2012

  NASDAQ COMPOSITE INDEX

The NASDAQ hit a new 11 year high last week at 2905 with the technology sector leading the way with a 3.23 % gain for the week.

***CHART #5 ***

Detailed Technical Analysis  (LAST UPDATE WAS JUNE, 2011)***

The 'DEATH CROSS' (DC) occurs when the 50 Day Moving Average (DMA) crosses the 200 DMA on the downside. If this occurs and the other technical indicators are in concurrence, a major correction in the stock market usually occurs. The 50 DMA penetrated the 200 DMA in June, 2009 on the upside which created a bullish 'Life Cross' (LC).  The 200 DMA slope turned positive in July, 2009 which created a major technical buy signal as shown in the chart above. Notice the LC occurred before the 200 DMA slope turned positive and the RSI started trading above 50 and reached the overbought zone of 70 before the 200 DMA turned positive between March - August, 2009. The MACD also started trading above the center line. All of these leading technical indicators showed that the bear market was over and it was time to go long..


*** UPDATE WAS JULY, 2011 to SP500 chart #5***

Inverse triple bottom where the right shoulder is higher than the left shoulder is a bullish indicator that a major bottom has occurred, this is also called accumulation. The circle at the extreme right on the 200 DMA shows that this index was a support line where investors put in buy orders which is also called bargain buying.  RSI #1 and RSI #3 indicate an up-trend in that every high is higher than the previous high. This occurred during the first leg of the current bull market. It also indicated that there was a large percentage of stocks going higher. The advancing stocks out numbered the declining stocks which gave to market upside relative strength. RSI # 2 indicates that there was relative strength building in the market after the May - June correction in 2010 with each low higher than the previous low and the LC occurred in October.

RSI #4 is a problem  in that each high is lower than the previous high, it shows there is less participation in the number of stocks reaching new highs and not adding to relative strength of the bull market. The bull market is still alive but becoming more sector selective.

***MACD***

MACD # 1 and MACD #2 both were in up trends during July 2011.

  Notice that both the RSI and MACD gave advanced warnings before the two corrections.

            For a complete definition and a technical analysis of the RSI & MACD please click

 

RSI-MACD

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SUPPER CYCLES

***CHART  #6 ***

AUGUST 3, 2013 update = 19.47

SC = SUPPER CYCLE also called SECULAR CYCLE is long term bear market cycle

Notice: this chart will be updated each month

   SC1 1906 to 1921 = 15 years;  SC2  1929 to 1949 = 20 years;  SC3 1966 to 1982 = 16 years  and  SC4 2000 to 2016 = 16 years with a goal set at P/E at 5 to 9 at X  based on history.  Within each SUPPER CYCLE there are CYCLICAL CYCLES which are called counter-trend cyclical rallies or cyclical bull markets within the  long-term secular supper cycle. For long term investors the time to invest in stocks is when the SP500 PE ratio is below 11 and sell when it is above 20.

 

  This information came from an article by David Skaria a Financial advisor for 'News Max' who is the  author of the 2010 book 'The Great Super Cycle'. David indicates the next bear Supper Cycle will be driven by the coming inflation tidal wave, dollar devaluation including the replacement of the dollar with as the worlds reserve currency.  David also believes the current cyclical bull market will reach the SP500 1500 area before the topping out. The market topping out usually lasts from four to seven months and is called the distribution period when professionals sell their stocks.

 

  Just as a comparison the current cyclical bull cycle can be compared with  the 1966 - 1982 cycles.

  Since the current secular supper cycle has started, Gold has climbed from $300 to over $1,600 an ounce. Some advisors are predicting that

  gold will continue to go up from current levels after the current correction is over.

 

David recommends the following as a way to ride out the next super cycle.

SYMBOL

          NAME

BEARX

The Prudent Bear Fund

HDGE

The Active Bear Fund

GLD

SPDR Gold Trust

CEF

The Central Fund of Canada

GDX

Market Vectors gold Miners

NEM

Newport Mining

GG

Goldcorp

GGN

Gamco Global Gold Natural Recourses & Income Trust which is invested is several

companies listed above and pays a 10% dividend.

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VIX DEFINED

 

 The definition of the VIX  index

 

The VIX stands for Chicago Board Options Exchange Market Volatility Index and it measures implied expectations for the SP500 index's volatility over the next 30 days. The VIX is like "fire insurance" for stocks and is called the fear index or gauge.

 

Professor Menachem Brenner and Professor Dan Galai first developed a method to describe Volatility in 1986 and it was published in the "New Financial Instruments for Hedging Changes in Volatility" In 1993 the CBOE introduced a volatility index under the trademark "VIX" based on a formula by Vanderbilt University Professor Robert Whaley  .

 

The VIX is quoted in percentage points and translated roughly to the expected movement in the SP500 index over the next 30 days. It is calculated and disememinated in real-time by the Chicago Board of options Exchange. It is a weighted blend of prices for a range of options on the SP500..  On March 26, 2004 the first ever trading in futures on the VIX began. As of February 24, 2006 it became possible to trade VIX options contracts

 

The VIX is the square root of the par variance swap rate for a 30 day term from day 1.The VIX is the volatility of a variance swap and not that of a volatility swap where volatility being the square root of variance, i.e. the standard deviation In other words the square root or the

RISK neutral expectation of the SP500 variance over the next 30 days and is quoted as an annualized standard deviation.

As an example: if the VIX is 15, this represents an expected annualized change of 15%  over the next 30 day period. This infers that the SP500 index will move up or down 15%/sq root of 12 = 4.33%. This implies  that index options are priced with the assumption of a 68%  likelihood

(one standard dilation) that the magnitude of the change in the SP500  in 30-days will be less than 4.33% (up or down)

 

Some advisers reported that if the VIX is over 20% expect a volatile market where investors have the greatest fear.

