February 21, 2011 – 04:03 am EST
It was more of the same from this relentless bull over the last week. Volume flows into most areas confirmed the price action and the Transports have now spent a few days above resistance at $95; all positive signs. There are a few areas that will need to be monitored for warnings of profit taking though, lets take a closer look…
** If you have a moment, please vote for Whitney in the Demon Bikini Model Search 2011.
**** The LTMF 80 system that comes free with this newsletter is showing a profit of 22.61% on its current trade. The two previous trades produced a return of -1.26% and 12.55%. We grow by word of mouth… please and thank you for continuing to tell your friends.
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ETF % Change Comparison
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The Semis (SMH), Small Caps (IWM) and Transports (IYT) were the market leaders over the last week. These are all highly economically sensitive so this shows confidence in the bull.
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Learn more – ETF % Change Comparison
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A Look at the Charts
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SPY is at a new highs on strong volume, it is difficult to pick holes in that.
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All looking good from QQQQ, just keep an eye on the volume trend for signs of weakness.
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If SMH sees a trend change in volume and QQQQ does the same then expect profit taking to follow.
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Wow great volume into IWM, awesome to see.
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It would be good to see IYT at least hold onto $95 and have OBV stay above its previous high.
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OM3 Weekly Indicator
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The buy signals remain active across the board and the bull alerts offer no warnings at this time.
Learn more – The OM3 Indicator
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TransDow & NasDow
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The Dow remains dominant over both the Transports and the NASDAQ. Historically the market has been very unproductive under these conditions.
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What the TransDow Readings tell us:
The TransDow measures dominance between the DJ Transportation Index (DJTI) and the Dow Jones Industrial Average (DJIA). In a strong market the more economically sensitive Transportation Index should be dominant over the DJIA.
Historically the DJTI has been dominant over the Dow 45% of the time. The annualized rate of return from the DJTI during this period was 18.47% with the biggest loss for one trade sitting at -13.27%. The annualized return from the DJIA during the periods it was dominant over the DJTI was just 4.06% and the biggest loss for one trade was -16.13%. A 4% stop-loss is applied to all trades adjusting positions only at the end of the week.
What the NasDow Readings tell us:
The NasDow measures dominance between the NASDAQ and the DJIA. Using the same theory behind the Trans Dow; in a strong market the more economically sensitive NASDAQ should be dominant over the DJIA.
Historically the NASDAQ has been dominant over the DJIA 44% of the time. Taking only the trades when the NASDAQ is above its 40 week moving average the annualized rate of return was 25.47% with the biggest loss for one trade sitting at –8.59%. The annualized rate on the DJIA during the periods it was dominant over the NASDAQ is just 8.88% and the biggest loss for one trade was –12.28%. A 8% stop-loss is applied to all trades adjusting positions only at the end of the week.
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LTMF 80 & Liquid Q
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The LTMF 80 continues to hold a position in QQQQ that is now showing a profit of 22.61%.
Liquid Q has just opened a new position in QQQQ. This new trade has a 66% probability of being profitable with an average profit of 7.36%
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Historical Stats:
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How The LTMF 80 Works
LTMF stands for Long Term Market Forecaster. It reads volume flows relative to price action and looks for out performance of volume measured on a percentage basis over the prior 12 months. During a sustained rally the readings will reach high levels (near 100%) making it imposable for the volume reading to always outperform price so any reading above 80% will maintain the buy signal. This system has outperformed the market over the last 10 years but performance has been damaged by some nasty losses. It only produces buy signals and only for QQQQ.
How Liquid Q Works
Liquid Q completely ignores price action and instead measures the relative flow of money between a selection of economically sensitive and comparatively stable ares of the market. It looks for times when the smart money is confident and and can be seen by through volume investing heavily is more risky areas due to an expectation of expansion. This system has outperformed the market over the last 10 years and remained in cash through most of the major declines. It only produces buy signals and only for QQQQ. We will provide more performance details on the web site for these systems soon.
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Summary
While there are not currently any signs of weakness, keep a close eye on the volume flows of QQQQ and SMH. It is positive that Liquid Q has just opened a new long position in QQQQ; this has a 2/3 chance of being profitable. If IYT closes back below $95 then the market is unlikely to make much headway so lets hope the Transports keep trucking. Make it a great week!
Any disputes, questions, queries, comments or theories are most welcome in the comments section below.
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Cheers
Derry
And the Team @ ETF HQ
“Equipping you to win on Wall St so that you can reach your financial goals.”
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Quote of the Day:
“Hope is not a strategy. Luck is not a factor. Fear is not an option.” – James Cameron