Ian Woodward's Investing Blog

As I write this Blog Note, I am reminded that we have just one month to the day for the Gathering of the Clans at our March 24 to 26 Seminar.  Hurry, hurry, hurry if you want to learn how to Manage Fear and Greed and to stay on the right side of the Market using the Balanced Approach which Ron Brown and I have developed.  Our objective is to show you winning ways in enhancing your Portfolio Gains, so let me once again ahead of time lay out the value of what we offer you at an intense but very friendly seminar which might help you grow and preserve your hard earned Nest Egg.

I note that my good friend Kevin from Qatar is wondering what is happening back here in the pulse of the market, so let me lay out the High Road and Low Road Scenarios and Targets so that he might be induced to come and visit us again!  Ron and I are having withdrawal symptoms from all the folks whom we have not seen in a while but are still loyal followers.  As usual, my opening picture gives you the gist of what to expect in the Blog Note below:

Those who are regulars to these notes now know what to look for in the following chart, but you will immediately notice we are now into “Nose Bleed” Territory with the light Blue lines I have added to the Major Market Indexes Chart.  However, the higher the Market goes the harder it falls, but the Bigger the Cushion before you get creamed.  The White Lines are your “Get Out of Jail Free” card:

It is painfully obvious that the Institutions do not want to let this Market die until we are well past the 13,000 mark on the DJIA.  It gets the juices flowing for the “herd” (usuns) that may be sitting on the sidelines and something for the talking heads at CNBC to pump things up for those who wish they “coulda, shoulda and woulda” been in at the start of the year.  Meanwhile the big boys are also reluctant to step up the bidding as witnessed by the turn down in the Money Flow, yet not enough to cause a stampede for the exits as yet.  I’ll show you that picture later.  The beat goes on albiet slowly to the High Jump Targets I laid out in the Newsletter:

The Canary in the Coalmine, AAPL, survived a whiff of Carbon Monoxide and is now sitting close to its old high.  It’s not difficult to estimate the two near term extremes on the high and low jump based on what transpired a week ago as it trotted into a climax run.  Don’t be surprised if the big guys suck you in for another Upside Power Trend move and then kill you to the downside:

Having given you enough for Targets on the Upside, let’s now turn our attention to the Volatility Scenarios that help us determine ahead of time when the Party is truly over long before you and I get whalloped.  The chitter-chatter on the HGS Investor Yahoo BB leaves me smiling as we look to “What If” Scenarios for some dramatic action to the Upside in the VIX and TVIX.

The Market has played right into our hands to develop the Up and Down Scenarios, especially as we now know for sure that 5 Buckets Up or Down in one day is a “Take it to the Bank” heads up to either enjoy the Power Trend or Run for the Hills with the Woody Indicator showing you the way.  With the TVIX this quiet despite the two shots across the bow last week, the real challenge for it is to get above the VIX in price before there can be a real surge in the making.  Otherwise it can again fizzle into a “Fakey”, as it did a week ago.  Yet, let me not deter those who are lamplighters with cast iron stomachs as there is good money to be made in the very short term when it stirs for a day or two as I show in these next two charts:

Here is the picture for the VIX and as you can see by the red and green arrows and comments on the bottom left hand side of the chart we had a couple of shots across the bow and despite the volume being light this week, the Bulls still have control:

This next chart shows you the full value of the Woody Indicator which leads the TVIX, and is our Savior from a Catastrophic Failure in the Market when it goes into shock ala Black Swan 2008, Flash Crash in 2010 and Debt Crisis in 2011 as shown below.  Let me add that those who come to the Seminar will have this chart in the HGSI Software so that you can follow this goodie in it:

This next chart is worth its weight in gold as there is much chatter on the HGSI Yahoo BB about “What If” Targets for next week so that you can be ahead of which way the wind is blowing.  By now, I have drummed into you that five buckets up or down can either be Mana from Heaven or the Kiss of Death, so here are the targets to watch for should there be a sudden knee jerk one way or the other.  I am not suggesting for one moment that we WILL see a Plus or Minus 5 Bucket Day, but in addition to whether we do or don’t, the chart shows you that the two numbers to watch for in the TVIX is either 13.31 for a strong move up in the Market or 20.05 for a Knee Jerk downwards:

As you well know in times like these, I always hunt with Chaikin’s Money Flow to sense the direction of the Wind Sock.  It is strong but starting to droop as big boys are gradually pulling money out while still buoying the Market up with talk of Golden Crosses and driving the Market above their old highs.

