Good morning Traders,
 
For this weeks update, we’ll leave you in the extremely capable hands of our option strategist, Gregory Clay.  Gregory’s service continues to hit it out of the park.  If you’re not trading options for income, you should be.  You can try either of his services for only $1.  I suggest starting with the WICS – Weekly Income Credit Spreads.  In addition to his weekly income credit spreads, you’ll also get the weekly article below which Gregory uses to set up the market. 
 
 
 
January Barometer Sent Strong Negative Signal
2/1/2015 5:44:31 AM
 
Market Summary
 
Stock market action so far this year has been weak and mostly negative. This action has been fueled by plummeting oil prices, weakness overseas, confusion about the Fed’s next move and it’s bellowing about low inflation. Santa’s absence and a down January are bad omens, but they do not guarantee unmitigated market catastrophe. Lower oil and energy prices, while a drain on energy companies and the people they employ, it adds a lot of money back in the pockets of consumers to put into the economy and the stock market. Also, European quantitative easing funds are likely to find their way into the U.S. stock market where prospective returns are greater. 
 
The U.S. stock market ended a rough month this past Friday, delivering its third loss in five days and extending its declines for the year. The S&P 500 index dropped 3% in January, its worse monthly performance in a year. While the U.S. economy continued showing signs of strength, energy companies suffered from a sharp drop in oil prices and some big multinational companies saw their earnings dinged by a stronger dollar. Investors also sifted through the latest batch of corporate earnings news, and the results were mixed.
 
As we said recently “…Gold Mining stocks are blasting off to start the year and Treasury Bonds continue to move higher as they have since the beginning of last year. Equity indexes are barely breaking even and how they end up at the end of January is considered a “barometer” of how they will end the year…”
 
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A tool to help confirm the overall market trend is the Bullish Percent Index (BPI). The Bullish Index is a popular market “breadth” indicator used to gauge the internal strength/weakness of the market. It is the number of stocks in an index (or sector) that have point & figure buy signals relative to the total number of stocks that comprise the index (or sector). So essentially it is the percentage of stocks that have buy signals. Like many of the market internal indicators, it is used both to confirm a move in the market and as a non-confirmation and therefore divergence indication. If the market is strong and moving up, the BPI should also be moving higher as more and more stocks are purchased.
 
Last week we stated “…the S&P 500 BPI is breaking above its downtrend line and starting a new uptrend. The market needs to finish the month on a high note to confirm a bullish breakout…” the current chart shows the breakout failed and converted into a tight trading range. The question is whether a break out of the trading-range will be to the upside or downside.
 
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The updated chart below confirms our recent analysis is still valid “…As circled in the updated chart below the dollar, treasuries and gold remain converged at high levels. Investors are expressing doubts about the global economy and are being cautious about overindulging in the stock market. This cautiousness is leading investors to park additional funds into commodity assets…”
 
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Market Outlook
As reported by the Stock Barometer, in pre-election years, February’s performance generally improves with average returns all turning positive. NASDAQ performs best, gaining an average 2.4% in pre-election-year Februarys since 1971. Russell 2000 is second best, averaging gains of 2.1% since 1979. DJIA, S&P 500 and Russell 1000, the large-cap indices, tend to lag with average advances of around 1.0%. However, February does not have a solid track record when full-month January was negative. Going back to 1950, DJIA has declined 23 times in January, S&P 500 25 times and NASDAQ (since 1971) 15 times. Regardless of index, the following February was down more often than up and the average performance was solidly negative. 
 
