Market Timing Research

And so the first month of QE2 is over with interest rates rising a bit and the stock market dropping for the month. However, in all likelihood QE2 will help raise the markets just a little bit more, and seasonals suggest that December will be an upwards month as good news floods in about internet sales and the solution of other worldwide crises.

Cycles analyst Charles Nenner of the Charles Nenner Research Institute had predicted that December would be a short term cycles low in the stock market, but it may be that today’s rally shows the kick-off has started earlier. Nenner also feels that we will see a collapse in equity prices in mid-2011, possibly due to deflationary forces or other reasons, and then eventually DOW 5000. Elliottwave technician Robert Prechter ultimately sees DOW 1000.

We don’t have any crystal balls but do agree that the markets will be testing the 2008-2009 lows next year, with a bottom in either 2012 or 2015.

But what does that mean for trading? Nothing at all using our methods. We pick stocks that have a fundamental story, apply the seasonals on top of them, and then make judicious trades. Let me provide an example to show you what I’m talking about, but first the S&P500 forecast:

Here’s what I mean about stories…

Many macro players are citing the fact that world growth will deplete our resources, and therefore there will be demand for more COAL and NUCLEAR energy. Okay, let’s check the seasonals for PKOL, a global coal ETF and NLR, a nuclear power ETF. We have a fundamental view, we want to get in, but we are worried about the timing. Should we get in now?

Let’s do our research …

Form these two charts, you can see that there is not a lot of past history to build accurate seasonals to go on. With the little data we have, December looks like it could see a continuation of the push upwards, but then there may be a drop in prices come January. If you are a short term trader you have the potential of a December pop, if it’s in your outlook, but for a long term investor you might want to wait and see whether there is a January correction so you can get itno a position (or add to one).

Since we would be long term players here if we are following long term fundamental analysis, we would be looking to get in on a drawback, so the charts would behoove you to wait. If we had 5 years of data we would be able to be more definitive but this is the best we can do with so little data.

If you had a lot of data you’d say: “I’m bullish on Stock XYZ. The reasons are –, — and –. I want to get in. Let me see if the seasonal says now is a good time or whether I should wait.” If you are already in, late December I would raise my stops or possibly sell calls. It would depend on the strategies you are used to using and your view of the market at that point in time.

So even though there are only two years of data, from so little seasonal data you still get an inkling as to how to use seasonals to help with your trading and investing. But once again, you want 5 years of data or more.

If you are following some options hotline, ALWAYS screen the trade past the seasonals and I’m sure you’ll cut down on your losers and find better places to take profits on parts of your position. You could make a living trading options off the seasonals and some momentum indicator alone that triggered trades to look at. This is just another way for using seasonal analysis to cut your risks.

Two popular ETFS – for the financial sector and technology – have our interest peaked. Cycles for the XLF ETF keep rising until April, and the seasonals show a dip ending about now and head upwards until at least January. As to Technology, see for yourself:

These charts are showing a bullish ride until January, and if there is a late year rally, especially after mid-December when any short term downwards cycles pressure vanishes, we may see the rises come true.

There’s been a lot of talk recently about trading Brazil’s ETF and how difficult it is getting as a fundamental macro play. The ETF has dropped recently, but this is perfectly in line with the EWZ seasonals and cycles.

Here is our best forecast:

This is one of the funniest videos we have seen on QE2, “the Bernanke” and the Fed’s policy of inflation, during a jobs-tight “I don’t have enough money and inflation makes it worse” recession, in order to stimulate the economy.

Our advice is the same: the Fed will stimulate and stimulate by lowering interest rates, but it will not stimulate the economy. It is pushing on a string because the jobs and industries are gone. Firms and people, however, will seek yield and seeking yield they will drive up the price of speculative assets. However, when the liquidity is withdrawn, we will have another CRASH again … just like the Dot.com bubble, real estate bubble, subprime mess, and so on.

We are in a “deleveraging” economy where we will keep reducing our debts and our borrowing (i.e. credit card usage), no matter how cheap money gets. A new frugality has set in during this Great Recession, reminescent of what happened during the Great Depression. Low interest rates will not change that behavioral pattern, and by the way, they won’t make the banks lend. The Fed with QE2 is trying to create additional reserves that banks then have to lend but if the banks don’t lend, which they are not doing and not likely to do, we are right back where we started.

