Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Gold Stocks Vs Gold – Not A Good Bet - 15th Dec 19
Silver Price Remains in 'Corrective Downtrend' - 15th Dec 19
Amazon - Snow Falling Effect Christmas Lights Outdoor Projector Review - 15th Dec 19
How to FIX Dirty Disk Windows Hard Drive Volume Error 0X80071AC3 - 15th Dec 19
Raffaele Riva and AUREA Are Breaking New Ground in Financial Services Across Europe  - 15th Dec 19
Canadian Cannabis Stocks CRASH as Canopy Growth Hits a Dead End - 14th Dec 19
Retail Sector Isn’t Dead, and These 6% Dividend Paying Stocks Prove It - 14th Dec 19
Top 5 Ways to Add Value to Your Home - 14th Dec 19
Beware Gold Stocks Downside - 13th Dec 19
Fed Says No Interest Rate Hikes In 2020. What About Gold? - 13th Dec 19
The ABC’s of Fiat Money - 13th Dec 19
Why Jo Swinson and the Lib Dems LOST Seats General Election 2019 - Sheffiled Hallam Result - 13th Dec 19
UK General Election 2019 BBC Exit Poll Forecast Accuracy Analysis - 12th Dec 19
Technical Analysis Update: Tadawul All Share Index (TASI) - Saudi Arabia ETF (KSA) - 12th Dec 19
Silver Miners Pinpoint the Precious Metals’ Outlook - 12th Dec 19
How Google Has Become the Worlds Biggest Travel Company - 12th Dec 19
UK Election Seats Forecasts - Tories 326, Labour 241, SNP 40, Lib Dems 17 - 12th Dec 19
UK General Election 2019 Final Seats Per Party Forecast - 12th Dec 19
What UK CPI, RPI INFLATION Forecasts for General Election Result 2019 - 11th Dec 19
Gold ETF Holdings Surge… But Do They Actually Hold Gold? - 11th Dec 19
Gold, Silver Reversals, Lower Prices and Our Precious Profits - 11th Dec 19
Opinion Pollsters, YouGov MRP General Election 2019 Result Seats Forecast - 11th Dec 19
UK General Election Tory and Labour Marginal Seats Analysis, Implied Forecast 2019 - 11th Dec 19
UK General Election 2019 - Tory Seats Forecast Based on GDP Growth - 11th Dec 19
YouGov's MRP Poll Final Tory Seats Forecast Revised Down From 359 to 338, Possibly Lower? - 10th Dec 19
What UK Economy (Average Earnings) Predicts for General Election Results 2019 - 10th Dec 19
Labour vs Tory Manifesto's UK General Election Parliamentary Seats Forecast 2019 - 10th Dec 19
Lumber is about to rally and how to play it with this ETF - 10th Dec 19
Social Mood and Leaders Impact on General Election Forecast 2019 - 9th Dec 19
Long-term Potential for Gold Remains Strong! - 9th Dec 19
Stock and Financial Markets Review - 9th Dec 19
Labour / Tory Manifesto's Impact on UK General Election Seats Forecast 2019 - 9th Dec 19
Tory Seats Forecast 2019 General Election Based on UK House Prices Momentum Analysis - 9th Dec 19
Top Tory Marginal Seats at Risk of Loss to Labour and Lib Dems - Election 2019 - 9th Dec 19
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19

Market Oracle FREE Newsletter

UK General Election Forecast 2019

Trading the Short-term Stock Market Trend Within the Long Term Trend

Stock-Markets / US Stock Markets Jun 02, 2007 - 07:19 PM GMT

By: Robert_McHugh_PhD

Stock-Markets We track both the primary (long-term) trend, and the short-term trend. Knowing both is key to making money trading or investing in the stock market . Simply, increase exposure when playing a short-term trend that is in the same direction as the primary trend.


Surprises are likely to go in your favor. An investor or trader can also play a short-term trend that is in the opposite direction as the long term trend, however exposure (the amount invested) should be limited, as surprises are likely to go against the short-term trend. All portfolio managers can benefit their clients considerably, achieving superior returns, by following our Primary Trend Indicators as follows:

The above chart updates our Primary Trend Indicator for the month of May, 2007 . It remains on a “buy” signal from October 31st, 2003, when the DJIA closed at 9,801.12. One of the tools we have in our arsenal to identify the status of a Primary Degree trend is a simple analysis of the 14 month moving average versus a Slower moving average calculation, the 5 month MA of the 14 month. It has been terrific at identifying multi-year trends, both up and down. While it is a little late in generating the buy and sell signals, it triggered a “sell” near the start of Primary degree wave (4) down, in mid 2000. What followed was a two and a half year, 39 percent drop into the wave (4) bottom on October 10th, 2002 . It took a while for this indicator to confirm that the rally that started on October 11th, 2002 would in fact be a multi-year primary degree wave up, wave (5) up. But by October 2003, this analytical tool did in fact trigger a Primary Degree “buy” signal. Since then, there has been a three and a half year further rally to new all-time nominal highs. We got a near ”sell” signal in mid-2005, but the rally rejuvenated itself, continuing on its ”buy.” As of May 31st, 2007, it remains on its “buy,” and the spread between the Fast and the Slow is widening. The positive spread widened for the first time in several months, from 232 points in March 2007 to 252 in April, widening further to 297 in May. But the spread is relatively narrow, as this compares to a 1,744 positive spread in December 2003. We require a 5 month moving average of the Spread between the Fast and Slow to reverse in a new direction for 3 consecutive months in order to declare that a new primary trend, a new multi-year trend, is underway. Since the PTI generated a “buy” on October 31, 2003, the DJIA has risen 3,872 points, or 39.5 percent .

