We hope you have enjoyed the little downturn we have had over the past couple of weeks. The Dow has dropped over 300 points this month, so far, with undoubtedly more to come. We should expect a bounce of some measurable magnitude but so far every rally seems to be sold. The market is near being oversold and that has normally been the recipe for a sharp upturn in prices. This time around we are seeing some buying interest at times and then it just leaks away.
We note that last week the market volume was fairly chunky during the decline. On Friday with the jobs report so good, the market managed some strong upside volume but had no follow through on Monday. Monday’s usually are the up day of the week but not this week.
With the Dow sitting precariously over the 10,000 level, traders have to be wondering if that will really hold, but so far so good. We don’t think it can hold so we continue to be short, realizing a short term bounce has to be coming soon. We don’t think that is absolutely necessary because we know that market dislocations can happen when the market is oversold, which it is close to now.
We would be Very surprised if the Dow made an attempt to get back to the 10,500 level before going down in earnest. The broader market seems much weaker than the Dow so when the Dow finally gets in gear on the downside and the broader market fails to confirm, we will start getting an idea when to cover our shorts. There seems to be some time for that to occur both in terms of price and time.
For now, we just bide our time and wait for a good opportunity to cover. When that day comes we may be able to set up some nice long positions that will do well for us. Until then, we just wait.
The Gold sector has not done much on the downside like we originally thought might happen. As you can tell, it hasn’t gone up or down much since we moved out of that sector. We do keep a close eye on it.
The other area of interest is the foreign markets, particularly Japan, although we’ve seen some strong moves already and don’t want to chase it too much. We will watch and you wait, together we’ll make some good trades.
Dow Industrials: 10,253.17 +14.41
RYVNX: 22.37 (a nice move so far)
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1 comment:
Hope the vacation out west was a good one. Any pitter patter in the future?
I am enjoying the market drop along with you. My 2-1 inverse fund has a 10.5% return and that was on the 3/3/05 purchase. Since I'm outside the 180 day trade window ($75 trade transaction fee), I am liking the looks of the trade even more. I was a little concerned when the DOW failed to move down with the NASDAQ yesterday but I am willing to wait.
Do you think it is too late to use a little exceess cash to get into the 2-1 inverse NASDAQ or should I add to my 2-1 inverse DOW fund?
Erick
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