In temrs of the John Q public, remember that home equity loans have dried up because housing prices have stopped appreciating and started falling, and will fall even moreso. It is now the era of renters. Consumers, worried about jobs and the economy, are looking for ways to reduce their debts rather than borrow more money.

However, for active traders we have the solution. Ride that liquidity wave by trading the stocks whose seasonals are in line with that bullishness and which, by the nature of the companies itself, will benefit from increased foriegn sales (due to a declining dollar), inflation and so forth. Caterpillar is a perfect example!

But I digress … here is that funny video I promised:

This list is priceless….if you have our seasonal charts to see whether the trend is large enough and long enough to risk or not. But I’ve marked the stocks to watch with asterisks!

So this is a list of the typical seasonal top dates for various stocks from the NASDAQ100 and S&P100 based on analysis from our seasonal analysis charting software. Naturally the dates can be shifted forwards and backwards several days each and would change if the market changed dramatically as well.

You also have to confirm any triggers with price trend indicators and our seasonal program, too, which you get with our Super Seasonal Cash Flow Trader’s package. For instance, some people are calling for a market top September 7-8, or September 13-14-15, and September 23. So many possibilities. I personally think September 14 will be the important date though I will carefully watch the 7-8 period.

Enjoy – And as I always sign the end of our newsletters, may favorable trade winds be with you.

MO – Sept 10-15
T – Sept 30
BNY – Sept 10-15
CVS – Sept 10-13-15 **
HD – Sept 13 **
LOW – Sept 13
WY – Sept 15, 24, 29-30 **
BAX – Sept 14-20 **
DD – Sept 13 **
FDX – Sept 16 **
HAL – Sept 9-13 **
MON – Sept 8, 20 **
TGT – Sept 13, 16 **
AMAT – Sept 10 **
ESRX – Sept 16, 29 **
GENZ – Sept 13-16
MCHP – Sept 8-13 **
NVDA – Sept 20
ROST – Sept 15
ALTR – Sept 20-22 **
APOL – Sept 9 **
CHKP – Sept 13, 30
EXPD – Sept 14
FISV – Sept 13-15 **
FLEX – Sept 9-10 **
FLIR – Sept 17 **
IACI – Spet 15 **
LLTC – Sept 13-15 **
LBTYA – Sept 13-16 **
MRVL – Sept 8
PCAR – Sept 3 **
URBN – Sept 15
WYNN – Sept 17, 21, 24 **

And now, some support dates …

CL – Sept 22
SO – Sept 21-23
CVX – Sept 23
ETR – Sept 23
MRK – Sept 30
MICC – Sept 15
PAYX – Sept 23, October 7

DO NOT FIXATE ON THESE DATES.

They are indications from the seasonal charts. You must be adaptive and confirm price changes with indicators before something becomes a stock pick. However, now you have the BEST, the absolute best predictions possible at this moment. If the market changes severely, naturally these dates will change as well because we will select different years from our past history bin to create our forecast.

But now you know the type of information you can mine from our newsletters. Not a lot of stocks to watch out of 200! And if you look at the seasonal charts, you whittle this list down even further.

Now that’s the power of the Factor Seasonal charts!

Last month we had a real hit (and great success in accuracy) showing some stock forecasts like RYAAY which followed their seasonal projections right in line with expectations. Well our NASDAQ100 newsletter was released August 28 — a few days early this month — to allow traders to get in some early trading since a lot of good patterns were expected to develop right around September 1.

A few days have passed, so let’s look at just three sample forecasts for YHOO, SBUX and PDCO right out of the newsletter, though of course the newsletter (and our S&P100 newsletter) have many more great trades inside, especially since we are waiting for mid-month highs to short a number of stocks or sell calls or buy puts.

As always, we are NOT RECOMMENDING any particular trade or trading strategy, nor saying these forecasts will come true, or guaranteeing you will make money with our newsletter, nor rendering trading advice, nor one of 1,000 different things our lawyers tell us to mention. Our normal disclaimers apply, and you are hereby noticed to read those disclaimers.

That legal gobbely-gook being said, here are the seasonal analysis forecasts for 3 sample stocks from the latest NASDAQ100 newsletter, and you can see how the shares are already following very clear expectations.