There have only been two signals since 1997 , so this tool is useful for long-term investors , as it filters out the noise of up and down corrections of significance in favor of the primary trend. It did give an early warning in 1999 and early 2000 as the two measures were nearly identical for several months. This chart is useful for Conservative Balanced Investment Portfolios since once we get a new signal, we can rely upon that signal for years . Further, it tells us which direction surprises are likely to occur , so when playing speculative options or futures, we can know the direction where a surprise trend turn is most likely to occur. Knowledge of the primary trend is also useful for determining how much to invest when trading . We can be more aggressive when entering a position in the same direction as the primary trend, and less aggressive when entering a short-term trend play against the primary trend.

We look at the next chart as a confirming indicator of the Primary Trend Indicator . It is a comparison of the position of the 20 Month Moving average versus the 40 month. As of May 31st, 2007, the 20 Month widened to 644 points above the 40 month, reconfirming the “Primary Trend Bull Market. ” Still, the spread is narrower from its widest point of 755 points in July 2005. What is nice about this indicator, is that once we get this indicator's confirming “buy” or “sell,” we can look forward with high confidence to a large chunk of the primary trend's move still being ahead of us .

For example, the 20 month MA crossed below the 40 month MA in February 2002, with the Dow Industrials at 10,106. From that “sell” signal point, the DJIA dropped 2,909 points, or 28.8 percent. That suggested a great spot to purchase Leaps Put options.

Then, going the other way, the 20 month MA rose above the 40 month MA in August 2004, at DJIA 10,174. The Dow Industrials since rose 3,453 points, or 34.0 percent. Here, your strategy could have been to either play long-term leaps call options, or to simply go long in the cash market and stay there, in other words, increase your long investment position.

There were no false crossovers or cross-unders with this confirming 20 Month/40 Month MA measure. Once it turned negative, the trend was down. Once it went positive, the trend was up.

As for determining the short-term trend to trade inside the long term trend, which is helpful for market timers, trend traders, or simply knowing how much to invest and when, we favor the Demand Power/Supply Pressure momentum indicator . The beauty of this indicator is it not only gives us entry signals, but also an exit signal strategy for aggressive traders/investors. Simply, whenever the Demand Power measure crosses decisively above the Supply Pressure line (we consider decisive to be 10 points), we receive an “enter long positions” signal. When the two lines converge and intersect, we get an “exit long positions” signal. Conservative traders always have the option of exiting earlier, once profit targets are met, or before two lines converge. Once Supply Pressure rises 10 points above the Demand Power line, we get an “enter short positions” signal, for

those interested in playing the short side. However, within a primary Bull market, playing the short side short term trend does carry more risk than playing the long side. If playing the short side, you would then exit once the two lines intersect if aggressive, or sooner if conservative.

As of Friday, June 1st, 2007, our proprietary S&P 500 Demand Power/Supply Pressure indicator remains on an “enter long positions” signal from May 29th, 2007, as the Demand Power line shows strong upside momentum, rising more than 10 points above the Supply Pressure line. Once these two lines intersect, we will be given an “exit long positions” signal for the most aggressive traders. To repeat, more conservative traders can exit any time they want, such as once a profit target has been hit, or the two lines converge, but before they actually intersect. The chart appears at the top of the next page. In just three days, since this DP/SP indicator signaled to “enter a long position,” the Dow Industrials rose 170.66 points. We present the DP/SP indicators daily for both the DJIA/S&P 500 and the NASDAQ 100, and the Primary Trend indicators monthly for our regular subscribers.

“And when the disciples saw Him walking on the sea, they were
frightened, saying, “It is a ghost!” And they cried our for fear.
But immediately Jesus spoke to them, saying,
“Take courage, it is I; do not be afraid.”
And Peter answered Him and said, Lord if it is You,
command me to come to You on the water.”
And He said, “Come!” And Peter got out of the boat, and walked on
the water and came toward Jesus.
But seeing the wind, he became afraid,
and beginning to sink, he cried out, saying, “Lord save me!”
And immediately Jesus stretched out His hand and took hold of him,
and said to him, “O you of little faith, why did you doubt?”
Matthew 14: 26-31

For a Free 30 day Trial Subscription , go to
www.technicalindicatorindex.com and click on the button
at the upper right of the Home Page.

by Robert McHugh, Ph.D.  
technicalindicatorindex.com

If you would like a Free 30 day Trial Subscription , simply go to www.technicalindicatorindex.com , and click on the FREE Trial button at the upper right of the home page. A subscription gains you access to our buy/sell signals, our Market Analysis Newsletters, Traders Corner, our model Conservative Investment Portfolio, Guest Articles, and our Archives.

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com. The statements, opinions, buy and sell signals, and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates, buy and sell signals, and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Copyright 2007, Main Line Investors, Inc. All Rights Reserved.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules