Stocks

As stocks have pushed off their recent lows, one question prevails: Will Santa leave something nice under the market’s tree? Or will Wall Street’s stockings be full of coal?

Historically, we’ve had similar setups. This may be a Christmas rally – or it may not be. There are a couple of puzzling signals that tell me something might be missing. While the Dow and S&P have bounced enough to both register short-term Very Bullish trend signals, the Nasdaq and Russell 2000 are both lagging, as each still exhibits bearish trend signals.

In recent history, the techs and small caps have led the way in such bounces, so their relative weakness gives me pause. Yes, we are getting some long entries but until we get a confirmation from both of these markets of a bullish trend, we must at least remain cautious. Call me a skeptic, but I’ve seen this movie before.

Due to these divergences, I do not see a signal to buy this market. If a Christmas rally materializes, we will see follow through in all the indexes. At this point, the strength in the Dow and S&P appears to represent a flight to safety, as buyers cautiously return to the market.

On the bullish side, The Wizard is registering more long entries (Pre-Buys) than short entries (Pre-Sells). If this continues, we should get our Christmas Rally. Additionally, the S&P just registered its biggest weekly gain in over 30 years – all in the face of bad news and worse earnings.

On the bearish side, earnings are terrible and forecasts are worse. Every economic category conceivable seems to be showing significant weakness. And last week’s rallies were on light volume (not unexpected during Thanksgiving week.)

So where does the market go from here? Only the market knows that. If the rally does materialize, we will see changes to bullish trend signals in all of the indexes. if the rally fizzles, we’ll see that as well. But whether the market is naughty or nice, the Wizard has plenty of gifts for all of us.

Christmas 2007

Last year provides a good reference. As the calendars below show, the 2007 Christmas Rally boomed and fizzled, as the expected bounce quickly failed. From there the markets traded lower for the rest of their before falling sharply in January of this year.

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Short until I get a signal.

Using the Conservative Scan, most of The Wizard’s existing short positions have already taken profits twice, leaving only 25% of their initial positions on the table. However, if you’re holding positions that make you nervous, just go to cash and wait for a strong buy or sell signal. Remember, you don’t always have to be in the market. Staying out until you get a strong signal is a perfectly valid – and very intelligent – strategy.

ETF’s

For those of you who haven’t been following the ETF’s, they have done just as well as stocks these past several months. In other words, they’ve been exceptional. The market has been demolished across all sectors, and the Wizard has been short all of them.

Well, not all of them. We have been long the Inverse ETF’s. If you’re not familiar with these, Inverse ETF’s profit when the market or sector goes down. They’re ideal for IRA’s – which don’t allow short-selling – because all you have to do is buy Inverse ETF’s to profit from market selloffs. So while the Wizard was short most ETF’s, it was long the Inverse ETF’s. We made money playing both sides of the market.

Both traditional and inverse ETF’s are ideal for trading sectors without taking the risk of individual stocks. If you want diversified exposure in the simplest way, ETF’s are an ideal choice.

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SEMINAR

There are a couple seats left for the seminar in Carlsbad.  If you want to learn how to use the Wizard inside and out while trading without fear, sign up today.

Have a good trading week, and I hope everyone had a terrific Thanksgiving.  We all have a lot to be thankful for.

Gene Stunkel

Founder and Creator of the Wizard

We don’t often talk about our longer-term strategies here, but they are often the most profitable. As you can see from the performance snapshots below, the Wizard has reaped enormous gains in both the Futures and Forex markets, both using the Weekly timeframe. Sometimes patience really does pay.

FUTURES: 100% winners. Again.

The proof is in the pudding. 34 open positions: 34 winners, zero losers. With an average hold time of 106 days (only about 3 1/2 months) our cumulative futures positions have reaped a profit of over $630,000.

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FOREX: 21 winners, 1 loser

The Wizard’s forex trades are just as impressive. 21 winners and 1 loser over the course of 122 days – 4 months. Total profit? How about $443,000?

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STOCKS

The Wizard is still short the stock market, as a very bearish trend signal still prevails for all of the stock indexes. The trend is still very much down.

Stepping away from the Wizard’s signals for a moment, the current environment indicates that there is a good possibility that the markets will head even lower. Currently there are many problems in our economy, and this is making it very difficult for the markets to establish any sort of confidence. Additionally, it doesn’t appear that the government has much of a clue as to how to solve this problems, as each of its supposed solutions have amounted to nothing more than throwing money around and seeing if it will stick.

As an investor, it is important to protect your capital. This means either staying on the sideline and in cash, or if you are already short with the Wizard, holding your positions and taking your profits according to our signals. The market will not go down forever and when a rally begins, whether it is next week or next year, you’ll always know that the Wizard will tell you.

SEMINAR 12/06/2008 in Carlsbad, CA

If you haven’t yet registered for the Seminar, seats are running out, so make sure to grab yours. In addition to teaching you everything you’ll ever need to know, we’ll also be introducing some new features.

Good trading,

Gene Stunkel

Founder and Creator of the Wizard

We have not received the signal to buy through this week.  We have received the opposite a double red, which indicates to us that at the least we are testing lows again.  With the turmoil that is in the markets and the possibility of major government money required to keep the automobile and other industries afloat, confidence  from the investment community does not exist.  

Last week I wrote that the market appeared to be a bear trap and this was not a good time to take buy signals. Well I want to show you how important it is to stay on the right side of the market.

On the following chart are the buy signals that were taken without the confirming long term concurrence and you can see what the results are.  They were almost all losses.  We give signals on all the stocks, but the ones we want to take are the double reds and the double greens unless we get a sector or industry that is showing the double reds or the double greens and is leading the change of direction.  We do not have that indication from anything at this time.

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As I said last week be patient and the buy signal will come. For the time being we are short and looking for pre-sells.  

It is a choppy market. If you are not an experienced trader you should be in cash at this time.

Gene Stunkel

Founder and Creator of the Wizard

The Wizard is pleased to announce its new Refer a Friend program. For each friend you refer who purchases a paid subscription to the Wizard, we’ll give you one month free of your current subscription package.

To refer your friends, visit our Refer a Friend page to use our automated form. Of course, you don’t have to use our form, but make sure to visit this page anyway, because you’ll need to give all of your friends your Wizard customer number. When your friends sign up, they’ll be asked for this number and, without it, you won’t get credit for the referral.

Refer as many friends as you’d like – the more the merrier. But please note that this offer is open to current subscribers only and only paid subscribers will receive the discounts.

As always, thanks for using the Wizard and good trading to everyone,

The Wizard

Click here to refer your friends >

We have seen somewhat of a bull move the last few days. It has even changed the short term trend to the bright green arrows and that indicates a start, but not a follow through. Now we need to be patient and watch to see what happens next.  We may move a little higher here, but it has the smell of a bear trap to me. We don’t even have a dark red on any of the long term arrows at this time. If we get the dark red or the bright green  on the long term arrows on any of the stock indicies, then we will be more interested in the up move.

Now saying that, we must look at the Browse sector sections. We find out that there are no double greens in any of the sectors and only 3 in all of the industries. Two of the three were in airlines that are headed up because of the decline in oil prices. The election could have a influence on this move and it would appear we will get different results with each of the candidates.

So what do we do here?

We stay on the sidelines until we get that bright green or bright red in the long term, and then we either buy or sell.

We let the market tell us what to do, we don’t act on partial signals.

We will get a signal, we just have to be patient.

Gene Stunkel

Founder and Creator of the Wizard.