Ian Woodward's Investing Blog

I had to stretch my Acronym a bit but Portugal, Institutions (ala GS) and Greece all hit the headlines today and that caused a “Really Big Shoe” to drop with a 2% decline today in most Market Indexes.  Let me not waste time with words, but show you the four pictures that sum up all our feelings for the day.   One more day like today and the Market Indexes will be below the Lower Bollinger Band, and you all know I don’t have to spell that out for you!  Seminar Attendees will enjoy the Last Chart.   The charts are well annotated so you draw your own conclusions:

Enjoy!  Best Regards,

Ian.

I couldn’t avoid a tongue in cheek headline for this blog note.  Everyone is aghast at the way this Stock Market Rally keeps sluffing off bad news and keeps trotting along the yellow brick road.  Sooner or later it will end, but there is only one way to behave – it’s YOUR stocks in YOUR Portfolio that matter.  This was an unusual week after the GS Caper, where the mood of Fear was soon tested…Fear for a day and a half, which dissolved as quickly as it appeared with the mood swinging back to recognizing many good Earnings Reports.   So the Bulls are still looking to a full moon.

We are back down to 16ish on the VIX, so that sudden hiccup never followed through, the Bears tried but no cigar:

So far, so good.  There are no Germs on the JIRM Index which has gained about 8% in the past month since it was generated, or about 2%/week, which includes the downdraft that occurred from the GS Caper, as these stocks were hit hard for two days.  Note that only two stocks are under water and not by much:

It sometimes pays to step back and see where we stand in the bigger picture.  The Nasdaq 100 (NDX) is already in the 2003 to 2007 Channel, and the Bulls hope it will stay there.  Whether it can push through to 2300 is another matter, but what does matter is when it is tested again on the downside at around 1825 or so:

Prolonging the theme suggests that the S&P 500 is already close to running out of steam or can push on to new heights at certainly 1365.  Wonders never cease, but we shall see if this Stock Market Rally has enough legs to last to 100% Gain!

By the looks of things, the Bears don’t yet have the fight en masse, and the Bulls continue to buy every dip.  Realize that the Large Players have the control, so play close to the vest, especially if this Market goes into a Climax Run as that will signal the Small Players have gone ga-ga.

Best Regards, Ian.

I am a little pushed for time so I will fall back on snippets of a Running Commentary with my friend and Seminar Attendee, Hsin, and others over the last three days.  We also covered this at yesterday’s Monthly HGS Investor Meeting, so all are up to speed.

Wednesday, 14th April, 2010

When you start rubbing your hands with glee, for sure that is the time when the Market is nearing a top:

Recall the Targets I gave you at the seminar and have since posted twice on the blog…it suggests we are very close to the top for now:

Now the $64 question is when will this beast give a Climax Run?  The answer is very soon, and I am claiming that some form of correction is due within a week to ten days.  We shall see, as you well know nobody knows for sure.  But why do I even suggest that?

Hsin, you now have eyes in the back of your head…just look at the  chart above and you will see from my notes why we are in VERY RARE Territory.  There are only six other times in 12 years that the COMPOSITE AVERAGE of %B of the Bollinger Bands of all ten Market Indexes have been above 1.1.  I go on to give you additional statistics on that slide so enjoy before I put up my blog hopefully this weekend.  Only back in June 2003 did the Composite of these ten Mkt Indexes stay ABOVE the Upper Band for five days before they began to drop. 

 We have no way of knowing when the break will happen and there are many other things you should watch to see if they are breaking down, none the least of which is the JIRM Index…it will be one of the earliest clues.

The Three Scenarios:

1.  A SURPRISE Knee Jerk down which will cause an obvious deterioration that all will see quickly
2.  A Climax Run which will surpass the Targets I show on the 3rd chart…give it a few more strong UPSIDE days
3.  A gradual fading of the rise with a correction that either gains steam or is minor and the rally goes again.

Don’t be TOO Eager to switch to the Short Side TOO FAST, is my next suggestion to you.  The stock Market is not a Black or White, on-off switch, flip-flop, call it whatever fits your fancy…especially at the top.  There are shades of Gray that you have to watch for very carefully.  After all, what caused this sudden additional recent euphoria…INTC and JPM, Technology and Big Banks firing on the same day.  Days like that don’t get turned off quickly.  So make sure to keep an eye on the Old Silverbacks and Top Banks list plus the additional obvious ones you added such as CREE, NFLX, ISRG, PCLN, BUCY and PRGO, etc. etc. If you have to pick one stock of all to watch it should be CREE, why?…because it has given us >16% since the Seminar and is double all the rest.  Late Breaking News:  Note that they hammered GOOG after hours.

Good Luck,  Ian.

Friday Night, April 16th, 2010

Well Hsin:  Scenario #1 worked today so no need to look further after all that anticipation.  But at least we knew we were close to the top, which again was pretty obvious, so no cigar!  Since it is also Options Expiration day, we should be patient and see where they close this beast. The cigar comes with what happens next? 

Either the VIX drives up another 3 points to 22ish and the S&P 500 goes down another 25 points (as I gave you GOLDEN Rules previously) and the party is over, or the Bulls come charging in to buy, buy, buy.  With something as serious as GS Fraud charges, I suspect it will be the former.  The floodgates open up below 1165 on the S&P 500, and will have wiped out the last 20 days gains.

