Click chart to enlarge The chart above is a chart of the Dow on an intraday basis. Each candlestick (bar) represents 20 minutes. The chart shows the entire recent rally from March 10th to present. We would recommend holding tight until this chart breaks support. If you want to sell at the top of the channel and repurchase as it returns to the bottom, you could theoretically increase your shares at no cost. We have no intention of selling any shares as the market rallies unless the top line is broken, or the Dow reaches the top of its larger, downtrending channel at approx 7700/7800. Other than those occurences, we will continue to buy the dips. We continue to believe that we have hit a bottom for the market, although the economy itself will not appear to improve for 6-12 months.
6 comments:
The market has bottomed? That's a really bold statement to make. You may be right, but as long as there funds that need to unwind their positions and close up shop, it's gonna be a bumpy road.
You think there are still funds that were able to hide their inevitable collapse for this long? Our guess is that any fund that is going to go under has already succombed. We're in month 18 of this thing already.
Snot, I agree with you. The government is throwing so much money at this problem that I'm thinking I don't want to be on the other side. I bought MVV before the FED announcement yesterday and they threw over a trillion on the table. Today I'm up 9% already on it. Since January 1st I am down 1% while the DOW is down about 12%. While I would have been better off in a money market, I didn't know that the market would be down 12%. However, following your trading strategy, on the whole, buying sector ETFs low in the channel and selling high in the channel, I have been able to trade 11% stronger relative to the market since January 1st. My holdings are in order of % LTL, DIG, MVV and UGE. I'm 13% cash and plan to go to more like 40% cash if we approach the 7800 mark on the DOW. So thanks, Snot, for the trading advice. Your method works.
As expected, XLF bounced hard off the last rsi resistance line. There is another line, but its way up in the overbought territory. I dont know if this is the top, but I bought a lot of FAZ at 24 and managed to lower my cost basis to 28. Now its back up to 30 and I took the opportunity to sell some and prepare for another leg downward. Its too easy to get spooked by the machinations of the central planners! I've decided to go with only 20% in FAZ, in anticipation of a trip down to 20 or lower. Note that SKF went all the way down to 100. That is a sure thing as far as I'm concerned. I'm sure SKF will be back over 100 no matter how this rally goes.
Here is the chart I used to calculate my trading range for today:
XLF-3-19-2009
I am basing the technical scenario on what happened back in july. The runup looks very similar. On the chart I have included a couple screenshots of my straightline extrapolation tool. Using that tool, I was able to calculate the likely high and lows of the day. Based on this analysis, I am going to sell more FAZ when XLF hits 8.65. This technique has worked wonderfully on countless occasions.
Joe, thanks for the kind words... keep up the amazing performance!
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