Excerpts From Market Updates 2005-2006

Right now risk takers can divide their money into 3 lots. Deploy the first lot in the 1100-11070 ranges.

The 2nd lot can be deployed in the 10950 ranges. If we don’t trade down to this level we will adjust this entry point upwards.  We will deploy the third lot later on.  We are basing our entry points on the Dow but as soon as these points are hit traders can start buying DIA options with at least 3 months of time on them; 6 months would be better. An example would be Jan 07 DIA 115.75 (ZWZAL) calls currently trading in the 3.20-3.60 ranges.  Traders would wait till the Dow traded in the suggested ranges and then attempt to buy this option. If the Dow hit the second entry points Jan 07 DIA 110 calls might look interesting also. Finally those traders who took part in the higher risk IBB option play that we put out last week get ready to buy one more set of options on this chap.   Market update May 23, 2006.

The fast and furious action we continue to witness in many small cap stocks indicates that there is still quite a bit of juice left in these markets.  Market update April 4, 2006

Long term we continue to believe the markets are in trouble but in the intermediate term a lot can happen and on this time frame we are still bullish.  April 11, 2006

This is a 6-year weekly chart of the Dow and Even though TA is stating that the markets are in trouble, psychological indicators continue to support the fact that we should lean more to the bullish side then the bearish side. Market update March 14, 2006

We can clearly see that the Dow has been locked in a tight channel formation for slightly over a year now.  At this point in time the Dow is testing the top of the channel formation attempting to build energy to blast past it and put in a new all time high.  The firs target will be a test of the 11, 200 ranges after that we think the Dow will attempt to enter our first target ranges (11350-11430). If the momentum is strong here then we think there is a chance that it could trade past 11,600.   Market update Feb 21, 2006

On a different note the commercials hold one of the smallest short positions ever in oil; this is very bullish for oil in the long-term. However one should digest this info with a grain of salt as the commercials usually take positions months in advance and have very deep pockets; hence they can sit through some rather steep corrections.  Ideally based on current data a pull back to the 36-42 ranges would be a good place to initiate new long-term positions.

It’s time to be patient and have discipline no matter how long it takes; usually when you wait for something time moves really slowly.  A nice pull back will be a good place for risk takers to open up new longs on the Dow and QQQQ’s via futures or options. Until then the best game plan is to buy key stocks in key sectors that are flashing buy signals.   Mkt update Dec 07, 2005

The Dow transports are very close to putting in a new high; an up tick in the transportation sector is usually a sign that things are getting better. Another 40-point move and a new 52-week high will be put in and then all the other indices will most likely follow suite.   The VIX flashed a negative divergence on the hourly charts which means that it will head lower therefore the markets should head up as they usually trade in opposite directions.

The longer the Dow trades above 10161 the less likely it is to trade to 9990 ranges and the odds that some sort of bottom is in place soar significantly.  Conservative traders can now use any pull back of 100 points or more to take half positions in Dow calls; buy calls with at least 6 months of time on them.  The DIA June 06 108 calls looks interesting (symbol is DIAFD) try to buy it in the 2.50-2.75 ranges.   Mkt Update Nov 1, 2005

One last very strong mass psychological signal comes from the long-term bear “Bob Prechter”.  Under the heading “drama ahead” in his Elliot wave theorist newsletter this  brain surgeon predicts that the markets are headed for a crash and is recommending all his subscribers to stay short. This is the same genius that predicted the markets would crash in the face of one of the biggest tech booms that ever took place during 1996-2000 eras.

 There are still subtle signs though they are not as strong as they were before that this market could plunge hard one last time just to scare the living day lights out of everyone; it makes one think of trick or treat. One final positive, which we did not mention above, is that there are quite a few stocks and ETF’s exhibiting the Pulse signal.  So to wrap this up traders who are willing to take on a bit of risk can start nibbling at options and futures now; conservative traders wait for us to flash an official buy.  Market update Oct 25, 2005

However we have some other positive news; last week while the volume itself did not reach extreme levels the down volume on the NYSE accounted for over 90% of the total volume (look at the table below). This type of action is usually seen close to market bottoms. We think one or two more down days where the down volume accounts for or exceeds 90% of the total volume will signal that a bottom is really close at hand.

