04 March 2008

Patience, Grasshopper...

...kept my power dry, twiddled my thumbs, etc. Can't think of any other cliches signifying that I did absolutely nothing but watch the markets today, like a creepy voyeur holed up in an oak tree.

The Dow opened lower, and rebounded a couple of times, but it couldn't quite manage to buck the downward trend.

My RSI(2) chart is still quite green, with 12/30 Dow components in dark green, and 3/30 in light green. That compares with 16/30 and 9/30 respectively on Friday.

Hopefully tomorrow will provide a lucrative opportunity for me to close out my positions in DXD and FXP.

I will not necessarily jump into a long Dow position using DDM.


It is trickier to trade profitably on the upticks in a down-trending market. If I miss an opportunity to close out a long position in a fleeting uptick, I may not see that level again.

But the market looks like it's moving sideways.

Looking at a daily chart:

Over the last six weeks, we see that the Dow has been trading in a range between roughly 11,750 and 12,750. The market swung back-and-forth in what looked like a triangle pattern. (Not that the triangle pattern shows us anything of any import, but the eye is drawn to such orderly geometric patterns.) Nevertheless, that triangle formation looks to have ended on the 27th, when the Dow broke that 12,750 level.

A weekly chart shows that the broader trend since October has been decidedly bearish:

Right now, I am more comfortable in picking up shares that short the Dow and China, like DDM and FXP, when those markets have fleeting episodes of strength.

Another cliche, the trend is your friend, is apt. Don't fight the tape. (Gah! The cliches are relentless.)

However, I will not shy from going long in the short-term with DDM. But only when the RSI(2) is most encouraging. Until then, I wait quietly...

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