After taking a year of from this blog (but not from trading) I am returning to action. I still use the same rules I have always used. But my discretionary actions have become more refined and my patience with the markets is much improved. I will be ending my experiment that I started last year, though I may pick it up again in the future. But for now, this will be my diary. I may not be as active as I would like, but I am going to try to write several times a week.
Obviously the market is in a downtrend.
I have taken positions in TZA and FAZ that I got into at the upper end of this most recent bear flag. There are no strong reasons for taking these etfs with the exception of the fact that I like the leverage they provide. Plus, with reports of a lot of credit being on the verge of "freezing up" in Europe, small cap companies and the banks they rely on would be some of the hardest hit.
I thought friday brought a break down from the bear flag in the indices. It happened on an increase in volume, but mondays futures strengthened into the open monday and stocks have traded relatively sideways all day (as of 1:00pm EST). 3:00 may bring a move, but the volume is still low. So either people are MIA, or are waiting. For what, who knows. Probably for the next knee-jerk reaction.
I posted in the comments section last post that we may be setting up for the last shoulder in an H&S pattern. If this is true, your upside target should be around 1150 in the S&P, 10700 in the DOW, and about 2350 in the NASDAQ based on the H&S pattern. If the double bottom holds up, the targets are all the same. Coincidence? Maybe. But its two different patterns giving the same result. Expect the markets to remain boring the next couple days, then climb higher next week. Use today's and tomorrows price hold-up to get yourself some nice long positions with a holding length of a 2-3 weeks.