 MonTueWedThursFriMonTue
Up Volume677,487234,319628,4271,299,766414,114805,227
Down Vol1,628,6232,254,1051,483,200779,2491,747,7631,455,603
Total Vol2,341,3942,498,7922,133,0382,111,7432,196,1192,299,038
Down Vol as a % of Total Vol71.06%90.7%70.6%49.5%81.2%65%

Mkt update Oct 11 2005

The price of PAL has spiked many times in the past 60 days. Usually just a few 100 shares trade at prices of up to 1 dollar from the current price only to suddenly pull back. We think this is another form of subtle manipulation. The trick here is to make the small chap think of the move he missed so that next time round he puts in a sell order but does so at market (since this up move takes place so fast and lasts for such a short period of time, the market order then actually becomes a death order as only 100 shares or so trade at the higher price then prices fall back down and the market order usually get filled at much lower prices) or to make it look like this stock has no staying power. Most individuals will not bother digging around to find out that the price spike is being caused by someone buying 100 to 200 shares as much as 1 dollar above the current price.   Hold PAL it remains a great long-term play.  Bullion on the other hand has suddenly started to perform decently and if it can stay above the 199-201 ranges for 9 plus days the short-term to mid-term picture will improve considerably. The long-term picture looks great.   Market update Oct 11, 2005

Palladium  

The new data and the current chart patterns indicate that palladium needs to trade above the 200 level for at least 9 days in a row before it can build strength to take out the 240 price point.  Risk takers can look to go long the December futures contract every time palladium trades below the 195-200 ranges.  Market update 10/07/05

 Unless things change significantly over the next few days to weeks everything seems to point (our TA indicators and mass psychology indicators) that the markets are building up strength for a nice move up. The VIX just put in a new 60 day high and this shows that fear or levels of uncertainty are rising. The put/call ratio continues to trend up.  Both these factors add to our bullish argument.  Last week the dumb money continued to short the hell out of the markets and if one takes a ratio of the dumb money shorting against what the smart money is doing the divergences are reaching an extreme point. Since the dumb money has always been wrong this is yet another strong reason to remain bullish on these markets. The time to go long now is drawing closer every day.Market update 10/06/05

The NYSE specialists continue to sit and watch the show from the sidelines and our new short-term tool called BLUE will flash a minor sell signal if the Dow trades below 10557. Risk takers are still short the Dow and should sell half their positions as soon as the Dow hits the 10530 ranges.  Consequently if we trade in the 10680-10700 ranges again, new short positions (or puts) can be initiated; maintain the stop at 10720. Market update Aug 9, 2005. 

 Dollar

99% of our indicators have confirmed that the dollar has put in a bottom. Risk takers can now look to go long dollar futures and keep rolling over till we flash a sell signal.  Market update Jan 11, 2005

Currently a buy.   Market update Jan 18, 2005

On the hourly charts it appears that the dollar is topping and it is very possible that we see one final spike that could take us below the 82 levels. This spike will be a fake downward move and its purpose will be to scare all the early dollar bulls into running for cover.  Future players could use this weakness to take new positions.  Market update Feb 1, 2005

Palladium

We are approaching the 176-support zone, if we fail to hold here the next target will be 165. Our view is that the lower palladium goes the more of a bargain it becomes. Long term the picture is very bullish. Market update Feb 08, 2005

The technicals are all in place for palladium to mount a long-term rally, but should Russia start playing games like it did last time, then prices could just go insane. Market update Feb 22, 2005

Palladium has held above the 176-price zone after repeated pullbacks. This is a very bullish sign.  So we are almost certain that palladium will perform very well this year. Market update March 1, 2005

