Click charts to enlargeThe chart above is the Dow. We sold DDM at 61 and change because we felt that an 800 point gain in a bear market was too much too soon. We're looking to either buy DDM (Ultralong Dow) or DXD (Ultrashort Dow) for our next trade, but right now we couldn't tell you which. The market is in no-man's land, and a gain of 600 tomorrow would be no more suprising than a loss of 600. We're in neutral territory. If we get anywhere near the 200dma (blue line), the market becomes an obvious short because the economy will be kept under pressure by the ever-weakening American peso, proposed higher taxes, and the ongoing rise in commodity prices. We're at 13.2% inflation this year... OUCH!
The only time the Dow is a "buy" is when a major 100+ year old financial institution goes belly up and the market drops 1,000 points in a few sessions. Other than that, we don't want it.
The chart on the bottom is OIL. In an earlier post (or comment to a post), we said that after OIL had completed its S-curve, its sharp drop was definitively over. In hindsight it is now obvious that OIL has put in a credible bottom. We do not expect OIL to reach old highs anytime soon. A long, boring, sideways consolidation is in order. If we are wrong and OIL makes it to new highs, this will not happen without coinciding with Dow 9,000.
We're 100% in cash waiting for a dose of irrational exhuberance (Fed induced or otherwise) to give us a chance to grab some DXD nearing the 200dma, or waiting for Citibank to go under so we can grab some cheap DDM. We'll let you know when one of these index funds looks like a low risk, high reward scenario. Until then, 400 point days, regardless of direction, are meaningless.
2 comments:
Hi, Snot, good comments on dow.
Warren Buffett's Berkshire Hathaway Inc. is investing at least $5 billion in Goldman Sachs, a huge vote of confidence for one of the survivors of the credit crisis.
US Senate ok’s extending energy tax credits;
The residential and business tax breaks for solar energy would be extended for eight years.
Tomorrow is a sunny day for solar sector.
I will try pick up some shares tomorrow am for quick trade.
We bought some DDM at the close today. Down 650 points from its high 3 days ago... worth a small position. We don't expect this position to be immediately profitable, but we feel confident that the worst case scenario is breaking even on the next rally. We're now focused on slowly averaging down. If we drop another 350, putting us down 1,000 in 4-5 days, a bounce would be imminent.
Post a Comment