"The Fed lowered interest rates more than expected and in a way that has Wall Street talking; in fact, the stock market is setting up a potentially bullish technical formation," technician Mark Leibovit, editor of Volume Reversal Survey -- often ranked among the top performing market timing services.

He reports, "The market expected a 50 basis point cut to 0.5% with a chance of a 75 bp cut to 0.25%. Some even called for a rate of 0%. The Fed made a lot of people happy, though a bit confused, by lowered the Fed Funds rate target to a range of 0% to 0.25%.

"This is the first time the Fed has lowered rates to a range instead of a an actual number. It also bring the Fed Funds rate to its lowest target rate ever. The Fed also pledged to use "all available tools" to combat a severe financial crisis and prolonged recession. The stock market likes the lower interest rate and the Dow is up 360 points, the S&P is up 44 and the NASDAQ is up 81.

"As I write, all nine market sectors are trading higher, led by Financials which are up 9.8%. Goldman Sachs (NYSE: GS) is up 17.2% after reporting its first quarterly loss as a public company.

Normally, I'm the kind of person who thinks it's ridiculous when investors sell in a bear market. I didn't flinch when the dot-come bubble burst, or in the downturn after the terrorist attacks. But this time is different.

In January, I pulled back my stock holdings to the low end of the asset allocation models. In the last couple weeks as the credit crunch unfurled while I was on vacation in Canada with my husband, I looked for an up day in the market to sell. On Friday, I cut our stock holdings in our regular and retirement accounts by about one-third.

On Friday afternoon I completely expected the market Monday to rise on word of a successful bailout. I warned my husband that there would certainly be a rally when the deal was approved and we would lose out. Boy, did that turn out not to be the case. It still may happen, but I really doubt it will completely erase Monday's loss.

Friday wasn't even my first choice for a sell date. As I said, we were traveling and the two other times I wanted to sell, we couldn't get a secure internet connection in time.

I still don't believe I've timed this perfectly. You just can't. If I had timed it perfectly I would've taken everything out of stocks last October. I could have saved around 20-30% of my holdings with that. And I'm absolutely certain that I won't jump back in at exactly the right time. I know the market lurches up in big jumps.

But I don't need to get it 100% right to save myself some money. When the market has been up lately, it's been on that crazy market wisdom that, 'Yeah! A bailout plan is coming!' But the big picture is still bad news: A bailout is needed and even it may not work.

Sy Harding, long-known for his work in cycle analysis, takes a look at the history of Presidential Election Cycle and what this portends for the next few years.

Interestingly, he explains how and why this cycle will impact the direction of the stock market in coming years regardless of which candidate becomes the country's next President. Here's his long-term assessment from his Street Smart Investing.

"As Paul Harvey once said, 'In times like these it helps to recall that there have always been times like these.' Yet the world hardly ever comes to an end. The future arrives. The cycles continue. Sunny weather still follows stormy weather, winter still follows summer, spring still follows winter -- every time.

"For investors there's nothing more important than recognizing that business, the economy, and markets also move in cycles, not endless straight lines. Recessions follow boom times, bear markets follow bull markets, bull markets follow bear markets -- every time.

"There are two cycles, one of intermediate-term duration, the other longer-term, which can be of significant importance to investors. The first is the annual seasonal cycle.

Using a proprietary "volume reversal" trading strategy, Mark Leibovit has been consistently ranked among the top newsletter timers. In his VRTrader, he looks at the outlook for stocks, oil, gold & silver -- and offers his choice for exchange-traded funds for traders to play these markets.

Leibovit explains, "The stock market's decline, besides being huge, is relentless. Every rally was met with selling and fresh lows were soon hit. The Dow crashed through the March and January lows and is now trading at its lowest level since September 2006.

"Apparently, that 1500 point rally off the March low was just a giant head fake. The Dow is now down 19% since last October and the S&P is down 18%, approaching bear market territory."

"Breadth is dismal, and down volume is ten times greater than up volume. Sector action is terrible. Seven of the nine market sectors are down more than 2.5%. Ouch! Financials have done it again and have set a new five-year low. Oil spiked through previous records setting a new record high.