 

***CHART  #7 *** The vix was  at 14.31 January 31, 2013***

(SEE CURRENT UPDATE BELOW)

VIX is one more market indicator as shown in this chart.

Notice the VIX touched the 30 mark 3 times during the sell off distribution

triple top period which acted as a warning indicator.

***CHART  #8 Update June 24, 2012 (SEE CURRENT UPDATE BELOW)***

This chart shows how to use the VIX as a sell indicator. The VIX kissed the 30 nark during the major distribution period in July 2008 which was a warning that fear was building ( this was also at the right shoulder of a major triple top). The VIX exploded to 40 at the same time the TA indicator Death Cross (DC) occurred and the SP500 than sank  from 1300 to 650. The green Life Cross (LC) buy indicator  occurred in June 2009.

The short term sell pattern reoccurred for traders in 2010 and 2011 for the market corrections during the current

counter-trend cyclical rallies or cyclical bull markets within the  long-term secular supper cycle.

Notice the VIX was still above 30 when the LC occurred in June 2009 but the VIX trend was going down.

***CHART  #8A ***Update AUGUST 3, 2013 vix = 11.98***

This is the VIX chart with the RSI & MACD included. The critical levels are at 20 and 30 as shown. 

Notice the VIX went over 22 in December due to the FEAR FACTOR of the FISCAL CLIFF and closed at

 safe level of 12.70 on MARCH 28, 2013.One advisor said that when the VIX is over 20 it indicates a market correction is coming. When it is over 30 a major market  down turn is coming and over 40 a recession is due to come. Another advisor said that the VIX will double in the second half of 2013.

 

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Elliott Gue Editor of Personal Finance recommends diversification into global companies as a strategy for the collapse of the USA dollar.

 This can be achieved by investing in companies that obtain some of their revenue from overseas such as:

  Qualcomm (NSDQ:QCOM), Bunge (NYSE:BG), Peabody Energy (NYSE:BTU)  in Table # 1

and Table #2 includes additional companies that have large foreign investments.

TABLE # 1

Revenue by Geographic Segment in $millions

 

Country

2005

2010

QCOM

Asia

$3,889

$8,485

QCOM

Other Global

$769

$1,942

QCOM


US


$1,015


$546


BG

Europe

$8,904

$15,490

BG

North America

$7,033

$12,099

BG

South America

$5,458

$11,945

BG

Asia

$2.956

$6,136

BG


Other Global


$26


$37


BTU

US Mining

$3,350

$4,027

BTU

Australian Mining

$598

$2,520

BTU

Trading

$679

$291

 

Table # 1

additional companies with foreign investments

 


Market Edge

 Market Edge uses Technical Analysis (TA) to determine the short term 'Buy' and 'Sell' recommendations for individual stocks. All of the recommended stocks on the MAX-ROI page have been reviewed by Market Edge as shown in the table.

A description of Market Edge analysis is listed below the MAX-ROI STOCK RATINGS table on the MAX-ROI page.

1.

SP500 50 Day Moving Average slope: When the it turns positive, day traders go long and when it goes negative they sell and

sell short

2.

SP500 100 Day Moving Average slope: When the it goes positive, long term investors go 25% long and when it goes negative

sell 25%.

3.

SP500 150  Day Moving Average slope: When the it goes positive, long term investors go 60% long and when it goes negative

sell 60%

4.

SP500 200  Day Moving Average slope: When the it goes positive, long term investors go 100% long and when it goes negative

sell 100%

5.

The LEI  indicator turned negative which is another bearish indicator.  The LEI indicator consists of four indicators: 1. Employees on non-farm payrolls 2. Personal income less transfer payments 3. Industrial production 4. Manufacturing and trade sales.

The LEI is the leading Economic indicator which had a reversal to the downside. The LEI also turned negative prior to the last bear market that started in 2008. A TA guys from CNBC pointed out that SP500 formed a head & shoulders top that started in the summer of 2007 and completed the right shoulder December 2007 with the right shoulder lower than the left shoulder. Although there was a famous V shaped bottom in March 2009 the CNBC technicians pointed out that it was also an inverse head & shoulders with the right shoulder higher than the left shoulder which is a bullish indicator. The next bullish indicator was the SP500 200 DMA slope turned positive just after the completion of the right shoulder. Based on the chart above if the investor used the (L.C. LIFE CROSS) as a buy indicator he would become bullish 8 weeks before the SP500 200 DMA turned positive in the summer of 2009.

Some of the market advisors  are now predicting that the market will drop another 10% to 20%  from the current level due to the worldwide debt problems (the debt bubble) and long term cycles

This chart below shows the 200 DMA of the SP500 index.  Item 4 in the "BB CYCLE' table indicates that all investors should be

100 % invested.

***CHART  #9 ***

This chart shows how the BB-CYCLE works and will keep you safe with your investments.   The 200 DMA had a up trend slope with full investment signals on the "A" and "B" cycles. Reference the  "Analysis of the bull market legs chart" at the bottom of this page represents the  A stage of the great bull market of the 80's & 90's. The "B" cycle represent the "C & D" bull market cycles on the legs chart. The "C" cycle was the bear cycle after the tech bubble burst in 2000 and all of the DMA's gave sell signals in time for investors to get out of the market. The "D" cycle was the bull cycle and the index made a beautiful "technical triple bottom" with each low higher than the previous low ( See the NYSE INDEX chart below). This was a sign that the bear market was coming to an end. The "E" bear market was caused be the housing and financial bubble busting. The DMA's slope turned negative in time for investors to get out of the stock market. The bear market bottom in 2009 had a V shape similar to the bear market bottom of 1987, However all of the DMA slopes turned positive in time for investors to enjoy the 60% rise in investment values. Most of the DMA slopes are now negative as shown by the charts on this page and the MAX_ROI Page.