On the positive side, let us not forget that 2900 on the Nasdaq has been the buggaboo level since the Days of Wine and Roses and we are once again knocking on the door for a potential strong breakout!  This is a chart my good friend Aloha Mike Scott generated many moons ago and I savor it with fond memories of 20 Years of giving back to the Community:

…And finally as I leave you with this thorough analysis of the pulse of the Market, never fall in love with one scenario.  In this day and age we are too quick to look to gloom and doom as the go to scenario, but there is usually a silver lining especially in the 4th Year of a Presidential Cycle, which seldom sees a Bear Market in 72 Years of History:

If you got to this chart, the sentence in red at the bottom is all you need to remember going forward.

Should you be thinking of coming to the Seminar, it does help you and us if you will sign up quickly as time is running out and the curtain is coming down in two weeks time on the special rates at the Courtyard Marriott, so it is up to you.

Best Regards, Ian.

As we well know the Market has been gradually troting up in sync with AAPL, but seems to be running out of steam for a much deserved rest.  It got its first shot across the Bow and we shall see what next week brings.  As AAPL goes so goes the Market.   Meanwhile, those who took the time to listen to my video which I did with Chris White of EdgeRater on Tuesday will see that the good stuff I covered worked well today.  If you haven’t seen it trot over to his website and enjoy.

Here are six Major Market Indexes and it doesn’t take two minutes to see they are all well extended over the past 20 day period.  Many retraced to the “White Line” that suggests support from the last six days or so, which all lost today with about a 0.8% drop…not big enough to cause panic at this stage as the Volume was not unusually heavy:

If next week these Indexes hold support at around this level then the inference is that they will attempt to go again, and if not, they better not drop below the Green Lines on heavy volume or this might be something for the Bears to get excited about.  As I covered in the video, the new Woody Indicator worked well the last couple of days against the targets I gave and especially today when viewed in conjunction with the VIX and more so the TVIX, and here is where we stand tonight.  If you have the stomach to play the TVIX and watch the market all day, you can make some impressive gains in a matter of a few days, but you had better be as quick as a Lamplighter!  Don’t blame me if you get caught.   However, Woody signals these moves with even bigger volatility, so enjoy:

As a reminder, here are the three subject videos which I am sure you will enjoy from Chris, Ron and myself.  You will find them on the Link I have provided you below.  They will be with the rest of the Videos on the Course just completed by scrolling down the right hand side.

EdgeRater Site

Best Regards, Ian

My faithful followers on this blog have been patiently waiting for me to put up a fresh blog note, and now that the Newsletter followers have had first insight into Ron’s and my thinking, it is now time to bring us all up to date.  I felt I should use the same picture as Newsletter Readers will immediately relate to the High and Low Road Scenarios.

I hypothesized that we either head on up for a Golden Cross of the Nasdaq (50-dma coming up through the 200-dma) a month from now or we trot down again for the Low Road to test support at the 200-dma or lower, the 50-dma.  My good friend Manu reminds me that we already have a Golden Cross with the DJIA, but all the other Market Indexes have still to achieve that significant event.

But first let’s look at the significant TIGHT moves all the Market Indexes have made not only this past week but in the last 20 days, which the picture below presents.  It all started with a bang coming out of the shute on the very first day of the New Year Rally on 01/03/2012.

The High Road Scenario:  I have overlaid a month’s worth of looking forward to depict how the Golden Cross comes to fruition in about a month from now, provided the move essentially continues as we have seen for the past month.   I say that we will need to see some more Kahunas, but given that %B is already in the 90’s that is unlikely, but if we have a small pull back then we could see that extra adrenalin to push %B above the Upper Bollinger Band, i.e., >1.0.

The Low Road Scenario:  This Rally runs out of steam and we head down for some form of correction.  Fortunately, at this stage we are sufficiently above the 200-dma, which up to now was the strong resistance, that we have a decent cushion to give the Bulls an opportunity to find support at that line.  All of this pre-supposes that we don’t get a Major Negative Surprise on the Global Economy front that has plagued this market the last eight months with a 17% correction in such a short timeframe of a matter of a week when most of the damage was done.

Having laid out the two scenarios simply in two charts, the next several charts show you the underlying pieces of the jigsaw and what to look for when a Rally gets a trifle “Peaky”.  Let’s start with two old favorites, the S&P 1500 Pie chart showing %B Buckets and then the %B for where the S&P 1500 %B for the Index sits and the disparity between them.

Note in this next chart where it seemed the Rally had run out of steam with the eight consecutive days stuck between 0.8 and 0.9, it got a second wind and %B for the S&P 1500 is now sitting up a notch higher with a Bucket skip to now reach 0.99 and 0.95 in the last two days.

