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Hold Your Nose and Buy

By Jeff Clark
Thursday, June 17, 2010

Bears beware.
 
The stock market will rally over the next month. Here's why...
 
 
This is a chart of the New York Stock Exchange Summation Index. It's a momentum indicator with an excellent track record of identifying short-term turning points in the stock market.
 
The indicator generates "buy" signals when the short-term moving average convergence divergence (MACD) – the black line on the bottom graph – crosses up and over the longer-term MACD line – the red line. Buy signals are marked by the green circles on the chart.
 
"Sell" signals occur when the short-term MACD line curls down and crosses below the long-term line. Sell signals are marked by the red circles.
 
How it works, why it works, and what it all means aren't important. All that matters for short-term traders is to buy when you get a green circle and sell when you get a red circle.
 
Here's how the S&P 500 performed after each signal over the past year...
 
 
Five of the six trading signals were profitable. The only exception was the sell signal in August 2009. That trade lost 8% before the indicator reversed and generated a buy signal. The sell signal in late March was a bit early. But it paid off pretty well.
 
Overall, the NYSI signals have been accurate. They usually last between four and eight weeks. The buy signal we got last Thursday should keep the bulls happy and the bears frustrated at least until the middle of July.
 
It's difficult to be a buyer of stocks right now. But according to the NYSI indicator, it's the right thing to do. So hold your nose and buy. We'll sell sometime next month.
 
Best regards and good trading,
 
Jeff Clark




In The Daily Crux Recent Articles
Market Notes

Fannie Mae and Freddie Mac plummet 50%... shares will delist from the NYSE as the gov't-run entities stop pretending to be public companies.


Indian outsourcing giant Infosys
quietly hits all-time high.
 
Nokia collapse continues... cellphone maker falls another 10% in the face of Apple competition.
 

Economic bellwether FedEx drops 3% on disappointing earnings outlook.

Market Watch
Symbol Price
Change
52-Wk
S&P 500 1116.04 +0.1% +22.6%
Oil 35.14 -1.0% -9.2%
Gold 121.90 +1.3% +32.0%
Silver 18.33 +1.4% +29.8%
US-Dollar 85.69 -0.6% +6.8%
Euro 1.24 +0.7% -11.2%
Volatility 25.05 -3.4% -20.6%
Gold Stocks 482.82 +2.7% +43.1%
10-Year Yield 3.19 -2.7% -12.6%

World ETFs
Symbol Price
Change
52-Wk
USA 112.14 +0.2% +22.5%
Canada 27.43 +0.0% +27.9%
Russia 17.79 -0.2% -0.2%
India 30.35 -0.5% +6.3%
Israel 14.07 -0.3% +34.5%
Japan 9.67 -0.2% +2.8%
Singapore 11.52 -0.5% +30.0%
Taiwan 11.69 -0.7% +21.8%
S. Korea 47.01 -0.4% +34.9%
S. Africa 57.69 +0.7% +25.6%
China 40.62 -1.2% +8.8%
Lat.America 45.32 -0.3% +31.9%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 102.70 +0.5% -0.2%
Big Pharma 61.41 -0.1% +7.2%
Internet 55.38 -0.3% +30.7%
Semis 13.64 +0.4% +24.3%
Utilities 30.37 +0.7% +10.4%
Defense 17.58 +0.2% +22.4%
Nanotech 9.11 +0.4% +3.6%
Alt. Energy 9.05 +0.0% -10.8%
Water 16.50 -0.1% +13.8%
Insurance 14.83 -0.3% +27.6%
Biotech 18.33 +0.2% +37.2%
Retail 17.21 -1.4% +25.2%
Software 21.88 +0.3% +34.4%
Big Tech 47.05 +0.3% +31.1%
Construction 12.35 -0.9% +14.0%
Media 12.70 -0.3% +46.8%
Consumer Svcs 59.85 -0.3% +35.7%
Financials 53.28 -0.2% +28.3%
Health Care 61.55 +0.1% +18.1%
Industrials 56.14 +0.2% +32.8%
Basic Mat 58.83 -0.5% +34.3%
Real Estate 51.98 +0.2% +61.4%
Transportation 80.24 +0.1% +40.4%
Telecom 20.07 +0.0% +11.9%