Tuesday

Major Trend Change - Dow Turning Point

1 Comment February 17, 2009 – 6:39 am |   | Permalink |  Print This Post |

TheInflationist puts an order to open for a long position at 7480 $5/point; 7390 at $5/point; and 7320 at $10/point. Our indicators suggest a major trend change is due. The Dow has dropped by 1340 points from a high in 6 January 2009 - that is a fall of 14%. Prior to any trend change, markets usually capitulate or surge prior to the ensuing trough or peak (respectively) to follow. We feel that November lows could be breached - this will fit nicely with the chart and also with other indicators (refer below) but this will be followed by a strong multi-week rally. Of course, nothing is certain - our technical analysis is as good as any out there without the test of time. Our portfolio is currently up >30% in about 1.5 months - we attribute this to sheer luck until we are publishing this from our yacht or private jet (we will let you know when that time comes).

Some of the indicators we use are unique to TheInflationist. We find currency and commodities useful in timing a trend change. The Euro/AUD is inversely related to the indices - ie it goes up when markets go down (and vice versa). Looking at the chart, it looks set to peak but most likely has one last push up as the markets make one last push down. We are expecting at least 2. We will place an order to open at 2.01 (short Mini). Gold and silver also looks like it is topping, and would fit nicely with one last push up as markets tank. This suggests that tonight or tomorrow night, markets will make a big move down. Please note that this may present as an intraday low - recovering most if not all by the close. It is more likely for the market to close at a level below 7550 for it to be registered on the daily charts. We feel this inflection point is due this week - we are pencilling in 17th to 19th February. This will be a multi-week rally of at least 10%. So, do not be penny wise pound foolish. If markets fall tonight, anchor a long if you do not have any positions. Make sure it is light enough for you to fire more longs if markets continue to go down (it is almost impossible for one to pick the turning point, so please anchor lightly). A very reliable indicator that you are not over-leveraging is what we call the “I want the market to go down” indicator. If you are cheering when your screen is flashing red, then you are fine. On the contrary, if you refuse to go to bed (for our Aussie traders) for fear of markets going lower, then you need to lighten up. It is better to feel that you will be making less than to lose it all.