We haven’t looked at this next chart in quite a while mainly because there has not been this kind of momentum for it to give us clues as to the potential strength of the move.  As you see on the right hand side with the two ringed numbers we are having healthy hits of over 300 stocks in Bucket >1.0…the overbought leaders!  That’s healthy, but as you can see on the one hand we need to see this number rise to >500, it also signifies on the other hand that once reached there is invariably a pause to refresh before moving up again or it is the signal of a Climax Run with a decent correction to follow:

As you would expect, the VIX has gone mighty quiet in the last three days, whereas there was a one day attempt that gave a spike up of about 2.5 points as shown by the white ring, which then immediately fizzled to the lowly 18.28 level which hasn’t been seen since last July.  As we well know this VIX Indicator is the “Go To” one especially as it just hit the lower BB, and so a rebound of some sort is near.  Readers of the Newsletter now know that I have come up with an even better gem in %B x BW which together will give us the early warning signs that the ballgame is changing.  Suffice it to say that any 1-Day change in the VIX which catapults it 3+ points will be a day to sit up and truly heed the shot across the bow.

Then again, another favorite Go To Chart is what is Chaikin’s Money Flow doing in three different timeframes.  You can view this in HGSI, but understand that 34 period portion has yet to prove of value as it has been just 20 days in this fresh portion of the Rally.  Note the major rush of Money Flow for the 13-Period and 21-Period which are at Record Levels.

…And now, last but not least, my favorite at tricky times like these, use the jolly old High Jump Tool only found in the HGSI software.  I have taught you several times of how to use it and if you don’t know, come to our next seminar on March 24 to 26.  I have done the homework for you and have given you that PROVIDED the Rally continues higher we have 50 to 75 points more to go based on past history before this Rally is really long in the tooth:

In summary, I have given you four different items to watch and those who have EdgeRater now have a fifth with %B x BW for the VIX as introduced by my good friend Chris White just a few days ago which I discussed in the Newsletter.  Just let the Market tell you which Road it is on, but these approaches to seeing which way the wind is blowing will help you protect your hard earned Nest Egg well ahead of the big shoe dropping if that is to be our fate.  Give us feedback.

Best Regards, Ian.

I note my faithful followers are wondering where I have been with the increasing hits on the blog.  I have been busy writing the HGS Investor Newsletter which Ron and I publish every 15th. of the month.  Here is the synopsis of what our contributors will get tomorrow of a 20 page document:

Overview:

The Stock Market is waddling along upwards since the last newsletter.  It goes without saying that the skittishness is the concern of the Global Debt Crisis compounded now by the latest news of Credit Rating downgrades of some nine European Countries, with France being one of them. There is no full blown commitment by the Establishment, but one cannot ignore the fact that the Market Indexes have eked their way into new high ground territory relative to the shambles we ended up with for a Santa Claus Rally.  I will define the High & Low Road Scenarios for a Golden Cross or a fall back into the doldrums one more time.

My report this month shows how the list of 36 Box 7 stocks I gave you hot off the press last month have done since then with an average gain of 8.55% (Blog Readers can see the list which I posted on the December 22 note); a review of watching Heat Maps for %B and Bandwidth; and my latest find which will give us the earliest possible warning of the next downdraught %B x BW with the VIX…the Volatility Index, which I feel is a new Gem!

This month, Ron continues his theme from the previous month of Buying Wolfpacks with strong internals showing you how to use screens that are supplied to you in the Woodward and Brown Reference files that are also explained in the video which goes with this Newsletter.

We look forward to seeing our faithful supporters in three months at the HGS Investor Seminar.  I will put out the usual details for the Hotel later this month on the Yahoo BB.

Good Luck and good hunting.  Ian. 

Well, at least we had a good start to the New Year, even though the Grinch Stole the Santa Claus Rally last year.

This is a strong breakout and the biggest gap up was in the laggards, the Nasdaq and the NDX:

However, the challenge is right now to get through the 200-dma and the 405 Freeway…Down-trend-line (DTL):

This next snapshot says it all in a wink which shows the strength of the move today:

…And this chart shows how close we came to another collapse, but survived to fight today:

Here is a new Chart for you to chew on…it shows in chart form the current status of %B x BW.  If you watch this carefully in the days ahead you will know if the Rally has achieved the goal of getting from 0.056 to above 0.1 to confirm the strength and that there is some conviction in the rally with strong volume :

This next chart shows that the drive has resumed and we are knocking on the door to getting %B >0.5 above 0.9:

%B above 0.5 is currently at 81% and has made a one bucket skip today as shown on the last line, above:

To start the New Year off, let me express my personal thanks for all the support and encouragement you have given to both Ron and myself over the 12 years that we have been associated with the HGSI Team.  We like to hear from you:

Best Regards, Ian.