\

Watch the moving averages. RSI & MACD very closely. The previous bubbles occurred in 1929, 1990, 2000 and 2007. Bubbles are occurring closer together now and the next one may occur within the next few years. Dr. Martin E. Weiss thinks that the next bubble will be caused by the excessive debt generated by countries around the world. If one country goes into default it may cause a chain reaction like a atom bomb going off and  cause all of the global markets to crash. The only warning will be that smart investors will selling in advance of the default and the slope on  the 50, 100 & 200 day moving averages will go negative. When this happens this service will issue a sell signal with the advice to hit the sell  key on your computers and wait.


 SP500 Operating Profits

YEAR

EARNINGS

YEAR TO YEAR CHANGE %

2010

$75.00

27%

2009

58.52

-11

2008

65.47

-23

2007

85.12

-3

2006

88.18

16

2005

76.28

14

2004

67.10

21

2003

55.44

16

2002

47.94

6

Four year Presidential cycle statistics by Louis Navellier

   The third year of the Presidential cycle usually is a good year for the stock market because historically it posts spectacular returns.  While economic prosperity tends to characterize the third year, the news media also seems to be much more upbeat, as they turn their attention to the promises of the candidates for the next term.

                           The average returns of the S&P 500 between 1899 through 2006 during the USA Presidential terms:

FISHER INVESTMENTS

REPORT

FIRST YEAR

SECOND

YEAR

THIRD

YEAR

FOURTH

YEAR

 S&P 500 11/1/1926 TO 12/31/2006 AVERAGE RETURN

7.2%

8.7%

20.0%

13.3%

POSITIVE YEARS

10

13

18

17

NEGATIVE YEARS

10

8

2

3

///////////////////////////

/////

/////

/////

/////

Louis Navellier REPORT

 S&P 500 1899 TO 2006 AVERAGE RETURN

2.9%

3.7%

11.2%

8.4%

 

  In the third and fourth years on the Presidential term there is rising optimism and the party in power adjust the economic indicators to be favorable for the upside to insure re-election. (End of Navillier report)

New research is now available from Barron's April 27, 2009 that will change the way the four year

 Presidential Cycle can be used for

technical analysis.

 

CHART #3

There is a strong tendency for each new president (1st term) to do whatever it takes to have a strong economy and stock market  when the time comes for reelection. As the above table shows, of the 19 bear markets since 1917 ( bear market is defined as a drop in stocks prices of 20% or more) all ended in the first or second year of the Presidential Term. The economy and stock prices recovered by the next presidential election. If you study the chart you will find that there were three bear market bottoms in the third year and one in the fourth year of the Presidential Cycle. Herbert Hoover did not get reelected and that is the year the bear market ended in the forth term of his Presidential Cycle

Based on the history of the Presidential Cycle, the odds are in favor of the current bear market ending in 2010 based on the economic signs that are showing up and the market seems to be building a base from the March 2009  low.

Based on the data presented in the table above, the president in office that is not eligible for reelection may not try to simulate the economy and that may explain the Hugh Bear Market in 2008 and 2009.

 

ART1-DESCRIPTION OF A/D AND HOW TO USE IT AS A MARKET TIMING TOOL

Special report comparing the Advance- Decline line to the  S&P 500 index

  • The idea came from Helen Melsler of Charles Schwab Inc. Helen uses the A/D data compared to the  S&P 500 index to determine oversold and overbought conditions of the market.

  • By plotting the A/D line compared to the S&P 500 index there is a definite correlation.

  • The A/D lines tends to change slope a few days ahead of the S&P 500 index;  therefore, giving an advanced notice of a change in market direction.

  • Also notice that the A/D line seems to lead the S&P 500 index during the C and D stages of a bull market

(Reference the 4 (A,B,C & D) stages of a bull market chart below.) This may indicate that individual investors have  joined the institutions by buying more stocks that have not participated in the bull market.

Elliott Gue Editor of Personal Finance gives advice on how to profit from the barrage of fiscal stimulus over the next two years, and a defensive position for the current bear market.

 

The following  price, yield and P/E data was obtained on January 16, 2009.

1. Transportation infrastructure: Research  companies that may win government contracts to improve roads and repair bridges.

2. Water infrastructure: Veolia Environnement ___ (VE) P=$26 Y= 7% P/E=8.6

3. Electricity Distribution: Shaw Group__ (SGR) P=$28 Y= 0% P/E=23.9

4. Inflation Hedge: Gold Corp _________ GG) P=$27 Y= 0.7% P/E=22.9

5. Health Care: Quality Systems_______ (NSDQ: QSII) P=$41 Y= 3% P/E=25.4

6. Higher Education: Apollo Group _____ (NSDQ: APOL) P=$88 Y= 0% P/E=27.4

7. Defensive bear market investments: Electric utilities usually maintain their value in bear markets; (AEP), (DUK) & (SO); & Waste

    Management (WMI)

     (AEP) P=$32 Y= 5.2% P/E=8.8;   (DUK) P=$15 Y= 6.2% P/E=14.7; (SO) P=$35 Y= 4.8% P/E=15:  (WMI) P=$32 Y= 3.3% P/E=13.7

 

Introduction

The Advance-Decline Line (AD Line) is a breadth indicator based on Net Advances, which is the number of advancing stocks less the number of declining stocks. Net Advances is positive when advances exceed declines and negative when declines exceed advances. The AD Line is a cumulative measure of Net Advances. It rises when Net Advances is positive and falls when Net Advances is negative. Chartists can use Net Advances to plot the AD Line for the index and compare it to the performance of the actual index. The AD Line should confirm an advance or a decline with similar movements. Bullish or bearish divergences in the AD Line signal a change in participation that could foreshadow a reversal.

