February Long-Term Trading

January is over -- hail and farewell -- and it's time to run through the long-term charts to see how to manage a 401(k), for example, or something else in mutual funds, where rapid trading is not really an option.

I'm looking at a 10-year chart with monthly candlesticks and a 12-month moving average. If a month crosses the ma and closes above it, that's an entry sign. If there's a cross the close is below the ma, that's an exit sign (or perhaps a signal for a short sale, if that's allowed under your fund's rules). One place to create long-term monthly candlestick charts is www.bigcharts.com. The price is right. It's free.

Looking first at some ETFs that mimic offerings that show on some 401(k) plans . . .

SPY, which tracks the S&P 500, has been bull mode since July 31, 2009, and is rising steadily on the monthly level of resolution. The ma12 is trending upward also.

TLT, tracking long-term U.S. Treasury bonds, has been in bear mode since April 30, 2009, and has a downtrending ma but no strong price trend.

JNK -- corporate bonds rated below investment grade (the average is B2) -- has been in bull mode since May 31 and is showing a steady rise, with the ma also in an uptrend.

GLD -- gold, the metal (not mining companies) -- bull mode since Dec. 31, 2008, rising price trend until last December, when it began a downtrend heading toward the rising ma.

USO -- oil, the liquid (not energy companies) -- bull mode since Sept. 30, 2009, but an entirely sideways trend mimicked by the ma.

EEM -- emerging markets -- bull mode since May 31, 2009. Rising price trend until January, and a rising ma.

Let's look for January signals among other stocks, both high-volume exchange-traded funds and corporate shares. These are probably not tradable in your 401(k), but could be long-term positions in an individual retirement account (IRA).:

• QCOM, entered bear mode on Jan. 31
• T, bear
• VZ, bear
• GDX, bear
• MS, bear
• PBR, bear
• GS, bear
• RIMM, bear (a December-January whipsaw)
• ABX, bear
• GG, bear
• GILD , bull
• KLAC, bear
• BBY, bear
• NEM, bear
• TBT, bear
• HK, bear
• MRO, bear
• NUE, bear
• EXC, bear
• CAH, bull

The scan above is looking only at moving average crosses. If I find something I like, then I look further.

Is there a price trend (high highs, higher lows for bulls; lower lows, lower highs for bears)?

Is the price in an area of congestion, which can be hard to break out of?

Have the been whipsaws the last few months?

And for longer-term trades like these, I also will look at the fundamentals -- how are recent earings trending? What do the analysts say?

For earlier writing on the long-term perspective, see my yearender, "Looking Backward", and a follow, "Monthly Breakouts".

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