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Analysis 8th June 2007
As you know from my writings on TraderTom I have been looking for a top in the indices towards the end of May or start of June. I showed numerous examples, and although I was premature, hoping it was coming Thursday/Friday, I think it is fair to say that the reward came, albeit later than thought. I am not writing this to praise myself. You know as well as I that I lost money on Friday. I was bleeding well and truly - not a nice experience to see your account dwindle - but that is the reality of trading from time to time.
I am not going to spend time on showing WHY the top was where it was. If you are curious, you should spend the £105 for a newsletter subscription to the Matrix Newsletter. You may not be able to understand the Matrix method without spending money on the CDs but you should be able to gain something from reading the newsletter.
I am however going to show you some charts that makes me a little sad that I covered my short positions just now. Although we have seen the DAX plunge another 100 points over the last 30 minutes, I do suspect there will be more downside coming in the next week.
The chart below is a weekly chart of the SP500. The numbers relate to the sharp counter-trend moves in the index. It shows that over the last 4 years most of the abrupt trend changes have lasted 3 weeks. It was in the third week that the low was made. I am pointing this out to you because I, maybe like you, have the tendency to do a little bargain hunting, or at least be tempted to bargain hunt. The reality probably is that so many are caught on the long side and margin calls are rife, so sharp swings should be expected.
My strategy is to run a core of short positions and trade in and out of them using volume spikes. It works wonders to trade volume on most indices.
click on chart to enlarge
The slide below is the DAX futures. It is really an interesting chart because once a market gets into a trend, the accompanying oscillator can remain overbought or oversold for a long time. The Dax 60-min chart is showing such a trend and I wish I had not gotten out of my short position an hour ago because I have not seen a reversal bar yet.
click on chart to enlarge
Here is the scary bit. If Wall Street is caught on the wrong side with puts exploding in their face right about now, we will see the scramble for cover, which means to sell the market. The option and futures expiration is no more than a week away, so be very careful about buying too soon. We could have a very tumultuous week ahead of us.
I sometimes refer to the Matrix and the Matrix Newsletter for timing the market. Steve Copan has produced a tutorial which explains in great detail what the Market Matrix and the Newsletter is all about. If you click on the icon below, you will be taken to a page where you will be asked to submit your name and your email address. If you do so, I will send you the following:
ANALYSIS