Calculation

AD Line (previous value) + Net Advances (current value)

The actual value of the AD Line depends on the starting point for the calculation. The AD Line has to start somewhere so the first calculation is simply Net Advances for one period. The next calculation is the AD Line value for the previous period's value plus Net Advances for the current period. The example above shows the AD Line calculation for 25 days beginning on April 15, 2010. The first value is simply Net Advances for that day (-93). The second value is lower because Net Advances for April 16th was negative (-1899). The AD Line moved lower until Net Advances turned positive on April 20th (+1934). Even though the actual value of the AD Line would be different if it began in January 2009, the shape of the line for this calculation period would be exactly the same. It simply rises and falls as Net Advances rises and falls. The shape and direction of the AD Line are important, not the actual value.

Interpretation

The AD Line measures the degree of participation in an advance or a decline. An AD Line that rises and records new highs along with the underlying index shows strong participation that is bullish. An AD Line that fails to keep pace with the underlying index and confirm new highs shows narrowing participation. Market strength is undermined when fewer stocks participate in an advance. Narrowing participation is often identified with a bearish divergence between the AD Line and the underlying index.

On the downside, the market is considered weak when the AD Line moves to new lows along with the underlying index. This reflects broad participation in the decline. A bullish divergence forms when the AD Line fails to record a lower low along with the index. This means fewer stocks are declining and the decline in the index may be nearing an end.

Bullish Divergence

Chart 2 shows a bullish divergence in the NYSE AD Line. Because the NYSE AD Line is based on the advance-decline statistics from the NYSE, it makes sense to compare its performance to the NYSE Composite. A bullish divergence formed in June-July 2009 when the NYSE Composite moved below its June low and the NYSE AD Line formed a higher low. Even though this bullish divergence is rather small and only encompasses a few weeks of trading, it foreshadowed an important low in July 2009. The NYSE Composite advanced over 10% from its July low to its August high. Larger bullish divergences can be found from October 2002 to March 2003 and from May 2004 to August 2004. These divergences foreshadowed important lows in the stock market.

Bearish Divergence

Chart 3 shows two bearish divergences in the NYSE AD Line from June to November 2007. The NYSE Composite moved to new highs in July, but the AD Line peaked at the beginning of June. The lower high in the AD Line in July 2007 set up the first bearish divergence because breadth did not confirm the index.

 

The NYSE Composite surged again to new highs in October, but the AD Line fell well short of its July high and formed another bearish divergence in October. Actually, there are two bearish divergences at work here. First, the AD Line did not exceed its summer highs. Second, the AD Line formed a lower high from early October to late October. With the NYSE Composite forges higher highs during these timeframes, bearish divergences took shape because breadth did not confirm. This string of bearish divergences foreshadowed the January support break and the bear market of 2008.

Quirks

The advance-decline statistics have a few quirks that chartists should understand. First, the Nasdaq AD Line can fall for extended periods, even if the Nasdaq itself is rising. This is because Nasdaq listing requirements are not as strict as NYSE listing requirements. The Nasdaq is full of upstarts in industries ranging from biotech to technology to alternative energy. There may be huge upside potential, but there is also risk of absolute failure. This means more Nasdaq stocks are prone to delisting. Companies that fail are removed from the index and replaced, but their negative affect on the AD Line remains. Chart 4 shows the Nasdaq AD Line declining even as the Nasdaq advanced from 2010 until 2012. The AD Line turned up and advanced along with the Nasdaq in 2013, but turned down in 2014 and did not follow the Nasdaq higher.

 

Second, the advance-decline statistics favor small-cap and mid-cap stocks over large-cap stocks. Thousands of stocks trade on the Nasdaq and NYSE every day and the vast majority of these stocks are small and mid cap. Relatively few are large-caps. Regardless of market cap or volume, an advance counts as +1 and a decline counts as -1. This means that an advance in ExxonMobil, with a market capitalization in excess of $200 billion and average daily volume in excess of 20 million shares, counts the same as an advance in Teco Energy, which has a market capitalization less than $5 billion and average daily volume around 2 million shares. The AD Line is the great equalizer.

Conclusions

The AD Line is a breadth indicator that reflects participation. A broad-based advance shows underlying strength that lifts most boats. This is bullish. A narrow advance shows a relatively mixed market that is selective. Narrowness participation in an advance (or decline) sets up the divergence signals. An advance with narrow participation is unlikely to keep up with the underlying index and a bearish divergence will form. Similarly, a decline with few stocks participating is unlikely to keep up with the index and a bullish divergence will form. These divergences can help chartists identify potential reversals in the underlying index.

END

HARTS ARE DATED 1/30/2009 AFTER THE CLOSE.

CHART #4    History of recessions in the USA since 1929. Based on history the market switches to an up trend 3 months before the recession ends on the average.

       

***CHART  #10 ***

 The change in slope for the DJIA 200 day moving average is posted on this chart. In each

                                  case a major change in market direction followed the new slope.