In any event you now have the tools to tell you which way the wind is blowing…JIRM (an acronym named after four people at the seminar) is blood red today with all stocks negative at -2.37% down as I write.

Six stocks are already under water since we made the list, and another day like today will net another five or six to zero or negative gain.  That spells half the leaders if that were to happen.  That’s all you need to look for…period.  Then the cigar comes with what happens after that.  I will wait on your thesis!

Best Regards, Ian.

When things get “Peaky”, turn to the High Jump Tool I have taught you to use time and time again.  Just type in “High Jump” in the Search window of this blog and you will see how I have used it previously with success.

I just gave you two snapshots in my last blog of the Rainbow Charts using the High Jump parameters from 2003 as a guide.  Here they are to refresh your memory:

You will note that in the last week, we have now risen above the 1187 target on the S&P 500 and  reaching for the 2458 Target on the Nasdaq.  So now is the time to refine the Targets.  So to cap it off, here is a simple rule of thumb to use for a quick estimate for how high is higher:

Use 8% above the 50-dma and you have a good feel for what is the next level.

 If you don’t believe me, use the “7a High Jump Individual Lines” View in the HGSI Charting Module Software and you are there:

The premise is that this Market is headed into a Climax Run and 8% is the next logical level.  Let’s get past 8% before we think of Supreme Greed setting in at 10%, but for your convenience here are both numbers:

% above 50-dma     8%     10%       Today 4/6/2010

S&P 500                 1212    1234              1189.44

Nasdaq                   2463    2509              2436.81

DOW                     11287   11496            10969.99    

The Bottom Line Message is that one or two more 1% to 2% up days and the Market will have met these Targets.  Also, the VIX is now down to 16.50 or so, and it won’t be long before it seeks 15ish if the market keeps rising.  Options Expiration is on Friday the 16th. of April, and Earnings Reports will begin in full force the following week for three weeks.  Sooner or later expect the fireworks to start.  To be forewarned is forearmed, but nothing has cracked yet.

Enjoy…Ian.

I am sure you all know by now that we had a very fruitful HGS Seminar and a good time was had by all.  The overall mood was Happy Days are Here Again, but stay light on your feet as things are getting Peaky!

To kill two birds with one stone this note will summarize the presentation I made in 12 slides and hopefully give some sollace to those who did not attend of what they missed.  Also for my newbie blog friends I show the power of the product in slicing and dicing the market in several ways and urge them to try the HGSI Software with a free sixty day trial, which they can register for on the top right hand corner of this blog site.

The single most effective slide that shows the power of the product’s strength is its proprietary Indicators as shown in this next slide.  Now that we have a year’s worth of this booming rally, a picture is worth a thousand words to show that power:

Many moons ago I gave you a winky-winky that the Black Swan we had in late 2008 would produce a White Swan opportunity in that there was a Volume Vacuum in coming back on the return path as shown below:

The good news is that we are almost there…the bad news is that we now begin to hit Overhead Supply.

The Camp Sunshine High Road Scenario suggests that IF the Rally is to continue we should expect to reach 1225 & 2450 say on the S&P 500 and the Nasdaq, respectively, before these Indexes are extremely extended.  The next two charts show the rationale by using both the Rainbow and High Jump Extension to guide us:

At the October Seminar and on this blog I showed you how the Rainbow Chart must first give us a tight Rope and then Flare out to demonstrate extension, as shown below:

That extension happened these past three months as shown in the next chart and now helps us to establish two scenarios from here:

1.  Do we suffer a Minor Correction of 8 to 10% or

2.  Do we have an Intermediate Correction with the strong possiblity of a Black Cross as shown in the  next chart:

The Trusty Saw Tooth Plan gives the Longer Term Type 3 & 4 guidelines of the Lines in the Sand for an 8% and a 10% Correction and also shows that anything below 1040 would bring into serious question of whether the Party is over for now.

Those who regularly follow my prognostications on the VIX will immediately recognize this chart and understand that the next Target for the Bulls is 15, and for the Bears is back to 30. It is currently at 17.26:

Now let’s turn to the Gloom and Doom Camp…they have had mighty slim pickings of late but are waiting patiently for their day to come, after many false alarms where they have been so bitten that they are not showing their true fangs AS YET!  In this next chart which uses an excellent depiction at the dshort.com website (they do give permission to use their charts provided we give them credit which I am doing), we can immediately see that they expect another big fall based on past models of Mega-Bear Markets:

HGS Seminar Attendees always get my usual reminder that the second year of a Presidential Cycle is the Worst Year for Bear Markets, so to be forewarned is to be forearmed:

Last but not least here are the familiar happy and glum faces for you to enjoy on the Upside and Downside Targets for the immediate future:

As always, there was one MAJOR Nugget that attendees got at the Seminar which was worth the second million they are about to send me since they are well on the way to making it.  I gave Newsletter Users a glimpse of what they would see and I will leave the attendees to say whether it was worth it all.   As they walked out the door, I was glad that they all felt Ron and I had raised the bar one more time.  This time they have a Golden Nugget for both the Upside and the Downside Scenarios when the “Moon is in the Seventh House and Jupiter aligns with Mars using Bullseye along with Eureka, Phoenix and the Kahunas.” This time they went away with a lock on the Fifth Dimensions song of 1969…time flies when you are having fun.

Best Regards, Ian.