  Palladium is doing everything in its power to drive the weak hands nuts and so it would be wise to simply not pay attention to the daily price movements. As long as we hold above 176 the futures looks rather bright.  We experienced similar situations when we took early positions in Nanotech (via ALTI) and in many of our junior oil plays.    Market update March 29, 2005

Palladium bullion is slowly but surely putting in a series of higher lows; bullish this is for the long-term outlook.  As long as we hold above 176 the futures looks rather bright.  Strong positive inter market divergence between bullion and Palladium stocks Market update April 19, 2005

 The dollar and palladium have traded in separate directions on several occasions but this only occurred for small periods of time; in the long run they always trended in the same direction.  Notice also that the current set up is eerily similar to the set that took place from 89-92; the last stage before the explosion. If history is anything to go by it appears that these guys are laying the foundation right now for a truly explosive move.  However this time round we feel that even though the dollar will rally strongly, the dollar rally will not be able to keep up with the explosive rally that Palladium will enter into.

This is one of the reasons why we are so bullish on this sector. Other reasons are as follows

1)       All our indicators are in the extremely oversold zone.

2)      All of them have flashed long-term buys

3)      This sector is hated/ignored by everyone

4)      None of the big writers are even talking about this sector

5)      Finally over 70% of the worlds Palladium resources are controlled by one country.

Palladium and Palladium stocks are long-term screaming buys.  Market update May 3, 2005

Both charts speak for themselves last week we promised to put up the Chart of PAL with its 6 trend lines; this is a highly unusual development. PAL is a screaming buy and so    is Palladium bullion.  6 trend lines is an extremely unusual development; we can count the number of times we have seen this rare formation. Market update June 7, 2005

Palladium stocks are finally confirming the longer term out look that there is over a 90% chance that Bullion has already bottomed. In addition Palladium stocks have been rising in the face of lower Bullion price: strongly positive this is.   If you have no position or have not taken your secondary positions do so now these prices will not last forever.  Palladium is still being ignored, its disliked and its been hammered; the perfect contrarian and mass psychology buy signal has been flashed.  Market update June 14, 2005

 The new data and the current chart patterns indicate that palladium needs to trade above the 200 level for at least 9 days in a row before it can build strength to take out the 240 price point.  Risk takers can look to go long the December futures contract every time palladium trades below the 195-200 ranges.  Market update 10/07/05

 This market has all the makings to potentially launch of a Super Bull Phase in the palladium sector. One thing to remember is that the larger the potential gains are the larger the intermediate potentials pains are. Market update 10/16/05

 Markets  

This conflicting data almost makes us feel like turning the computers off and sitting on the beach and forgetting about the markets for a week or two.  Our indicators have not flashed any outright sell signals and so even in the face of such conflicting data we have to hold firm and stay long. We have to be disciplined and patient and control the strong urge we have of trying to guess the outcome. Without discipline we are all sitting ducks waiting to be picked off one at a time with nowhere to hide. Market update march 1, 2005

There are many signs now that the market is getting closer to putting in some sort of tradable bottom.  However the negative action from the smart money indicator and the lack of outright buy signals from our indicators leads us to believe that there is still more downside left in the markets.  The number of new lows in all moving averages has risen once again this week after dropping last week, another indication that the worst has not yet been seen.  Most likely we will witness one or two days of huge panic selling before the markets stabilize and provide the base for a strong sustainable rally. Market update April 12, 2005

All the signs are in that some sort of bottom is close at hand.  The positive divergence signal by the smart money indicator was a big plus and the fact that it’s no longer dropping precipitously on the daily charts is another positive. The second big positive divergence signal from the Biotech sector is another big bonus as is the sudden turn around in the number of new highs on the 20-day moving average.  The ultra bull/ bear ratio of the pro funds is in the bullish zone  (this was illustrated last week). All that is left to complete this picture is nice huge fear based sell off where the down volume surges to the 90% mark.  We had warned everyone to mark the months June and July on their calendars as they represented important turning points in the market.  It now seems that they could actually usher in a new bull. We could end up putting in a final low during these months and then mount a spectacular rally that will catch everyone off guard.  We are not quite ready to fully endorse this view but as each day goes by the evidence slowly but surely seems to support this viewpoint. Market update May 3, 2005