   CHART ANALYSIS DJIA 1970 TO 2008

TOTAL

QUARTERS

UP

QUARTERS

DOWN

QUARTERS

UP

MONTHS

DOWN

MONTHS

152

127

25

381

75

CHANGE IN SLOPE 200 DMA BY QUARTER

NUMBER

1

2

3

4

5

SLOPE DOWN

1ST  Q 1974

3RD Q 1987

2ST Q 1990

1ST Q 2000

4RD Q 2007

SLOPE

 UP

1ST Q 1975

2ST Q 1988

1ST Q 1991

1ST Q 2003

UP MAYBE 2009 or 2010


     A presentation on Market Technical Analysis was given  to the Expovest Club members on

                                                                         August 5, 2008.

The presentation included the history of using the 200 day moving average change in slope as an indicator of a change in market direction from 1970 to 2008. Support, and resistance channels, triple tops and triple bottoms were discussed. The tables above show the buy and sell signals based on the 200 DMA change in slope. Based on the table above the investor would be in cash for most of the bear markets since 1970. For long term investors that  never sell stocks, there are more up quarters than down quarters, which should result in a positive return on investment. (ROI).

 

History of bear markets as published in Barons  June 30, 2008:

1. 1929-1931 (the great depression) the DJIA dropped  85%

2. 1973-74 (the oil embargo), the DJIA dropped 50%.

3. 2000-2003  (the tech bubble, Enron, WorldCom, World Trade Center collapse) the DJIA dropped 55%

4. The reasons for a current bear market are listed above.

With all  bear markets, including 1987 and 1991,  the  DJIA has an average drop of 30%, according to the article in  Barron's.

If this is the start of another bear market, the DJIA should  find technical support somewhere between 20% to 30% below its current level. Since this is election year the market may not test the support  level until  2009 or 2010

To maintain the great bull market that started in the 1980's, the support for the DJIA is in the 10,000 range as shown by the chart above which has been penetrated.

STOCK MARKET REACTION TO CRISIS EVENTS SINCE 1929

BY T. ROWE PRICE ECONOMISTS

THE TIME TO BUY IS WHEN THERE IS BLOOD IN THE STREETS FROM BROKERS JUMPING

OUT OF WINDOWS AVERAGE ANNUAL RETURNS 1 YEAR AFTER BEAR MARKET BOTTOMS

 SINCE 1962 = 31.4%

CAUSE OF

MARKET CRISIS

REACTION PERIOD

 DATES

% GAIN/LOSS

IN DJIA

 REACTION

PERIOD

% GAIN/LOSS

IN DJIA IN 63 MARKET DAYS AFTER REACTION

PERIOD

% GAIN/LOSS

IN DJIA IN  126 MARKET DAYS AFTER  REACTION

PERIOD

FINANCIAL CRISIS 1929

10/11/29 - 11/13/29

-43.1

+34.1

+46.0

WW II

12/6/41 - 12/10/41

-6.5

-2.9

-9.6

ARAB OIL EMBARGO

10/16/73 - 12/5/73

-18.5

+10.2

+7.2

NIXON RESIGNS

08/7/74 - 08/29/74

-17.8

-5.7

+12.5

FINANCIAL CRISIS 1987

(BLACK OCTOBER MONDAY)

10/2/87 - 10/19/87

-34.2

+11.4

+15.0

IRAQ INVADES KUWAIT

08/02/90 - 08/23/90

-13.3

+2.3

+16.3

ASIAN STOCK CRISIS

10/07/97 - 10/27/97

-12.4

+10.5

+25.0

TT & PENTAGON  ATTACKS

9/10/2001-9/21/2001

-14.3

+21.2

+24.8

MORTGAGE CRISIS & REAL ESTATE BUBBLE 2007/08

12/2007-11/2008?

-40 to -50

   

                             TA 101 indicators for a sell signal:

1. Triple top where each bottom is lower than the previous low. The charts above shows a triple  top on the

     DJIA and the NYSE  Indexes from the 2002-2008 bull market.          

2. Distribution period after a long bull market where the institutions and professional investors take profits.

3. The 6/27/08 charts above show a negative change in slope of the DJIA & NYSE 200 Day Moving  Averages (DMA)

                      TA 101 indicates the following to be a buy signal:

1. Triple bottom  after an extended bear market where each bottom is higher or equal to the previous  low

     and each high is higher than the previous high.

2. Accumulation period after a long bear market where the institutions and professional investors buy stocks

3. Positive change in slope of the NYSE 200 Day Moving Average (DMA).

There are several non-technical factors that should be considered in evaluating the current stock market:

 

1.  Presidential four year cycle usual results in a positive stock market during an election year.

2.  The economy is predicted to continue to grow in 2008 and 2009 but at a slower pace because of energy prices.

3.  A bear market usually starts prior to a recession and the economist are saying that the chance of a  recession in 2008/2009 

      is 40 to 60%.

4. The old indicators are not as reliable as they use to be because of the global economy.

5. The unemployment rate over 5%.

6. The Personal Finance Newsletter recommends staying in high dividend paying stocks during a bear market because based

     on history they go down the least and you will receive income to help relieve the pain for capital losses.

7. When the stocks in the S & P 500 Index are trading near P/E of 10-12, it is a time to buy stocks for long term investments.

     When the stocks in the  S & P 500

8.    Indexes are trading at a P/E of 20 or above it is a time  to take profits and invest in defensive equities and bonds. This

     advice came from an article in Barron's on 9/22/2008.

 STOCK MARKET IS A LEADING INDICATOR

 

***CHARTS  #11 & 12 ***

 PROOF THAT THE STOCK MARKET IS A LEADING INDICATOR

Based on 10 recessions since 1945, there have been a medium of 10 months per recession.  As seen in the chart the stock market has been a good indicator of each recession. From the pre-recession bull market peak (top) to the bottom, the S&P Index fell an average of 23.6%. The market usually starts rising half-way through the recessions and gains on the average after the recession low  an average of 24% and after 12 months to 32%. Ten of the 18 bear markets since 1930 were accompanied by a recession.

