Thursday

Short on Rallies

1 Comment January 28, 2010 – 12:28 pm |   | Permalink |  Print This Post |

We fired our first short way back in July 2009 at the textbook Head and Shoulder pattern - when the H&S pattern was so obvious that it was even quoted on mainstream media. We should have known better that when it is clear to everyone, then that’s the least likely path the market will take. That contrarion approach is clearly the way to trade. The key is to know what the majority vote is - that’s where reading news, blogs, and speaking to mom and dad investors help. The “problem” is we follow all these great traders’ blogs on InvestorIdol - so what we read may actually be (we hope) the “smart money” talking. So when the consensus says “time to short”, what do we do? Are the manipulators so good that they can even fool our panel of experts?

From our panel of a dozen or so on InvestorIdol, only one have clearly stuck their neck out on the bullish side. Most are in the bear camp whilst the rest have not taken a clear position.

We remain bears and will short on rallies. We think there will be a rally that will take us close to previous high, but not above and probably only after another drop to challenge 10k. Stops will be at previous high.

Everyone has their own strategy and tolerance in terms of leverage. Ours are very low as we value our sleep!

The chart below was posted a few days ago of our road map. If markets dip below 10k acutely, we will release some shorts and hope for a higher reentry. If markets rally first to 10450 we will short tonight.  Looking at the chart below, we believe we are at the Day 7-10 phase ie sideways to mild up before another acute drop sub 10k.

1937vs2007comparison