Thursday

FTSE 100 and Wall Street Forward: Measure of Sentiment

Post a Comment January 22, 2009 – 5:28 pm |   | Permalink |  Print This Post |

We did not take profit when the DJIA surged up yesterday to 8300 but we put a stop at our entry point again at 7980. Our indicators suggested a turn yesterday so we broke our Rule of protecting profit wanting to “let our profit run” instead. But here we are again - market is trying to break lower. We just anchored another long position at 7960, this time we doubled out position to $10/point. Our China is still open. This is a critical point. Our indicators suggest this is going to rally. This is a true psychological stress testing - our mind is on a thread mill racing away and it is feeling the strain. Stop this time should be 40 points at 7920 (ie $400 loss - small price to pay) , but will re-long if it goes sub 7900. All major blogs have identified this point as a major battle point between the bears and the bulls. We are weary that we are in a bear market and when everyone expects the market to do something, it usually does the opposite. A good way to measure this is the futures contract - FTSE 100 Forward  March 09 is LOWER than the current FTSE, indicating that the general expects the market to go lower. So our contrarion checkbox is ticked. Our indicators also suggest yesterday was the turning point. Again we are fundamentalist at heart, and we feel these indicators are widely known by most “experts”  - so they represent easy targets to trap traders who subscribe to them. We generally apply a margin of safety and factor in a buffer. We still think it may break through these widely quoted supports but the risk rewards are in our favour provided we have tight stops (which we do). It will be a long night. Our concern is we expected an acute dip followed by a quick rally - taking out traders going long. So far we have not seen that, which is a concern. Be strong, and trade with discipline. Good Luck!
(Speaking of discipline, please remind us to protect our profits next time instead of putting our stop at entry points - our champagne bottles were opened and half empty when markets decided to turn on us again!)

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