Monday

TheInflationist StockPicks, Your StockPicks

DAX vs FTSE Discrepancy

We closed half our Dow ($5/point) at 7490 pre-open as per our previous post. Dow is currently 7450 at time of writing.We would like Dow to go to 7360 before re-opening another $5/point bringing us back to $10/point. All these trades trying to time the market could be penny wise pound foolish. We prefer to make as few trades as possible, but averaging down to protect our profit is good risk management. Also we opened long position for the German DAX at 4086 (+30 points) and a short FTSE at 3954 (+60 points at time of writing) - a difference of 132 points at $5/point (ie 4086 - 3954). The Dax have been trading above the FTSE since Oct-Nov 2007; where the cross over occured (ie Dax went above FTSE). Since then it has been trading between 100-1000 points above the FTSE. A word of warning, prior to that the Dax were trading up to 600 points BELOW the FTSE. So this period could be a cross over point (ie for Dax to go below FTSE). In general, the gap narrows during economic downturns. However, we believe it takes time for that to occur. The Dax fell a whopping 300 points on Friday from top to bottom (4% fall). Infact, we are tempted to open a naked long for the Dax (Dax is currently 4050). Another 3% down night tonight would serve us well, but after reviewing the charts again, we feel that Friday lows could be it. As we said, ideally we would like the Dow to close at 7200s to be registered on the daily chart (which would mean an intraday low sub 7200). So, at most another big down day. Last week the Dow fell by 6%!

We also opened a long ASX at 3313 today in our personal portfolio and took profit at 3380. The Australia 200 have been very resilient in the recent fall.