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We recently commented “…Next week’s performance is considered critical as a prognosticator of the market’s expected 2015 performance. According to the Stock Trader’s Almanac January has quite a legendary reputation on Wall Street as an influx of cash from yearend bonuses and annual allocations typically propels stocks higher…January Barometer simply states that as the S&P goes in January so goes the year…The long-term record has been stupendous, an 89.1% accuracy…The market’s position on January 31 will give us a good read on the year to come…No other month can match January’s predictive prowess…”According to the Stock Barometer the January Barometer indicator is negative again for the second year in a row and 5 of the last 8 years. Since the start of the secular bear market in 2000 January has been down 7 of the last 15 years with an average loss of 1.2% on the S&P and Dow and a fractional gain of 0.1% for NASDAQ. All of the major errors have occurred in secular bears, so if we still are in a secular bear market, which we contend we are; perhaps we can find some solace in this fact. We are continually reevaluating the efficacy of the January Barometer as we do with all indicators, market cycles and seasonal patterns. But it is way too early to relegate the January Barometer to the indicator graveyard. Its 754 batting average is solid. Also of note, this is the first time since 1950 our January Indicator Trifecta has registered a down Santa Claus Rally, an up First Five Days and a down January Barometer.
Last week we said, “…Commodities continue to be the top performers in the first-quarter. Fourth-quarter revenue and earnings results have not impressed investors, which are suppressing the equity indexes…”
  
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A standard chart that we use to help confirm the overall market trend is the Momentum Factor ETF (MTUM) chart. Momentum Factor ETF is an investment that seeks to track the investment results of an index composed of U.S. large- and mid-capitalization stocks exhibiting relatively higher price momentum. This type of momentum fund is considered a reliable proxy for the general stock market trend. We prefer to use the Heikin-Ashi format to display the Momentum Factor ETF. Heikin-Ashi candlestick charts are designed to filter out volatility in an effort to better capture the true trend.
 
Last week’s Momentum Factor ETF (MTUM) chart analysis said, “…The current trend is pointing towards stock indexes moving back toward recent highs…” As noted in the updated chart below, recent upward momentum converted into a new downtrend. The most probable near-term outcome is range-bound trading with triple-digit market fluctuations.
 
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Volatility is back and may be here to stay. Expect more of it moving forward this year and beyond. As seen in the graph below, the Volatility Index (VIX) and S&P 500 Index crossed last week. The VIX ended higher as the S&P 500 had a down week. Energy companies start reporting fourth-quarter revenue and earnings numbers next week. If they disappoint it is reasonable to expect the VIX to continue higher.
 
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Our previous Total Put/Call Ratio analysis said, “…investors are worried about a market pullback and loaded up on put option contracts. The current ratio is excessively bearish and reflects money managers protecting their long positions in the event traders respond negatively to fourth-quarter earnings and revenue numbers…” Investors remain bearish and are buying more puts than calls in response to higher volatility.
 
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We have been pointing out how the American Association of Individual Investor Survey (AAII) survey continues to prove its worth as a contrarian indicator. Last week we stated, “…as retail investors drastically reduced their future bullish outlook the stock market jumped higher…” This past week you can see that as individual investors’ bullishness surged the stock market responded with a losing week.
 
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The National Association of Active Investment Managers (NAAIM) Exposure Index represents the average exposure to US Equity markets reported by association members. The green line shows the close of the S&P 500 Total Return Index on the survey date. The purple line depicts a two-week moving average of the NAAIM managers’ responses. As the name indicates, the NAAIM Exposure Index provides insight into the actual adjustments active risk managers have made to client accounts over the past two weeks. Fourth-quarter NAAIM exposure index averaged 67.77%. Last week the NAAIM exposure index was 76.23%, and the current week’s exposure is 92.62%. Last week money managers drastically increased their equity exposure on stocks that are exploding during fourth-quarter earning season.
 
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Trading Strategy
The equity market is suffering under the weight of concerns about global economic growth and mediocre fourth-quarter earnings reports. The graph below is the 30-day return for the main 10 S&P equity sectors. You can see virtually all the groups are down for the month with only Healthcare and Utility sectors barely above water.
 
Our index indicators are giving bearish readings, which is more in line with the general market trend than the occasional bullish readings such as we saw last week. The Dow has fallen into a bearish “lower highs, lower lows” chart pattern. Our internal indicators have also fallen back into more bearish modes, so options traders should continue to add bearish positions. Against the current whipsaw action, it is best to take smaller positions than you normally do, but don’t sit out completely.
 
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Feel free to contact me with questions,
 
Gregory Clay
Option Strategist
 
 
——————————–
 
 
Gregory just entered a trade in Netflix – subscribe now so you don’t miss his next trade!
 
