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Nov 10, 2008 - Issue #136

Market Timing

CNBC, Kudlow & Company, et al, continuously ask their guest analysts, "Is this the bottom?" The answer, of course, is that no one knows. So what? It's not necessary to pick bottoms (or tops, for that matter). It's only necessary to identify them as soon as possible after they occur.

MarketClub has an algorithm that does a pretty good job of doing exactly that. It's not perfect. What is? But it will do until something better comes along. It has a long and successful track record.

How does it work? Like most good ideas, it's really quite simple. They don't keep it a secret. It's just common sense, actually.

In rising markets, monthly charts (used as a 'filter') indicate when the trend changes direction by penetrating the lowest low of the last three months.

In falling markets (like we're in now), a rising trend change is signaled when the highest high of the last three months is taken out.

The same criteria are used on weekly charts for 'timing' purposes. Trade long positions only during rising trends and short positions only during falling trends. In other words, trade only with the major trend in your favor. That's it. Simple, but it works.

If you only follow a few markets, you can do the work yourself. If, on the other hand, you want to know when signals are changing for all the markets, MarketClub will notify you in real time. They'll even e-mail you when you want to be 'alerted'. You couldn't possibly do all that work yourself.

Heads Up

During the next two weeks, the following Dow components report earnings. Keep a sharp eye out for possible price swings leading up to 'earnings day' (Subject to revision):

11/13 WMT.

11/18 HD.

11/24 HPQ.

Dow score card for the week ending 11/7/08.

DJ-30: 8943.81 -381.20 -4.09%. The Real World (arithmetical) DJ-30: 37.43 -1.61 -4.11%.

UP: 5, Down: 25.

Trends (weekly charts): This is the subjective part.

Rising (Generally Higher Highs/Higher Lows) 3 (n/c) 10%:

MMM, +*T, VZ.

Consolidating (Generally Lower Highs/Higher Lows) 22 (-5) 73%:

AA, AXP, BA, CAT, CVX, DD, DIS, GE, -*HD, HPQ, IBM, INTC, JPM, KFT, KO, MCD, MRK, PFE, PG, UTX, WMT, XOM.

Declining (Generally Lower Highs/Lower Lows) 5 (+5) 17%:

-*BAC, -*C, -*GM, -*JNJ, -*MSFT.

+/- denotes change of direction.

* denotes change of category.