Oil Has Found a Bottom at $83 Per Barrel

Unless we have a recession, oil has found a bottom at $83 per barrel.  Take a look at the chart on the Money Velocity page of Fibonacci-Stocks.com to see the recent flat bottom of oil's price in the $80 range.  The looming European embargo of oil from Iran has put a bottom under oil.

In this current scenario, ERX, a  leveraged oil ETF, is the best way to make money.  It is selling for $36 per share now, and it could go to more than $50 per share in the next couple of months.  That would be a gain of almost 50%.

Golden Timeline

Investing in the stock market can be very tricky.  If you make the wrong decisions on stocks, you not only lose money, but you also lose time.  It takes ten to fifteen years minimum to build up a good retirement.  If you lose three or four years here and there due to bad decisions or market downturns, it will be very hard to make up the lost time.  The solution is to designate 90% of your investment money to a portfolio that is designed to produce gains year after year.  In this way, you will preserve your capital and add to it.  Then, if you want to speculate, you could do that with the remaining 10% of your money without destroying your future.

Fibonacci Stocks.com has a great page showing a Golden Timeline plan where you can protect your principal while gaining a lot of money for your retirement.  50% of the portfolio is comprised of high dividend real estate investment trusts that will pay you dividends whether the stock market is up or down.  Then, the other 50% of the portfolio involves trading SSO, a leveraged ETF for the S&P 500.  SSO will only be bought when it is safe, and profits will be taken after a gain of 12-15%.  Then, the cash will sit safely on the sidelines until the next bull trend comes along.  You can't go broke if you are constantly protecting your profits.

Time To Own Dividend Stocks

Most investors have heard the story many times that the best time to own stocks is the six month period of November through April.  I agree with this historical pattern.  Another way to know when you should be invested is by comparing the charts of 7-10 year bonds (IEF) and SSO, the leveraged S&P 500 ETF.  As you can see in the chart below from Google Finance, SSO crossed over IEF in early January signaling a huge upside for the stock market.

Unfortunately, the best time of the year for owning growth stocks has now past.  There is still high interest in the stock market since 10 year treasury bonds are now selling for less than 2% yield.  Most people are going to put their money where it will earn the best return.  However, the good times for stocks will not last forever.  We are now entering the six month period of May through October when stocks are most volatile.  If you want to play it safe, you could own a couple of high dividend REIT stocks during this time.  AGNC is paying more than 16%, and ARR is paying more than 17%.

Stock Market Trading Range

Most of the gains for the stock market have already been made this year. It will probably be a see-saw battle between the bulls and the bears from April through the November election. Bad news will surface from time to time that will send the market down. Then, through continual inflows from 401K funds, the bulls will eventually restore order again for a while since the money will need to go somewhere.

In this type of environment, a trader can always make money based on whether or not there is volatility in the stock market. If the market is calm, then XIV, an inverse volatility fund can be bought at around $10, and it could be sold at $12 or $13. The profit will need to be taken quickly because it will not last.

Then, for the downside of stocks, TVIX, a leveraged volatility fund could be bought. You could buy it at $8 or lower and sell it when it gets to $9.50 or higher. Then, hang onto the cash until the stock market pulls back again several weeks later. In this way, you can most likely make double or triple digit returns over the rest of the year based on whether the market is acting like a bull or a bear.

Market Correction Is Here

After an unbelievable stock market run over the last several months, it looks like stocks will finally see some downside for a change. The depth of the downturn will probably depend on whether the economy will show more improvements. Selling has already started ahead of May this year because the stock market has experienced such a long uptrend. TVIX, the leveraged volatility exchange traded fund, will probably be profitable for a while as we move into the summer. Be certain to take profits when you are ahead, though.

Several market indicators point to a downturn in addition to the normal summer pullback. One of these indicators is the New York Stock Exchange summation index. The chart has been going down since February while the Dow 30 kept making new highs. This wide divergence between large caps and all other stocks could not last forever. The strong stocks can carry everybody else for a while, but eventually the large caps go down also. It looked like the Dow 30 finally started going down this past week. The million dollar question is how far the stock market will fall. Stay tuned and be careful about owning stocks for the next few months.

Bull or Bear

The current stock market trend matters tremendously when you are trying to decide what stocks are worth owning and what stocks should be sold. Long term bull markets will have plenty of bear rallies with the reverse being true in bear markets where short-term bull rallies will occur. Since the middle of December, we have seen primarily a bull market trend. Bears have been gored. One recent example of this has been TVIX, the double volatility ETF. This stock never dropped below $16 per share in all of 2011 and was higher than $100 per share in the first part of October 2011. This all changed starting in December to the present. TVIX was in a free fall during the past three months. If you were expecting the former $16 bottom low to hold, you would have lost money for a while when TVIX dropped below $14.

As of the week ending February 24, TVIX was hanging around the $16 to $17 range with increasing volatility. The volume has been rising since TVIX formed a bowl bottom in the $14 range. The stock has also crossed the $20 mark two times recently. This is a case where you can probably make a small amount of money on TVIX during a bear rally within the greater bull market trend.

How do I know we are are in a bull market primary trend? The best place to look for support on this idea is the St. Louis Federal Reserve website where you will see charts of improving employment statistics along with low inflation and other good economic news. Two good stocks to own in the 2012 bull run are Clean Energy (CLNE) and Westport (WPRT). They are both involved in using plentiful natural gas for transportation purposes. Clean Energy is building natural gas fueling stations coast to coast and north to south. Westport is building natural gas engines for large 18-wheeler trucks, fleet trucks, and passenger trucks. After the nation-wide infrastructure is built, manufacturers will also be building natural gas cars. This revolution could possibly become as powerful as the computer and internet explosion of the 1990s!

Stock Market Timing

The holy grail of making money in the stock market is knowing when to buy and sell. I have recently discovered a couple of charting techniques that could come close to solving this mystery. I will also give some stock examples and charts to illustrate this. After you sell the stocks according to this timing scheme, it will be imperative to keep the trading money in cash until the next buying signal. This is to protect profits. If you can make 20 to 30% a few times each year from this plan, you will eventually see the value of sitting in cash sometimes.

If you want to know whether we are in a bull or bear trend, just look at a chart of the S&P 100 percent of stocks above the 50 day moving average. If the successful stocks total line is above the 50 day line, then it will be safe to own stocks. You could sell whenever you are up 20% or whenever the S&P 100 bullish chart falls below the 50 day average. One specific stock that you could own to go along with this plan would be SSO, the leveraged S&P 500 ETF.

Another chart plan for buying and selling involves the slow stochastic signal line and the MACD signal line. Pick a popular stock like AGQ, which is leveraged to the price of silver. Whenever the slow stochastic signal line crosses over at the bottom, you should buy AGQ. Then, whenever the MACD signal line crosses downward from the top, you should sell. Buying with the slow stochastic signal will get you in the trade at the best time, and holding on for the MACD downward crossing before selling will smooth out false signals that appear on the upper slow stochastic signal line.