Sun and Storm Investing Market Timing Blog™

The SP500 has for the moment failed an important breakout. Although the index could recover and move back up through the prior breakout point (see other posts from past two days please), the risk has gone up that a correction will occur. We formed a double top and the index attempted and failed to close ABOVE the breakout point represented by the November high. You can see that Nov. high to the left in the chart below.

What to do?

Read my article about “Passive Shorting™” on my website SunAndStormInvesting.com or you can “Google” it and find 3 articles I wrote about how to handle these failed double tops.

Remember, that there is NOW a failure, but we have to see how the index behaves. It could recover despite the risk of a correction that has appeared. That is why in general I recommend scaling in and out of the market in steps rather than jumping in one move.

Oh and please be sure to sign up for my FREE SP500Tracker™ newsletter below. It should come out in the next couple of days. You can sign up at no charge here:

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Enjoy your day!

David

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

They are playing with my number this morning. What do I mean by that?

I mean that the breakout of 1227.08 is being tested from BELOW this morning. By “playing with” I mean that the market is defining the number as being important, by showing in the price action that the number is being traded around. Sometimes a market will come down and play from above and sometimes, it will slip below a bit and then recover. But when a market “plays with my number,” I know I’m on to something intuitively. I know that the direction the market takes from that number that is being “respected” is going to point the way for the next few minutes, hours, days, or weeks.

You say “Great! Where does that leave us not knowing the time period?” There is a next step. Once you see that your number is “in play,” you need to look at the overall chart and see if that number has particular significance. Is it at a double top or an important breakout point? If so, once the market DOES DECIDE on where it is going, UP or DOWN, from there, it is going to move in a significant way.

“So what can I do when I know from you or from my own reading of the market that a “number is in play?”

If you are underinvested and the market breaks back up through the number, and if you want more proof then wait until it closes above it, then you add to your position in the market when it SHOWS YOU that it wants to move up. Why invest more AS a market is moving down. This is the beauty of my newsletter bv the way. I provide a check on your thinking about whether today..each market day…because I write my letter every night…whether today is a smart day to BUY, SELL or HOLD.

Why buy when the market is just starting to fall? Why not wait for the strength that shows it is moving up first? John Rothchild stated my investment philosophy exactly when he said “I never buy at the bottom and I never sell at the top.” He bought NEAR the bottom and sold NEAR the top.

If you review my webpage on Passive Shorting™ on my main SunAndStorm.com site, you can learn how to do the above! You sell NEAR tops and buy NEAR bottoms. And if you are wrong, you take a small loss once in a while to prevent LARGE losses. Your large losses are the ones that matter, not the small ones. If you have no small losses, you are likely not risking enough. No risk, no gain. That is a fact.

But you REDUCE your risk by using methods like Passive Shorting™ near tops. Google “passive shorting” to read the 3 articles I’ve written on various applications of this method. I coined the term, so the 3 articles are right at the top of the search page.

And PLEASE remember to sign up for my FREE SP500Tracker™ newsletter. You can cancel at any time, but why not try out something or learn from an approach that has been working for a decade for me…for FREE! Sign up at this link:

Click Here to Subscribe to my FREE SP500Tracker™ and free “Tips”

Have a great day!

David

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

Don’t look now but the S&P 500 index is at this moment retesting its high from 11-05-2010 of 1227.08. It is just below that number at the moment at 1224.56. A failure to hold here may then lead to a challenge of the breakout above the April 2010 high.

By the way, just because it is retested, that does not mean the breakout will ultimately fail. We simply have to watch the way it behaves especially if it threatens the April high.

Before you go, please be sure to subscribe to my “Tips” newsletter. When you subscribe you also receive my SP500Tracker™ newsletter for FREE.

Click Here to Subscribe to my FREE SP500Tracker™ and free “Tips”

Enjoy your day.

David

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

Gold is in a bit of a swoon today and the Gold Bugs Index (HUI index) which is tracked by the GDX, is swooning with it of course.

I want you to look at a chart of the GDX. Look at a daily chart. What you see is that we’ve come off a FAILED breakout. That means that there was an attempt to make a new high today that failed. And now GDX is down 1.65% for the day. That was after being UP 2.99% earlier today!

Now to see what COULD happen this time around too, take a look at the daily chart for GDX on 6-21-2010 and you will see a similar topping formation with a failure to make a new high. The market could not even break out back then and the high volatility retest (the swing in the market that day was big compared to the prior days) and the failure to make a new high sealed the fate on a pullback, which ended on July 28th, 2010.

