New Buy Signal for Stock Market

Trader Talk

The major stock indexes fell today as more financial companies reported heavy losses and write-downs. Volume was interestingly lighter than yesterday. The leadership profile has flip-flopped back into negative territory, with 117 stocks making new highs versus 202 stocks making new lows.

Officially, the NASDAQ fell 0.4% on 2.1 billion shares, while the Dow Industrials dropped 1.2% on NYSE volume of 4.7 billion shares. The short term momentum oscillators remain positive, confirming the now BULLISH stance of the AlphaKing Trading Indicator. We have new trades below to exit all short positions, and to begin the dollar cost averaging process of entering new long picks.

The stock market has been in a bear market since October of last year. Peak losses were over the 20% range. Thus both time and price destruction commonly seen during bear markets has been within expectations this time around. The FED has been aggressive in pumping money into the financial system, while the financial markets experienced a capitulation of sorts, with record numbers of stocks making new lows, and the volatility index almost hitting the wash-out 40 level. Thus the ingredients are present for the bear market to be over, and a new bull market underway.

Fundamentals lag stock market and economic trends, so the bad news may not be telling the real story. Of course the bears could have it right, and our new buy signal quickly turn into a whipsaw sell in the non-too-distant future, but one could have written that at every positive turning point the stock market has experienced in history. The most important element when it comes to making money in the financial markets over the long term isn't whether this or that signal proves to be real versus a failed whipsaw one, rather it is about keeping losses low on the failures while letting the winners and the gains run when the new trend turns out to be the real deal. Our research shows that the AK Trading Indicator is the best there is at delivering that high gain/low loss requirement. It has spoken, and we are acting. The QQQQ long position for the Index portfolio will be changed to a leveraged long ETF on any pullback close to the 50 day MA for the NASDAQ going forward, while we will add new long positions to the other portfolios each day until we are fully invested, or our trend following indicators turn negative.

Kevin Wilde, Chief Trading Strategist AlphaKing.com

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