|
The contents on this page are a small sample of StockTradersHQ's member resources (FREE Trial!)
1.
Our staff of professional technical traders analyze 1,000's of potential stocks every day to provide you with a list of stock picks with the greatest potential for explosive gains.
2. These stockpicks are traded with our real-time portfolio. Email alerts are sent for every entry and exit. Through the member-only website, you will have our support every step of the way.
3. Our subscription service provides all the resources, stock picks and tools an investor needs to make very profitable, consistent trades while maximizing gains and minimizing losses.
SEE OUR TOP PICKS FOR 2006...
|
|
Tuesday, January 25, 2005
Market Recap
Well, it is about time!! We finally got the bounce in the market that we had been expecting, but it comes a little late, in my opinion. This bounce today was not as impressive as it would seem, and did nothing to improve the charts of the major indices. Yes, the Dow closed up 92 points today however, looking at the charts I have tonight, you will see major resistance ahead at the 10500 level. It is going to be tough for the Dow to get back above 10500, at least on the first couple of attempts. The NASDAQ and S&P also have resistance straight ahead at the 2050 and 1175 range respectively. The NASDAQ gained 11 points today and that may seem good at first glance, but a closer look reveals that it actually closed lower than the open today, and that is a negative. This indicates a market that cannot hold its gains. Sellers are out in force anytime there is a little strength to be found.
Earnings Continue to be Stellar
One thing the bulls may have going for them is positive earnings. This afternoon, after the bell, a slew of earnings reports came out and the majority of them were great. There is no slow down in the hot housing sector as CTX beat estimates and guided higher. I mentioned this sector last week as one of the market leaders. This report should send housing stocks up tomorrow. Hopefully, these positive earnings reports tonight will bring some follow through buying tomorrow and lead this market higher. Be aware of a negative reversal day tomorrow, if the market gaps up again as a result of these good earnings releases today after the bell. I continue to advise caution on the long side. Cash is the preferred position with limited trading right now. If you go long, play the bounces and close your trades quickly when you have a profit. The short side of the market looks better each day and our short watch list is growing. As mentioned in Sunday's Commentary, we plan to hedge our long positions with some short selling into this strength, since the charts of the indices look so weak right now
The January Market Indicator
According to the Stock Trader's Almanac, there is an indicator called the “January Indicator,” and this indicator states the first month of the year in stocks can forecast the outcome of the year as a whole. Historically, this indicator has a 90% accuracy rate. If this January is any indication of things to come, than the bulls are in for a rough ride this year. As you know, the markets have been down this January, so if the indicator is to be correct again, it looks as though the market will be down this year. Could it be just a coincidence? I do not know, but you cannot argue with 90% accuracy. Having said that, the flip side of this is that since it has an accuracy rate of 90%, it may be due to be wrong and maybe this will be one of those years where the indicator is wrong, 10% of the time. An example of this indicator being wrong was in 2003, when the S&P 500 Index declined in January. The index ended up in the opposite direction at the end of 2003, with an amazing gain of 26% for the year. Also, in 2001, this indicator was wrong when the January barometer pointed to a good year, and the S&P 500 wound up with an 11% loss. Hopefully, this year, it will be wrong again. Of course, if you want to rely on this indicator, you could always short the market and, if you are right, you will make money even though the market declines.
The Super Bowl Indicator
There is another popular indicator that many people watch closely. You have to wonder who is really depending on the Super Bowl Indicator. Is it the smart money on Wall Street? Or, is it the less educated average investor? I find it hard to believe that a professional trader would rely on such an indicator. On the other hand, it has been very accurate over time.
Here is how the indicator works. When a team from the American Football Conference (AFC) wins the Super Bowl, it is normally bad for the stock market in that same year. When a team from the National Football Conference (NFC) wins, it is normally a good year for stocks and the stock market closes higher at the end of the year. In other words, if the indicator is reliable, a Philadelphia win on February 6th will mean stocks will rise in 2005, but a New England victory would be a bad sign of things to come for the stock market this year.
For those of you who may not have heard about this indicator before you may laugh but, believe it or not, the Super Bowl Indicator has an 85% accuracy rate. I remember the 2003 Super Bowl, when the Tampa Bay Buccaneers blew out the Oakland Raiders. That year, the market indexes surged to double-digit percentage gains to end a three year bear market. I also remember how the Patriots victory, in the 2002 Super Bowl, correctly forecasted that year's dismal stock market performance, with the Dow plunging 17%, its worst performance since 1977. That same year, the NASDAQ suffered a brutal decline and lost nearly a third of its value.
The Super Bowl Indicator has been correct 30 of 37 times and 27 of 30 times from 1967 to 1997. However, recently, the Super Bowl Indicator has been inaccurate. It was wrongly bearish in 1998 and 1999, when the markets were in a super bull market advance, making all time highs during the Internet bubble. Then, wrongly bullish in 2000 and 2001, when the market began its 3 year bearish trend. In 1999, it was wrong when the AFC's Denver Broncos won and that forecasted a market downturn that failed to materialize. Then, the 2000 win by the NFC's St. Louis Rams, predicted a favorable stock market for that year, but we all know what happened that year, we had the biggest bubble bust of all time.
Is the outcome of the Super Bowl purely coincidental to the stock markets performance in the same year? It may be nonsense, but nevertheless, it is very accurate. My opinion of this indicator is much like the Presidential election year indicator. It is a fun statistic to keep track of but, in the end, it has no relevance for either short term traders or long-term investors. Investment decisions should be based on either fundamentals or Technical Analysis and not on predictions of who is going to win a football game. Enjoy the big game but do not let the outcome influence your trading decisions.
Do not forget to check your short-term holdings and know when those companies are reporting earnings. Holding a stock through earnings is risky and I do not recommend it. You can always buy the stock back after the dust settles.
http://www.fulldisclosure.com/highlight.asp?client...
Stockcharts listing
Please vote for us once a day at stockcharts.com. http://stockcharts.com/def/servlet/Favorites.CServ...
Thank you all for voting |
|
|
|
|
|
|
