Friday

Dow Dropped Thursday As Predicted by TheInflationist

Post a Comment February 27, 2009 – 2:45 am |   | Permalink |  Print This Post |

For our faithful readers who read our post last night warning of an imminent drop and failed rally, I hope you resisted the temptation of pulling the long trigger. We got phone calls from our trading friends from the UK at 0400 am telling us that the Dow has “crashed” to 7280 and that it was the last ride up. They were busy loading up on long positions. I was half asleep, but cautioned against going heavy on the long side and that the Dow would fall further; and to read my last post for the night which was dated in the future (Headlines: “Top Story March 2009: Dow Goes Below 7000″) after carefully reviewing the charts and data from all sites we subscribe to. We are convinced the 7000 mark would be breached. Many sites think that our assumption is a major bear trap: ie people would short hard believing the Dow would break 7000 - and that that school of thought was “too obvious”. I rather not make money than to lose money - ie another Trading Rule of ours: Protect Capital. If you do not have a single long position, our view is to put a small long anchor; one which you can take the pain of >500 points. If you already have a long position not far from this level, do not anchor more. And if you are thinking of shorting (like we are): dont!

We foolishly reentered at 7250 at $5/point (on hindsight we should have used S1 as an entry point). I hope most of you sensed our concern in our previous post and stayed sideline. Effectively, we have reduced our entry price by 250 points (having gone in at 7150 and exit at 7400), so our entry price now would be 6900. I actually closed out my Long Dax in my personal portfolio (small profits), and left the short FTSE positions open (which i closed out this morning when FTSE was 3833 for a nice profit). That was a risky move and is against our rules of discrepancy trading. We took the risk, and it paid off - we may not be so lucky next time. For our public portfolio, we will leave our discrepancies open for now, but aim to take profit for our second trade if the gap opens up to 70 points (arbitrary no). We fear that the gap may narrow again (if and) when markets move lower.

Our indicators suggest a big move coming up tonight, which we believe will be a down. We hate making micro-day-to-day calls - because they are unreliable and humiliating. We will not be shorting, nor be opening extra long positions.

I would also like to thank Mr Magik for his invaluable numbers. Last nights Magik Numbers were on the mark: 7150 - 7400 range as predicted. The Inflationist have been a long term supporter and paid subscriber of Mr Magiks daily newsletters (we almost never pay for anyones newsletters), and am grateful for his willingness to share his insight with our readers without an additional charge on our subsription.

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