Tuesday, July 18, 2006

We Exit Our Shorts For Now

Tuesday’s market probably completed a move down in the NDX, NASDAQ 100.  As we look at the chart from early January to today we see a good move down from the high.  Back on January 11th, the NDX traded as high as 1761.46 and today it traded down to 1446.77, for a drop of 314.69 or 17.8%, not bad for a first move down.  The move up started on October 6, 2002 at 795.25 and we think it finished at the 1761.46 high in January.  Of course, you could have participated in most of the move down had you climbed on the RYVNX in early May.  When the NDX was 1715.23 on May 8th, the RYVNX closed at 18.17 compared to the January low of 16.99.  Today’s close stands at 24.66 for a very tidy profit from either of those two points.

We have been talking about the possibility of getting out of our positions for a short term low and then getting back in when prices are a little better.  We mentioned not getting too cutesy about this trade and wondered whether it was such a good idea.  Well, after the market closed on Tuesday, YHOO disappointed and dropped about 14% in after hours trading.  We do know how this tends to work as the market could open a little weak in the morning and rally from there.  There is the little matter of the CPI coming out just before the market opens on Wednesday.

The positions we take don’t always work out and because of this we always recommend a lot of caution with our ideas.  Right now, we are trying to set our sights on the jobs report due out in a couple of weeks.  We are hoping to see a little bounce out of today’s lows in the NDX.  IBM did have some decent news after the close as well and it was slightly better and received much better than the YHOO news.  Tomorrow we’ll see what will happen.

We do Not recommend this but we did take a long position today so we are slightly bullish over the very short term.  This huge drop we’ve seen in the past couple of months could have a nice corrective bounce and we would like nothing more than to take a little of the upside into our pockets.  Again, we don’t think you should try this at this time due to the short term nature of this trade but if we do get this rally over the next couple of weeks we would recommend you sell what you have left.  The fall lows will provide us a nice opportunity to get long again.

To follow up on gold, it was down again today.  After trading up to $675 on Sunday night, we see it at $630 this evening.  The interesting thing about this gold move is that, if you look at the HUI, you see that it peaked about two weeks ago.  Gold peaked on Sunday night.  The stocks lead the metal, generally.
Dow Industrials:  10,799.23  +51.87
RYVNX:   24.66  (out here)
RYAIX:  25.62
TLT:  84.44
BEGBX:  13.24

1 comment:

Anonymous said...

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