On average corporate earnings peaked about 10 months prior to the start of the  recession and hit bottom about 4 months after the recessions began

***CHART  #13 ***

NYSE INDEX and the 200 day moving average. There was a long distribution period in 1999-2000 with a triple top and a negative change in slope of the 200 DMA. There was a classic triple bottom and a positive change in slope during 2002 and 2003 which was a long term buy signal.

***CHART  #14 ***

DJIA and its 200 Day Moving Average shows the same    pattern of sell and buy signals as the NYSE. Both indexes are showing signs of a major top distribution period at this time.

***January Barometer***  1/1/2007/1/1/2011

Since it is January 2009 it is time to take a look at the famous January barometer which holds that  as the major indexes go in January so goes the entire year. This indicator was devised by Yale Hirsch of the Stock Traders Almanac in 1972, which has a good track record of being right 90% of the time and even higher in odd numbered years when the new congress convene. The reason it works so well in odd years is the agendas that are set by the new congress in power. This tells investors what to pay attention to. This year it is energy independence and recovery from the economic crisis. Yale uses the S&P 500 index and Dow Theory Forecast uses the DJIA to forecast the direction of the market. This service uses the NYSE index. The first five days of the new year also has predictive power as to the direction the stock market.

 

 

DJIA

NYSE

S&P 500

STATUS

JAN 2, 2007

12463

9139

1418

 

JAN 31, 2007

12621

9254

1438

ALL UP FOR MONTH OF JAN 2007

DEC 31, 2007

13264

9740

1468

ALL UP FOR THE YEAR OF 2007

//////////////////////////

/////////////////

/////////////////

/////////////////

/////////////////////////////////////////////////////////////////////////

JAN 2,  2008

13264

9740

1468

JAN 31, 2008

12442

8994

1355

                       ALL DOWN FOR MONTH OF JAN 2008

DEC 31, 2008

8776

5757

 903

ALL DOWN FOR THE YEAR OF 2008

/////////////////

/////////////////

/////////////////

/////////////////////////////////////////////////////////////////////////////

JAN  2,  2009

8776

5757

 903

JAN 31, 2009

8000

5195

 825

ALL DOWN FOR MONTH OF JAN 2009

DEC 31, 2009

        10482

7184

1115

ALL UP FOR THE YEAR OF 2009

//////////////////////////

/////////////////

/////////////////

/////////////////

/////////////////////////////////////////////////////////////////////////////////

JAN  2,  2010

    10482

7184

1115

JAN 31, 2010

    10067

6883

1073

ALL DOWN FOR MONTH OF JAN 2010

DEC 31, 2010

   11577

7964

1257

ALL UP FOR THE YEAR OF 2010

//////////////////////////

/////////////////

/////////////////

/////////////////

/////////////////////////////////////////////////////////////////////////////////

JAN  2,  2011

11577

7964

1257

JAN 31, 2011

          11891

        8139

            1286

ALL UP FOR MONTH OF JAN 2011

DEC 30, 2011

          12217

        7477

            1257

                                    DJIA UP FOR the YEAR 2011

                      SP500 WAS FLAT & NYSE WAS DOWN FOR 2011

//////////////////////////

          /////////////////

/////////////////

///////////////////////

/////////////////////////////////////////////////////////////////////////////////

JAN  2,  2012

    12217

7477

1257

 

JAN 31, 2012

  12632

  7801(EST)

  1312

ALL UP FOR MONTH OF JAN 2012

DEC 31, 2012

13104

8443

1426

ALL UP FOR THE  YEAR 2012

//////////////////////////

///////////////////

/////////////////

///////////////////////

/////////////////////////////////////////////////////////////////////////////////

        JAN  2,  2013

13412

8632

1462

JAN 31, 2013

13865

8889

1499

ALL UP FOR MONTH OF JAN 2013

DEC 31, 2013

/////////////////////////

///////////////////

///////////////////

///////////////////

/////////////////////////////////////////////////////////////////////////////////

JAN  2,  2014

JAN 31, 2014

DEC 31, 2014

DATE

DJIA

NYSE

S&P 500

STATUS

Special report comparing the Advance- Decline line to the  S&P 500 index

  • The idea came from Helen Melsler of Charles Schwab Inc. Helen uses the A/D data compared to the  S&P 500 index to determine oversold and overbought conditions of the market.

  • By plotting the A/D line compared to the S&P 500 index there is a definite correlation.

  • The A/D lines tends to change slope a few days ahead of the S&P 500;  therefore, giving an advanced notice of a change in market direction.

  • Also notice that the A/D line seems to lead the S&P 500 index during the C and D stages of a bull market

      (Reference the 4 stages of a bull market chart below.) This may indicate that individual investors have

       joined the institutions by buying more stocks that have not participated in the bull market.

CYCLE THEORY

  •  Based on cycle theory the period from October to mid December is the best time to buy stocks and sell them during the first two quarters of each year.

  • The same rule is applied to selling covered calls. The trend of the market is still up and the slope of the 200 day moving average has not reversed to the downside.

  • For more information on technical analysis and cycle theory be sure to attend the EXPOVEST Seminars.

  • This service thinks the four year cycle will have an influence on the market and the 200 day moving average will reverse to the downside  in 2007 or have a major correction.

  • There may be a market correction like the one in 1987 or the one in 1990 or 1997 which will provide an opportunity to buy the recommended stocks at a lower price.  The reversal in 1987 had a brief distribution period which gave a short warning of the coming down turn.