"The precious metals also showed strong gains today with gold up 32.80 to 915.10. We cleared the June 9th high of 907.20 touching 909.50 opening up potential to 931.00 (May 21 high).

The Wall Street Journal's "Ahead of the Tape" column looks at (subscription required) one of the age-old market-timing indicators: the election year.

Conventional wisdom holds that election years are a good time to buy stocks because incumbents hoping to hold on to power, for themselves or their party's successor, will try to win voters' favor with fun things like tax cuts and spending to give the economy an upward jolt.

Conversely, politicians usually save things like tax hikes for their first two years in office, hoping we'll forget about it by the time election year rolls around.

The Journal argues that the subprime meltdown and general housing turmoil could make the election indicator less reliable this year. "Investors should also keep in mind the one time in the last half century the presidential cycle didn't work: 2000, when the dot-com stock bubble imploded. No amount of fiscal stimulus could stave off that bear market. It remains to be seen if Washington's pump-priming machine will work this time around."

Markets are too complex to use any one indicator -- no matter how impressive its past performance -- to try to jump in and out of the market. It's been said many times before, but most investors should just buy and hold and pay no attention to the election year indicator, the Super Bowl indicator, or anything else.

A piece in The Wall Street Journal laments that the day to day gyrations of the market are hard to predict. Duh. Furthermore, the methods that once appeared to be effective in making predictions no longer work. Double-duh.

It's an interesting piece, and a good one, focused on the role that hedge funds may be playing in increasing market volatility. The problem is this: who really cares? According to some, days where 90% of shares traded in the same direction, was a good indicator of a bottom:

"This used to be a good signal of a major bottom," says Tim Hayes, Ned Davis's chief investment strategist. "Now, it could be turning into a signal of the end of a less-significant market correction -- or it could be turning into an inconsistent signal" that simply means investors are anxious

Well wasn't that enlightening?

There have been very few market prognosticators, and not enough to make me think it's anything other than luck, who have correctly predicted the markets swings over an extended period of time. Does any of this volatility matter for the long-term investor? No, and the long-term investor is the only one who's likely to do well over the long-term.

So sit back, dollar-cost average, and count on the long-term growth of the economy for long-term returns. And don't pay attention to investment strategists who use the word could twice in the same sentence.

George C. Lane developed the Stochastic Oscillator in the late 1950s, according to Stock Charts. You can view their page for the extensive, mathematical calculations behind the indicator because they can explain it much more simply than I can. However, here's the important thing: I've found that this indicator has predictive value in helping me spot overbought or oversold situations.

I never buy stocks simply because they are overbought -- the stock needs to be displaying the strength needed to stage a rebound or "bounce." For example, in the two situations I highlighted in a recent technically focused article, both of the stocks were oversold (one of them according to stochastics, the other from price action) and both were showing strength.

This is important because, in my experience, stocks can remain overbought or oversold for a very long time. While you might argue that, if this is the case, then why should someone even spend their time looking at the indicator? In my opinion, the same could be said about judging a stock's value -- a stock can remain over or undervalued for a long time before the true value is reached. That doesn't mean performing such measures is a waste of time.


As you can see from the chart, Stochastics certainly aren't a "holy grail" for market timing, if employed with the proper mindset, they do hold predictive value, in my opinion. While I'm sure efficient market theorists are going to attack me for that statement, I think the chart speaks for itself.

You can see that the first time the stock was "oversold" (bottom of oscillator), as soon as the stock began to rally, the rally continued for 10%+.

However, as you see, it is not flawless. For the stock's run from $23-$33, the indicator would have had you selling after just a small percentage of that move. But that's understandable in my opinion, because the market was playing catch-up in Microsoft as people realized that a low double digit earnings multiple was extraordinarily irrational for such an incredibly profitable company.

Through this post I've tried to explain how I use the Stochastic Oscillator so you can better understand what it means if you see it inside charts in my post. Feel free to comment with any questions!