Thursday, March 15, 2007

Stocks: Is It Time To Short Again?



In the above chart, I analyzed all of the recent pullbacks over the last 6 months. When the Dow was trending up (rising 50 day moving average) the pullbacks lasted anywhere from 2 to 5 days with 3 days being the most common. Now that the 50 day moving average is moving down, I view rallies as pullbacks to short. The most recent rally or pullback lasted for 5 days and then the market sold off. So 2 to 5 days is a good measurement of time to use when looking to time into a pullback.

Today the the dow made a higher high, so this is just the first day up within a pullback in my opinion. That means I expect at least another day or two of prices moving higher before we can look to short. My guess is sometime early next week this pullback should terminate and the market should begin to head back down again.

The last 5 day rally to short in the dow was a 300 point rally last week. So far we've bounced about 250 points from yesterday's low...I expect the dow to rally a little bit more before rolling back over. I'd like to see the dow move up to the 12250 area and then start to show signs of weakness.

Keep in mind that this is just my opinion and how I am trading this market. Anything can happen over the next few days, but since this is my blog, I'm going to share my thoughts with all of you. We'll see what happens.

9 comments:

Team Titanic said...

Kevin,

Re your post several days back about the inv. correlation of the Yen and US markets. Check the yen this evening (Fri morning in Japan Mar 16) Yen up, nikkei down, auatralia, n. zealand, singapore, seoul all down.

If asia closes down tonight, more than likely we will be down tomorrow (who knows how long this correlation holds up), but right now it certainly seems like the yen carry is a primary driver of this move down.

Assuming our markets respond to a higher yen tomorrow, what are your thoughts on the implications of this correction?

If the yen turns out to be the main factor driving us down and sub-prime is truly an isolated crisis, could this correction could be very similar to May 06?

As always your posts are thought provoking and insightful.

Team Titanic said...

sorry abt long comment

Kevin said...

Yes, the Yen is what is driving this market and I am short. I've been short since last week. The purpose of my post was to help some traders who are not already short this market time into a short position if that is what they are looking to do.

Declan Fallon said...

Nicely put. The 50-day MA boundary will be an interesting one to watch if markets do attempt a "double bottom".

Best wishes,
Declan

Monster Rules said...

I have been using GOOG/APPL as leading indicator of market direction recently;

Notably Mar 5 Monday, when market hitting "bottom" and negative; GOOG & APPL was up that day;

And Thur 3/15, while Naz is barely green, both GOOG/APPL are RED mostly today; this weakness might suggest this 2nd rally would be weak???

chiu said...

Kelvin,

You have some short positions since last week.

Do you have a set of trading rules ?

Kevin said...

Of course I have a set of trading rules..That's what got me into the short trade last week.

As far as managing the trade,as the market goes down I take some profits and I trail my stop down. If the S&P begins making higher lows and higher highs, I'd look to exit my position.

miamirenter said...

well besides yen, euro is furtively going up..$1=0.75 Euro now..
i bet CPI will he a hot number and Ben will be on the hot seat..

Sandro said...

The good excuse for early next week sell-off will be housing starts. Numbers will be below expectations, no doubt about that.

DISCLAIMER

This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Trading and investing involves high levels of risk. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.
 
Google
Technorati Profile Finance Blogs - Blog Top Sites