Personally I expect stock reversals for many shares starting around September 7-8 and 14-15, so I have a close stop on my own trades. I chose not to even show the bearish trades yet since the best are yet to come, so there’s still time to subscribe and get those.

The whole point is that you can use these Factor Seasonal chart projections, in conjunction with normal technical analysis, to buy/sell stocks and buy/sell options. I particularly like writing vertical credit spreads since with the mathematics available from the ThinkOrSwim platform, we can lower our risks tremendously picking the right strike price and expiration that are likely to collect premium more safely. The newsletters give the timing and direction, and the ThinkorSwim platform gives the math.

I hope to offer another newsletter on this trading strategy in a few months time after we get all the details worked out for this yet another trading strategy possible using our factor seasonal analysis.

Until then, if you already trade options, then watch this video of projections and think about what YOU WOULD DO if you had this information that you could use with your own trading system …

Remember, every month we analyze 100 different stocks in our NASDAQ100 and S&P100 newsletters. Mid-month we release the DJIA newsletter, which follows the most optioned big cap stocks. If you are an active trader or investor, this is the one service that provides projections whereas everyone else just offers opinions. Our best offer is the Seasonal Cash Flow Trader package whose price is rising soon.

Fortune magazine just ran a short article on Home Depot (HD), pointing out that hurricane season is coming. Right about now Home Depot usually makes a pop upwards in price, but we have a problem. And this problem is why we always tell people you must, you absolutely must look at the Factor Seasonals for a stock before you invest or trade because they will show how a stock acts in all sorts of environments.

But first, the best seasonal price forecast or projection chart for HD going forwards from this moment in time:

Right now, the Home Depot price behavior has most closely matched what it does during Bear Markets. Yes, Bear Markets. And with that knowledge, we can look at our Bull-Bear market Factor Seasonal chart of HD and see that the point of recognition is September 13. That’s when the stock possibly plummets. When you have your own seasonal software from our Super Seasonal Cash Flow Traders package, you can create this type of chart to determine this date exactly.

So how do you trade this? I wouldn’t. I simply look for the stocks where I have a much better certainty of outcome because all the factors are aligned. Every month I produce analysis for 100 stocks in each newseltter and ALWAYS find great trades. Home Depot has too much risk for me because I look for much better odds.

Oh, you mean you WANT to trade Home Depot, so you’re asking what to do? Well, come September 13 I might buy puts OR sell calls in a vertical credit spread. That’s me — it’s not a recommendation to you. Right now I might sell puts in a vertical spread as well…that’s me once again, not a recommendation. Buy for a pop? Too risky for me because of time cycles for the Dow Jones (of which Home Depot is a member) peaking the first week of September. It might go up but I just don’t like trades that short in time because it doesn’t give me enough time room for the seasonal to prove out, and with today’s volatility, I want all the factors in my favor. That’s why I go with the newsletter spotted set-ups.

Anyway, that’s how I do it. Doing it sometimes means “I don’t”. That doesn’t mean HD won’t go up or make money, just that the newsletter offers far better setups in my opinion.

Remember, check the Factor Seasonal charts before trading or longer term investing.

This is the current best forecast of the Dow Jones Industrial Average using the best seasonal technology and methods available. Remember this is seasonals, not cycles. Actually the forecast is not very good for the simple reason that the upper right hand corner shows — the figure is less than 70%, so it’s not very accurate or trustworthy for going forwards.

However, some readers wanted to see this projection so here it is, and it matches with the cycles projections from the Foundation for the Study of Cycles which still suggests some type of interim top (perhaps at a lower level) in September, and then a collapse.

There’s been a lot of interest lately in international mutual funds. I’m starting to see quite a few investment advisors and financial newsletter analysts telling their clients to go overseas to help dampen their exposure to US stocks and the US economy that is in the doldrums. Usually they recommend the BRICs and various international ETFs with international exposure. However, I recently came across this list of top international funds, and decided to do some analysis for you.

The following top funds, rated #1 by Zachs, show how they have typically performed when the US was in a recession or the expansion phase of the business cycle.

The five funds include:

Sentinel International Equity A (SWRLX)
Laudus International MarketMasters (SWOIX)
Fidelity International Discovery (FIGRX)
Scout International (UMBWX)
Artio International Equity A (BJBIX)