TREND-DATA

***CHART  #15 ***

 

NYSE INDEX 1970 TO 2007

BUY/SALE SIGNAL  USING THE 200 DAY MOVING AVERAGE PLOTTED WITH

 THE NYSE INDEX.  WHEN THE SLOPE OF THE 200 DAY AVERAGE CHANGES

TO THE UPSIDE  [BUY] AND WHEN IT CHANGES TO THE DOWNSIDE  [SELL]

AS POINTED OUT BY THE (SC) LINES. Notice that each low during the market

distribution phase in 2000-2001 was lower than the previous low which was an

early warning of a change in market direction. It is time to take a close look at

the four year presidential cycle as it is one of the most reliable  patterns  in

stock market history. The second year of the President's term in office tends to

exhibit a bear market bottom.

Analysis of the bull market legs

***CHART  #16***

Following material was obtained from Ivan D. Martchev of the Global Viewpoint Service. The three stages of the great bull market from 1982 to 2000 are as follows: Disbelief,  Acceptance and Mania. During the 1st phase most investors do not believe  the market has changed from bear to bull. The 2nd phase most investors accept it and start buying stocks The 3rd phase is when investors become speculators with irrational exuberance (Mania) which means "excitement of psychotic proportions accompanied by disorganized behavior." Investors try to drive the market to the moon. 

 

***CHART  #17 ***

The following material came from the EXPOVEST research group. This is a closer look at the current bull market by analyzing the slope of each  leg. (A) had a 6 degree slope; (B) =11; (C) = 40 and (D) = 65. This would put the (D) leg in the mania phase of the bull market. This chart is an excellent presentation of technical analysis. The TA rule is that if each low on a chart is higher than the previous low then the trend is up and for the bear market  if each low is lower than the previous low then the trend is down. The slope of

moving average indicators will soon change direction

which is the best indicator of market trend. 

 

  One More Look At All The Major Sell Signals
BID 7/23/2001

If you have read this column since June 14, nice going. You just covered 24 major sell rules. Of course, knowing them is one thing. Pulling them out of your quiver and firing them at the right moment in the market is another. It takes time and practice to master each one. You don’t need a Ph.D.  that is, unless perhaps it’s the kind that value fund manager Mario Gazelle has said he looks for: Poor, Hungry and a Deep desire to succeed. You may want to clip this column and tape it on the wall or a place where you can quickly refer to it. Review these rules to preserve your capital and maximize your gain.

The 'DEATH CROSS' (DC) occurs when the 50 Day Moving Average (DMA) crosses the 200 DMA on the downside. If this occurs and the other technical indicators are in concurrence, a major correction in the stock market usually occurs. The 50 DMA penetrated the 200 DMA in June, 2009 on the upside which created a bullish 'Life Cross' (LC).  The 200 DMA slope turned positive in July, 2009 which created a major technical buy signal as shown in the chart above. Notice the LC occurred before the 200 DMA slope turned positive and the RSI started trading above 50 and reached the overbought zone of 70 before the 200 DMA turned positive between March - August, 2009. The MACD also started trading above the center line. All of these leading technical indicators showed that the bear market was over and it was time to go long.


   1.  Cut your losses short. Sell when a stock falls 7% to 10% below your buy price. You bought it thinking it  would go up.
   2.  Sell into a climax run. A 25% to 50% gain in a week or two? After the stock’s already doubled, tripled in price? Great!

        No, too  great! No stock goes vertical for long except in the mania last phase of a bull market.
   3.  New highs on low volume. Buying is going flat, especially if past highs came on healthy trade (volume)
   4.  Stock slices through trend line. Remember to draw them over a period of at least four to six months.
   5.  Leaders in the sector crack. Stocks tend to move in packs When the ‘top performers’ tumble, the whole sector could be in

        trouble.
   6.  Institutions sell hard. When the major average post four or five distribution days within a week or two, the market is in great

        danger. Fund managers are  rushing for the exits, each low will be lower than the previous low on the charts.
   7.  Stock declines on the heaviest volume since its breakout. A hint that institutions are getting out. It may lack strength for

         more gains.
   8.  High-volume churn. Lots of trading activity, little prince progress.
   9.  Earnings growth slows. Two quarters of slower growth, or a 66% deceleration, can spell doom.
 10.  Late-stage base. Three or four bases are usually the limit. Five are rare.
 11.  Stock rebounds in lighter trade after sharp sell-offs. Proof of why it’s worthwhile to study a daily chart for price and volume

         clues.
 12.  CEO appears on magazine cover. By then the public knows the stock too well. What works in the market is not necessarily

         obvious.
 13.  Excessive stock splits. When it happens, optimism runs rampant and buy-backs.
 14.  Stock fails to stay above its 50-day moving average. Especially bad if down days occur on heavy trade.
 15.  Stock stages its biggest price gain of the rally. Often coincides with a climax run.
 16.  Breaks through an upper channel line. Rally gets out of control.
 17.  Fails to follow through after breakout. The initial thrust higher tends to last more then a day. If it doesn't, the breakout will

         likely fail.
 18. Head-and-shoulders pattern. A late sell signal. Try to spot others first.
 19. Closes excessively above the 50-day. Enthusiasm reaches a boil.
 20. Relative Strength line fails to reach new high ground at breakout. Use
www.investors.com  charts to spot
 this.
 21. Exhaustion gap. A spectacular way to end a rally.
 22. Breaks out from sloppy base or on below-average volume. Such action is failure-prone.
 23. P-E ratio rises 121% since breakout. When this occurs, look for other key sell signals.
 24. Sell your laggards, force-feed your winners. You want to reap the biggest possible gains, right?  Under-performers are dead weight sell them first.

