Stock Market in Crash Mode

Trader Talk
The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading indicator. The accumulation/distribution profile remains negative, confirmed with a very bearish leadership profile, with 23 stocks making new 52 week highs versus 1,103 stocks making new 52 week lows.
The 4% rule remains bearish, while Federal Reserve policy remains bullish. The VXO volatility indicator closed the week at 51.8, continuing the bull market for fear. The primary Elliott wave count suggests the wave 3 of 3 meltdown run has moved into the crash phase, with the next couple of weeks prime time in that regards.

Traditional seasonal trends have us looking for a difficult third quarter for the bulls, while the Presidential cycle remains bullish for the remainder of 2008. The Benner-Fibonacci cycle will remain bullish until 2010, though this prolonged time period may include one or more cyclical bear phases. The AlphaKing combination cycle sees a bear market slump running all the way into mid-December when the next major turn-date is slated to land.


Summary:

Once again we start the weekly summary regarding trading action this week with what we wrote to start last weeks update, and the week before that: "WOW!"
The Treasury and FED finally got the bailout package approved on Friday, with that success failing to prevent the stock indexes plunging near 10% on the week. If $700 billion recapitalization of the banks is not enough to force the bears to capitulate or the bulls to get excited, then what is out there that can? The economic news remains grim, and that is the real story behind this week's trading action. We're in a crash run, plain and simple. This will probably be over later this month, early next, with this week's terrible action week two of a potential four week meltdown. One key item to keep an eye is the financial crises around the world. European banks are in danger of collapsing for real here - despite $600 billion cash infusion from the FED THIS WEEK! - and their central bankers and political leaders meet this weekend to discuss the crises. Our view remains that we are in a bear market of some historical proportions, with a retest of the 2002 bear market lows our target for this down-leg of the bear. The FED may pull-off a surprise rate cut, potentially coordinated with a worldwide move to cut interest rates. Do not be surprised to see sellers gleefully jump on board any and all rally attempts going forward, even one induced by a surprise rate-cut. While the VIX fear index has spiked to above 50, that contrarian sentiment gauge reached 150 back in the 1987 crash, and this is much worse than that. Thus we continue with our theme that we've seen nothing yet, and capital preservation remains job one. We will survive this, and trend followers who protect capital here should be in fine shape to pick up some super attractive assets once we hit bottom. Buy low sell high, what a concept.

Kevin Wilde, Chief Trading Strategist, AlphaKing.com

Interview with AlphaKing.com Founder

Nov 11, 2006 12:23 ET

Superstar Stock Picker Shares His Secrets and Top Stock Picks

CHARLOTTE, VA -- (MARKET WIRE) -- November 11, 2006 -- We're talking with Kevin Wilde, a six-year investment superstar at Marketocracy.com, who has a stunning stock-picking performance record. The Five Year Rankings, through Sept. 2006, just came out and Kevin placed fourth out of 70,000 investors. "Kevin, how were you able to beat 70,000 investors in the stock market competition run by Marketocracy.com? That seems an incredible feat!"

The simple reason for my success is having a strategy designed to outperform during all market cycles -- up, down, sideways -- one that told me when to buy, hold, or sell to lock in profits. I had my AlphaKing strategy, my systematic approach, and my competitors didn't.

"If it was designed to outperform in all market environments, how did it do in the grueling bear market years from 2000 to 2003?"

The AlphaKing strategy shot to the top of the rankings at Marketocracy.com, and my personal account made money each and every year, despite the bursting of the stock market bubble that caught so many people off guard. And, I did it long only, without shorting any stocks or indexes.

"But how were you able to thrive when so many others lost their shirts?"

I recognized that stocks can go up incredible amounts during the good times, only to retrace all of those gains and then some when the tide turns, often with little reason for the rise, let alone for the fall. So, when building the AlphaKing System, during my research, I looked for ways to recognize when a stock or stock market had peaked, so that I could move into stocks on the rise rather than face the misery of watching profits disappear and turn into losses.

"It sounds like you use some sort of technical analysis to time your moves into and out of stocks."

