9-4-2012 Comments

As Jerry pointed out leading stocks were leading yesterday. I find this encouraging. Prior comments about possible double tops still stand, the market needs to make up its mind. Today we will drop a distribution day from the count because the distribution day that occured on 7/31/2012 falls out of a trailing 25-day window. On Friday we will lose another day. The distribution count today stands at 2 before the open. I have no idea why the market is rallying but it is following election year historical patterns. It the market continues to follow the pattern we will rise for at least another 1-2 months.

I find that the market exposure model has worked very well at keeping me on the right side of the market even when all of the other indications are so confusing. The most important aspect of the model to me is that it follows the medium and long-term trends very well without whipsaws. Most CANSLIM investors are somewhere between 50% and 200% invested and have been for quite some time. This doesn't mean that this is a robust rally but the profits are slowly building.

The exposure count is +6. Normally the count is limited to +5 but in a power trend the count is allowed to go to +7. This doesn't mean that any more exposure is warranted but by allowing the count to move higher it takes more sell singals than normal to take us out of the market. The latest model change to MEM 2.0 did two things: turn the power trend on earlier and also allow distribution clusters to take us out earlier if and when they show up. The power trend now comes on when the 21-day ema is trending above the 50-day for 5 days and the lows of the NASDAQ are above the 21-day for 10 or more days and the 50-day is rising. We have been in a power trend since 8/16. Distribution clusters (4 distribution days out of a trailing 8 day window) will casuse an S13 sell signal which will also turn the power trend off. We seem to be nowhere near that eventuality now.

I am invested in KORS, FRAN, NSM, ELLI and EQM. FRAN is not acting well after last night's earning release so we will see what happens. I have enought cushion to hold it to the 10-week line if it needs to go there.

Mike, is there any service that has coded all these rules so that a person who doesn't have the time to track the market quite so closely can at least know automatically where the model stands?

Thanks for the great work you do here.

[QUOTE=adam ali;23568]Mike, is there any service that has coded all these rules so that a person who doesn't have the time to track the market quite so closely can at least know automatically where the model stands?

Thanks for the great work you do here.[/QUOTE]

Adam,
There is a service called Leaderboard provided by investors business daily. This service shows you the output of the model and a short history of all of the signals, essentially all of the signals from the most recent or current rally. Leaderboard has a lot more also. It has a watch list prepared by IBD staff with commentary and annotated charts for every stock on the watch list. It also has other lists such as the cut list (may be useful for shorting candidates), IBD 50 and the IBD sector leaders list. In order to view the Market School model information you will have to go attend Market School, they turn on the feature for graduates of the school. None of this is cheap however. It is fairly easy to see why it is expensive as it is a labor intensive process to do intraday commentary and chart markups on every stock on their watch lists. I subscribe to this service. You can go to investors.com and check out the details.