 

Additional TA Signals for when to sell (See the RSI-MACD chart above)

The 'DEATH CROSS' (DC) occurs when the 50 Day Moving Average (DMA) crosses the 200 DMA on the downside. If this occurs and the other technical indicators are in concurrence, a major correction in the stock market usually occurs and it is

time to sell 

Suggestions from Bobs-Webb Service to reduce oil consumption in the USA


              In 1974, the speed limit was set to 55 MPH due to the oil embargo.

                               There is a debate among politicians to lower the speed limit on the interstates again.

A compromise is to set the speed limit at 65 miles per hour (MPH) for the interstates; with the highway patrol writing citations for speeding over 65 MPH. This will save a few million barrels of oil based on media reports.


 Cities and counties should also reduce the speed limits on all roads by 5 MPH.


It has been reported that truckers have already adopted the 65 MPH limit in order to increase their miles per gallon  (MPG).


Several companies in the delivery business have installed computer devices in their vehicles that inhibit speeds above 65 MPH.


Some companies  have also programmed route changes so that delivery trucks make only right hand turns.


If the 65 MPH limit is set as the max speed; "as an option" new vehicles should come with a warning signal device that sounds off when the speed reaches above 65 MPH.


Currently the most efficient transportation is electric autos, trains, motorcycles and bicycles.


Since it has been proven that a light rail system in large cities is a very efficient means of transportation, tell your congressman and city council to vote "yes" to build a light rail system in your city. This will reduce millions of cars on the  roads and help reduce pollution.


Car pools and increased bus service in cities will also help reduce fuel consumption and get cars off the roads.


It has been reported that more people are taking trips by train rather than driving or putting up with the bad and expensive service the airlines are offering.

             More ways to increase miles per gallon (MPG) as reported by the

                                     St Petersburg Times July 6, 2008.

Avoid aggressive driving by observing the speed limits and stop doing abrupt starts and stops. This will increase

MPG by 5% and up to 33% on the highways when you are going at a higher speed.


Drive in the right lane and use cruise control set to or just under the speed limit. This will provide constant speed control and will  increase your MPG by 20%. As the cars fly pass you, wave at them because they must be millionaires.


Reduce the weight in your vehicle; for each extra 100 pounds of weight your MPG will be decreased by 2%.


Engine idle will cost you a gallon of fuel each hour. Turn off your engine if you plan to idle longer than 5 minutes.


According to the experts, you should leave your windows up to reduce drag, your AC will not reduce MPG.  Also

remove those racks on top of your vehicle as they also will increase drag .


Vehicle maintenance is important to increase MPG. Keep your tires inflated to the pressure recommended in your

owner's manual. Keep your vehicle in top shape by having the oil and oil filter replaced each 3,000 miles. Maintain

other maintenance required for your vehicle as specified in your owners manual and your mechanic.

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                          What is 'Book Value Per Common Share'

Book value per common share is a measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly.

                                                                              Formula

 

                                                    Total Shareholder --  Equity-Preferred Equity

Book Value per Share =  ---------------------------------------------

                                                               Total Outstanding Shares

  Should the company decide to dissolve, the book value per common indicates the dollar value remaining for common shareholders after all assets are liquidated and all debtors are paid. In simple terms it would be the amount of money that a holder of a common share would get if a company were to liquidate.

BREAKING DOWN 'Book Value Per Common Share'

The book value per common share is an accounting measure based on historical transactions. The book value of common equity in the numerator reflects the original proceeds a company receives from issuing common equity, increased by earnings or decreased by losses, and decreased by dividends paid out. A company's stock buybacks decrease the book value and total common share count. Stock repurchases occur at current stock prices, which can result in a significant reductions in a company's book value per common share. The common share count used in the denominator is typically an average number of diluted common shares for the last year, which takes into account any additional shares beyond the basic share count that can originate from stock options, warrants, preferred shares and other convertible instruments.

 

The Difference Between Market Value per Share and Book Value per Share

The market value per share is a company's current stock price, and it reflects a value that market participants are willing to pay for its common share. The book value per share is calculated using historical costs, but the market value per share is a forward-looking metric that takes into account a company's earning power in the future. With increases in a company's estimated profitability, expected growth and safety of its business, the market value per share grows higher. Significant differences between the book value per share and the market value per share arise due to the ways in which accounting principles look upon certain transactions.

For example, consider a company's brand value, which is built through a long series of marketing campaigns. U.S. generally accepted accounting principles (GAAP) require marketing costs to be expensed immediately, reducing the book value per share. However, if advertising efforts enhance the image of a company's products, the company can charge premium prices and create brand value. Market participants may send the stock price higher, resulting in a large divergence between the market and book values per share.

 

How to use book value for stock selection

This is called Buffett Style investing because he looks for companies that have value. Buffett waits until the price is tight and as the saying goes when there is blood in the streets and everyone has given up on the company he buys. One of the things he looks at is the PRICE TO BOOK value. In the example below for British Petroleum the price to book is equal to 1 which will mean the company is safe to buy. With a dividend of 8.6% means he will get paid above bank and bond rates while he holds the stock.

 

British Petroleum BP PLC 

METRICS Source: Reuters Value Metrics P/E TTM –

 P/E forecast EPS 2062.6 P/Free Cash Flow

TTM -- P/Sales TTM .47

Price/Book = 1.0

Dividend Yield (%) 8.6

EPS growth -- 1 year dividend growth 1.3 3 year

dividend growth 6.6 Long term growth rate 3-5 years 22.5

 

 Below is an example for a long term investment where both the price of the stock and the book value go up together. The chart shows that sometimes the book value is greater than the stock price and sometimes the opposite is true.