The Dow has rallied very strongly in the last few days and today’s rally appeared to be rather impressive also. However it appears that this move up is mostly like a trap to snag the early bulls and we will most likely experience a hard correction soon.  It also looks like our second scenario might unfold; the smart money indicator flashed a small negative signal and we stated this meant that the Dow would break below 10,000 or at the very least experience a 200-350 point correction.  However if we trade past 10,500 on the Dow then we could experience a correction of up to 600 points.  From a long-term perspective the picture continues to look better and better.  Market update May 17, 2005

Many so-called top-notch pundits have been stating that the market cannot rally in the face of a stronger dollar; the fact that the dollar is getting stronger now means that the markets have to correct.

Our response is that they are completely wrong and blind; the market can do anything it wants provided the right ingredients are there. One way to see what might happen is to pay attention to long-term charts and also remember that history has a tendency to repeat itself just as stupidity has a tendency to multiply over time unless its dealt with immediately.  One quick look at the 9-year charts above will reveal that the dollar and the Dow can rally in the same direction.   From April 1996 to October 2001 the Dow and the Dollar mounted an incredibly strong rally together then things started to change.  They both started to top with the Dow topping out early; they then both proceeded to correct. The Dow however only corrected from Oct 2001 to approx November 2003 while the dollar continued to get hammered; this action has confused and fooled most experts and leads them to believe that the markets cannot rally in the face of a strong dollar. What was really going on here was a very smart covert operation; the markets were being propped up to disguise inflation and the wholesale massacre of the dollar. That is why we were one of the first to price the Dow in stronger currencies and illustrate this illusion for what it really was; the Dow was going nowhere but down when priced in stronger currencies.  Now the old relation seems ready to take effect where by the dollar and the Dow trade in the same direction, well for sometime at least. Market update May 17, 2005

 

The NYSE specialists continue to sit and watch the show from the sidelines and our new short-term tool called BLUE will flash a minor sell signal if the Dow trades below 10557. Risk takers are still short the Dow and should sell half their positions as soon as the Dow hits the 10530 ranges.  Consequently if we trade in the 10680-10700 ranges again, new short positions (or puts) can be initiated; maintain the stop at 10720. Market update Aug 9, 2005.

Risk takers had a chance once again to short the Dow as it traded as high as 10685 on the 11th; so all risk players could have either shorted the Dow again or bought puts.   We have another minor sell signal triggered by our BLUE indicator now that we traded and closed below 10530; this signal will become even stronger if we trade below 10494. Risk takers should have also sold half their positions the moment 10530 was hit; in terms of futures that equates to 750 dollars per mini Dow contract and 1500 dollars per full Dow contract (10 dollars a point).  Market update 8/16/2005

 For long-term players we made the following comments.

Even though the data is rather conflicting in the short-term time frames; the long-term picture is still rather clear and bullish.  While there are many short-term negatives there are no major long-term negatives yet and many long-term positive factors; hence there is no reason to think the markets are going to crash.  Therefore every major pull back (450-650 points) should be viewed as an opportunity to open up new longs.  The recent strength in the once dead biotech sector (now undergoing a healthy and normal correction) also adds positive weight to the long-term outlook. Market update 8/16/2005

  This scenario came true as from a high of roughly 10700 to a low of 10140 the Dow corrected over 560 points; traders that went long Dow futures locked in explosive gains of between 5000-6000 a contract. Option traders also did very well.

