Timing The Market
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With breadth
improving and the number of stocks making new highs increasing,
it seems we could see some constructiveness in the broader markets soon. One of
the timing models I follow is showing a buy signal;
the others appear to be setting up but still have not turned green. I also like
to monitor the Tradingmarkets.com timing indicators,
as the more signals going in the same direction, the more likely the move will
be for real.Â
For those who want to create your own timing models, I highly
recommend you reading Martin Zweig’s book Winning On Wall Street. In it,
he gives a number of timing models which have stood the test of time. Also check
out Larry Connor’s and Mark Boucher’s Market Timing Course online.
With that said, we should continue to
build our watch list and only test the water if all pieces fall into place, of
course on a lesser scale by adjusting position size. The leading sector as of
Friday was the Consumer/Cyclical sector which consists of the homebuilders,
banks, medical, etc. So needless to say, today’s column came up with said
stocks.
On Friday, I mentioned Sunrise
Assisted Living (SRZ)
broke out on high volume today but closed weak with a tail.
MDC Holdings (MDC)
is pulling back on the right side of its multi-week cup and is in the process of
forming a handle.
MI Shottenstein Home (MHO)
is pulling back from its high and appears to be setting up a handle to go with
its nine-week base. Note that volume is pretty low on the homebuilder.
Cendent (CD)
appears to be moving up gradually in what looks like an ascending base.
Remember that all securities are
risky. In any trade, you should always reduce your risk by adjusting position
size and placing open protective stops where you will sell your long or
cover your short in case the market turns against you. For an introduction to
combining price stops with position sizing, see Loren’s lesson, Risky
Business.