The fundamental crowd typically says something akin to "as goes the housing market, so goes the stock market". That is both evasive as well as missing the point, in our point of view. We could list a number of reasons why that view or any other economy-based view is of absolutely no use to the investor with a timeframe of anything less than several years (even perhaps a decade or longer) but the foremost of them is the fact that the stock market leads the economy by 6-9 months. In a scenario like the present, the markets could drop a further 50% or rally 50-75% in 6-9 months.

Accordingly, a shorter-term view is imperative if one is a trader/investor with a horizon of anything less than 3-4 years. One needs to try and envision the path of the markets over each 4-6 week period and then plan his/her allocation strategies based upon the potential paths over that period.

We've done our research and are absolutely convinced that the action over the next 4 to 6 weeks depends largely upon the answers to the three questions listed on the chart below.

As you can see, we've given price action only secondary consideration (notice the low opacity of the candlesticks) on the chart of the S&P-500, above. The Bollinger Bands, the 20-day Moving Average (in the upper pane) and the Bollinger Band Width (in the lower pane), have been given primary importance.

Those divergences have not yet completed themselves - a new failure swing high is needed in order to complete a positive divergence - but it won't take more than one or two days of gains within the next couple of sessions in order to bring about such completions.

The majority of the following setups are primed to provide huge trading profits, if the aforementioned stock market buy signals eventuate. (A few setups that will gain from any continuation of the declines have been provided at the end of this write-up as well).

Each potential trading pick has been provided with a rundown of the technical analysis on it's stock chart, buy (sell) trigger points, stop loss parameters and initial targets. Each of those elements is malleable according to trading style, of course.

Stock picks that have triggered or are close to triggering will be moved to the respective stock picks list in the members area immediately and will be followed until either the target has been met or protective stop loss has been triggered.

Long Stock Picks

The following are several stocks that could be expected to do well given a rebound in the markets:

Long Stock Pick - ATK

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As you know, the trend leading into the month of October was an extremely bearish one and, as such, it will be of no surprise to note that the vast majority of trading picks were on bearish setups that were placed on the Short Stock Picks list.

The first trading pick featured below is a short pick on ERIC. 

Short Stock Pick: ERIC - descending triangle

ERIC was about to break out of a descending triangle in mid-Sept when this bearish trading pick was featured. The height of the pattern was just over 2.50 points. The stock traded sideways for around a week before moving in earnest towards the target of 7.50.

The weekly chart of the S&P-500 (SPX), as well as those of a few other indices, is showing a relatively rare event that almost always signals that a near-term bottom is barely days away. The chart below is a snapshot of the weekly chart of SPX, taken mid-day on Tuesday. While there are several compelling reasons to believe that a short-term bottom is nigh, the one that I want to point your attention to is the fact that the whole candlestick for this week is outside the lower Bollinger Band.

Before we scrutinize the chart in more detail, let me make it unequivocally clear that I continue to believe, just as I have for the past year, that the major markets will be cut in half over the coming year or two and that this is purely a short-term to medium-term trading call.

With that caveat out of the way, let's take a closer look at the chart.

The Rectangle is a neutral pattern; it can show up as a continuation pattern or as a reversal pattern. Rectangles are seen during uptrends and downtrends and are often referred to as trading ranges or congestion areas. They share some of the qualities of symmetrical triangles.