We could see the same pattern again.

What to do? Consider taking profits here on GDX and re-entering part of your position once the market has pulled back a bit. How much you sell and how much you hold is a matter you will have to decide for yourself. Check out the Passive Shorting™ page on the SunAndStorm.com site to learn more about getting out and getting back in.

Before you go, please be sure to subscribe to my “Tips” newsletter. When you subscribe you also receive my SP500Tracker™ newsletter for FREE.

Click Here to Subscribe to my FREE SP500Tracker™ and free “Tips”

Enjoy your day.

David

P.S. The GLD chart for the gold ETF looks the same as the GDX chart.

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

UPDATE: We are OUT of this trade as of 12-01-2010. It worked!

The truth is that it’s about the only thing that is working. I thought the other day when gold bounced off of some support and Europe was falling apart that the dollar up, gold up, and stocks up scenario was in play but IT IS NOT!

The scenario since 11-04-2010 is:
DOLLAR UP
GOLD DOWN
STOCKS DOWN

From 11-04-2010 to this morning the numbers were:
UUP UP 5.13%
GLD DOWN 2.79%
SP500 DOWN 1.86%

So gold is actually doing WORSE than the US Stock market!

NOTE: UUP and EUO will likely give you a K-1 on all accounts and taxes on IRA profits to deal with, so speak to your accountant if needed. Schwab did the paperwork for me last year, but your broker may not do so. The other issue with these ETF’s is that they rebalance daily and reflect time loss on futures contracts which will degrade your return relative to the move in the US dollar index or Euro, respectively. If they simply go up and down, you will lose money, not stay even. We are expecting an up trend now, so I feel they will work, but it’s your money and your decision as to how to invest it.

I recommend moving out of this gold trade as there is also a head and shoulders taking shape that could drive down gold further. I am maintaining my long position in gold as a hedge, while dropping the trading position. If you do not yet believe this, fine, but please set some stops. I could be wrong if there is a higher level of panic perhaps.

The dollar trade looks like it will work, and gold may not, so why risk it? The point of setting mental stops where you will get out, is that there is no point in giving up all your trading profits!

I’ll have more charts later today or tomorrow morning on my BLOG page (see link below). And I’ll save something for my FREE subscribers that will go out by this weekend on the SP500, so please sign up using the second link below if you have not already done so. It’s FREE!

Enjoy your day.

David

You can review more of my most recent comments on the markets HERE:Market Timing Blog at SunAndStormInvesting.com

Click here to get my soon to be released FREE SP500 Tracking newsletter and my investing and trading “Tips” for FREE

 
Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

See the link to the page with all the numbers and charts on the REIT decline:You can review more of my most recent comments on the markets HERE:Market Timing Blog at SunAndStormInvesting.com

Click here to get my soon to be released FREE SP500 Tracking newsletter and my investing and trading “Tips” for FREE

 
Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

The US dollar trade perked up LAST NIGHT when it move above the critical level I had pointed out to my paid subscribers as the key selling point. That number was 76.71. That is very positive for a short term rally.

The one catch is that these reversals of reversals have to prove themselves as all other trends do, so we must see a bit more progress to be sure the UUP will continue to rally.

This will of course produce downward pressure everything else except Treasuries which tend to rally with the dollar. That means stock, commodities, and everything that has been the subject of very Bullish buying lately could begin to sell off.

I would not necessarily trade out of your long positions in a big way, but you could scale back a bit or set stops below here and decide when you will trim your exposure. See my page on going “passively short” the market on the blue Navigation Bar to the left on the home page SunAndStorm.com.

I would say that holding above 76.98 on the dollar index would be a very good sign that the rally has more to go. We are trading slightyly ABOVE there at 77.09 right now. We have to be sure it HOLDS above there by the close to confirm the second sign of strength.

Since the dollar trades all night long, it’s hard to suggest using closes except for weekly closes, since Forex people do give themselves a weekend break! If you buy intraday, beware of reversals and scale into the trade. If you don’t know how to do that, subscribe to my 2 week trial and I’ll send you the EBook for free on how to scale IN and OUT of the markets profitably.

I’ll publish some dollar charts on my blog page later today, so be sure to check back later. The charts should be up by around 6 pm at the latest. (see blue nav. bar toward top for the button).

NOTE: I give REAL TIME TARGETS during the day many times, and if you subscribe to this WordPress Forum (just click the Subscribe button above), you will get Email announcements of each post. That way YOU will MISS NOTHING.