AlphaKing uses fundamental analysis to screen for those superior stocks that offer the best chance of going up during favorable trends, while using technical analysis to highlight when to buy, hold, and sell these investment gems.

"What indicator do you use to time the entries and exits?"

Of all the findings of the AlphaKing Research Project, the answer to this question is probably the most important of all, though the answer itself is more complex than simply saying choose this or that as the best technical indicator. I had to build my own technical indicator that I call the AlphaKing Trading Signal, since none of the commonly available indicators worked well enough for what I needed. The stock market never goes straight up, then straight down, then straight up again, so it is vital that whatever technical entry and exit system a trader uses is robust enough to be able to handle the churning periods of indecision. It is imperative that traders, portfolio managers, end up with a reasonable profit after a stock or stock market has completed a full bull and bear corrective cycle. The AlphaKing Trading Signal is an amalgamation of trading rules I have found to most effectively handle the complex trading patterns stocks and stock markets undergo in real time.

"Do you charge for access to this indicator at your website?"

Actually, no. You can access all trading signals on the 4,300 most popular stocks for free at http://alphaking.com/ along with a graphical snapshot rating of each company's most important fundamentals. The system doesn't own any stocks when the AlphaKing Trading Indicator is in sell position.

"So the trading signals and fundamental ratings are free on the stocks you can get data on, but you do something different in the portfolios, which are available by subscription. How do you select the stocks that go into the 8-position long or short group, and in the 25-stock long-only small cap group? Do you still use a system, or is there subjective reasoning involved?"

It's a combination of both. There are 4 basic questions that need to be answered before I buy a stock: Market Direction, Company Fundamentals, Short Term Chart, and Long Term Chart.

Market direction is answered by the AlphaKing Trading Indicator. Next, I seek companies with great fundamentals using a quantitative process which takes into account superior growth, value, financial health, and institutional support. In the short term chart, I look for stocks rallying off of strong short term support near longer term moving averages, with favorable volume trends. In the long term chart, I want stocks that are rallying off of longer term support, after a prolonged, multi-year sideways basing process. What is most interesting is the double bottom formation. Fundamentals on the double bottom retest are usually the determining factor whether such support will hold. Stocks with strengthening earnings and good value as the stock is forced to endure a large double bottom retest are apt to be the next stock market leaders during the next rally phases, provided the companies are able to deliver on their earnings forecasts, and the stock market stays clear of any major reversal signal.

"So what is the best way for the individual investor to take advantage of AlphaKing?"

AlphaKing aims to help people make money over time, and I believe the charts, trading signals, model portfolios, and daily summary published at http://alphaking.com/ are a giant step forward for the individual investor. They should use the information in any way they feel it is of help to them. I manage my own money using the system, timing entry and exit of my 401K using the timing signals of the Index portfolio, and my individual stock picks in-line with the GrQ/8 Hedge Fund, and GrQ/25 Small Cap portfolios. Some may want to use the trading signals and fundamental ratings shown in the free chart section as a second opinion or to time buys and sells in stocks of interest.

Very few financial websites provide trackable performance to measure the value of their services. I believe that investors and traders should target only those investment elements and stock selection methods that have proven to have outperformance value over the long term, and how can they possibly do that effectively if there is no performance data they can track? I update the performances of our portfolios each day on the Performance and Portfolios pages, as well as highlighting returns for every trade since 2000 in all 4300 stocks in our database.

"Do you offer services to manage individual investor money?"

I currently do not, though I do plan to open a hedge fund in the future designed along the lines of the AlphaKing 100 index (which you can read more about on the Performance page at alphaking.com). I have partnered with the online stock broker, FolioFn.com, so that investors can trade the larger AlphaKing portfolios for a one-time annual commission of $199, which is a savings of thousands of dollars each year in trading commissions compared to the discount brokers. Individuals have to enter the trades themselves, though FolioFn makes this very easy. The goal of http://alphaking.com is to make making money in stocks as painless and profitable as possible.

For Free charts with trading signals and fundamentals ratings, visit AlphaKing