 Unless things change significantly over the next few days to weeks everything seems to point (our TA indicators and mass psychology indicators) that the markets are building up strength for a nice move up. The VIX just put in a new 60 day high and this shows that fear or levels of uncertainty are rising. The put/call ratio continues to trend up.  Both these factors add to our bullish argument.  Last week the dumb money continued to short the hell out of the markets and if one takes a ratio of the dumb money shorting against what the smart money is doing the divergences are reaching an extreme point. Since the dumb money has always been wrong this is yet another strong reason to remain bullish on these markets.

The time to go long now is drawing closer every day. Market update 10/06/05

DOLLAR

We were bullish on the dollar before anyone had the nerve to mention the B word here.  Granted we were bullish a bit too early but our bullishness paid off; it’s better to get on board early than miss the boat completely. Here a few past articles that illustrate our stance plus a few excerpts from past market updates.

The Resurrection of the Dollar              Gold, Dollar and Palladium

99% of our indicators have confirmed that the dollar has put in a bottom. Risk takers can now look to go long dollar futures and keep rolling over till we flash a sell signal.  Market update Jan 11, 2005

Currently a buy.   Market update Jan 18, 2005

On the hourly charts it appears that the dollar is topping and it is very possible that we see one final spike that could take us below the 82 levels. This spike will be a fake downward move and its purpose will be to scare all the early dollar bulls into running for cover.  Future players could use this weakness to take new positions.  Market update Feb 1, 2005

Long-term it’s a buy.   We should witness a pull back, which should provide another opportunity to go long. Market update Feb 8, 2005

Long-term it’s a buy.   The pull back we were waiting for has taken place so risk takers can look to take futures positions in the 83.00 ranges.  Market update March 1, 2005

Both our targets of 83.60 and 84.20 were hit and exceeded.  Risk takers who took our advice and went long around 83 are sitting on gains of approx 1200 dollars per futures contract.  Sell half your contracts now and place a profit stop at 83.40.  As long as we can hold above 83.40 on a closing basis the mid-term picture looks very bright. Market update March 29,2005

The dollar has done it again; the 1st time round it underwent a full phase shift from down to up and by passed the neutral phase stage.  Then it underwent another full phase shift from up to down again bypassing the neutral stage and now its done it again gone from down to up without entering the neutral stage. This means that the possibility of the dollar entering into a super rally phase is extremely high.  We are going to wait for an oversold condition on the hourly charts before issuing a new entry point.   Market update May 17, 2005

 Merger Mania 

SBC communications is buying AT&T for $16 billion, Met Life is buying Travellers life and Annuity for $12 billion and Kodak is buying Creo for 980 million in cash; such deals usually start at the beginning of a huge speculative phases in the markets.  In total already over 100 billion dollars worth of deals have been announced in 2005. The merger mania phase usually leads to a stock mania phase and then finally this will lead to stupendous crash.  Market update Feb 1, 2005

Biotech Sector

It continues to look good for the following reasons

1)  Inter market positive divergence. While the general market were heading lower IBB and several small biotech companies flashed positive divergence signals; they   were putting in higher lows while the markets were putting in lower lows.

2) Insiders have noticed this anomaly and they are starting to pick up shares in their companies at rock bottom prices. Since they run these companies they must know something that the masses are unaware of; a great bargain perhaps? One company with good insider buying that looks decent is AGIX

3)  This sector is being completely ignored and to great extent despised since it has  been in a downtrend for sometime now; money gushed out from this sector into the Energy sector. All this money went into the big name stocks and that is why there are several small cap energy stocks that have barley budged at all. As usual the masses leave the ship at the wrong time; they jump from the frying pan into the fire.  Market update April 19, 2005

 Natural Gas

Well as stated Natural gas  put in a new 52 week high after trading past 9.35 and almost all of our indicators have now confirmed this new high except for one.  This confirmation occurred much faster than we envisioned. Therefore on the next decent pull back we will most likely advice risk takers to go long natural gas futures. Market update 8/16/2005

Additional Market Calls from 1999-2004

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