Regards,
 
Carl Adams, Publisher
 

Visit www.stockbarometer.com to try our service for only $1.

 

Market Summary

The current version of Easy Money Options
Income (EMOI) articles began publishing in April 2014 and herein is the past six
months’ trade results. As presented below, we executed a total of 22 trades,
with 21 of these closing with a gain. Displayed
below are the details for each trade. The Opening Trade date is when the ‘Trade
Alert’ was published for the trade. Each trade was closed out on the date
associated with the Closing Trade. The gain or (loss) for each spread is shown
along with a Summary Total (year-to-date accumulated result of all the trades).
The trades do
not
include commissions and fees. Also, results will
vary based on the number of contracts traded, and at what price the orders are
filled
.

 

 

 

 

 

 

  

Note

As a side note, increased market volatility over past
month has made it more difficult to execute opening trades at recommended limit
prices. Suggested limit prices for each option contract are the published quotes
at the time an article is written. Generally, in the past, trade suggestions
were posted in the evening for execution the following day. And with record low
volatility it was usually easy to get into trades the next day. Now with daily
triple-digit market moves and higher volatility, it may take a couple of days to
execute the trade at an acceptable price.. Keep in mind that in the ‘Trade
Setup’ for Trade Alerts we suggest a minimum credit amount that we would accept.
So that generally, even if the recommended prices are not available, we would
accept the suggested minimum to do the trade.

 

Regards,

 

Gregory Clay

Options Strategist

Info@StockBarometer.com

Gregory Clay’s Option Newsletter – High Value Option
Trader

Gregory Clay’s Option Newsletter – Weekly Income Credit
Spreads

 

Good afternoon traders,

A while back, we introduced you to one of our new traders, Gregory
Clay. Since then, he’s been burning up the options market – in a very safe
way, I might add – and I wanted to report on his returns since 4/17.
They’re quite remarkable for the level of risk he’s taking. Here is an
update in Gregory’s Weekly Income Credit Spreads newsletter.
To try Gregory’s service going forward, here’s a link and a code to use to
get your first 4 weeks at $1.
On to Gregory’s performance update:

Market Summary

All the trades published thus far in Weekly Income Credit Spreads
have been profitable. Subscribers who executed the opening trades
got 100% of their profit objective by letting the positions expire worthless
(retaining the entire premium received). Displayed below are the details for
each trade. The Opening Trade date is when the ‘Trade Alert’ was published for
the trade, the option contracts expired worthless on the date for the Closing
Trade. The gain for each spread is shown along with a Summary Total
(year-to-date accumulated result of all the trades).
The trades do not include commissions
and fees. Also, results will vary based on the number of contracts traded, and
at what price the orders are filled.

Summary

Our July 6th Weekly Update mentioned “…overbought condition needs to be resolved, but
stocks continue to churn higher. Though the chart has been showing candlestick
bearish reversal signs, this may be a case of regardless of what the chart says;
ultimately you can’t fight the Fed. Fed Chairwoman Janet Yellen said she is not
concerned about asset bubbles. Investors interpreted this to mean the Fed will
continue to provide liquidity if it believes that is what is necessary to
stimulate the economy…”

Click on link for complete article
http://www.stockbarometer.com/viewarticle.aspx?articleid=10574

Regards,

Gregory Clay

Options Strategist

—————————————–
Again, this is pretty remarkable performance in just 2 months to have 8
positions return over $20,800!
 
And better yet, you can follow along for the next 4 weeks for only $1 by
clicking the links below and using the discount code WIC1:
 
Gregory’s service also includes his Weekly Setup
every weekend where he sets up the week ahead and gives you an idea what he’s
looking for and what will happen with your trades. Unlike other services,
Gregory lets you know what to expect before the trade; sends you an alert
getting you into the trade, and sends you an alert on how to handle getting out
of the trade!
And he’s batting a perfect 8 for 8…
You won’t want to miss his next trade.
Regards,
Carl Adams, Publisher
PS – CLICK HERE TO SIGN UP and don’t forget to USE DISCOUNT CODE WIC1 when signing up.