Tuesday, August 19, 2008

Tangled Trend Lines

The S&P 500 is breaking trends almost as soon as it forms them. Earlier this month an ascending triangle formation resolved less than a week after I identified it. This morning I described a new wedge formation, and this afternoon it's already finished.

The lower July-August trend line was decisively broken today, which forecasts a decline from here. That means it's time to get back into SDS. Given the recent chaotic behavior and lackluster optimism in the market, I'm only going to purchase a 50% stake in SDS for now.

11 comments:

Dan said...

Jody,
Will you be using a stop loss and if so what will you use?

Thanks

Jody said...

Hi Dan,

No, I won't use a stop loss for this purchase. The market may disappoint me by going flat here, but it's unlikely that the S&P would rally above 1320 from here without giving some obvious new signals first.

Dan said...

Jody,
I assume you have not bought in yet and will do so on Wed 8/20.

What is your strategy for your purchase - buy at market open or try to catch a particular price or ???

Thanks!

Jody said...

Correct.

I can't predict the best time or price to buy tomorrow. I'd be perfectly happy if I got in when the S&P was above 1280, but that may not happen, so I won't wait for it.

Dan said...

Jody,

What do you think of the market action today. I took a position in SDS this morning.

I image you are in at your 50% buy?

I was not surprised to see the market up a bit today considering the last 2 days of sell off.

So we ride this out hopefully as the market declines from here..?

Jody said...

Unless or until I see signs that a rally is imminent, I'm staying in SDS.

I don't really pay attention to single days unless the market breaks through a trend line. There's a great deal more data that I use besides the trends - I'm simply emphasizing trends in my blog right now because they are easier see and explain.

Dan said...

Jody,

Ok, thank you.

Dan said...

Jody,

Will you be updating your blog to indicate your cash vs SDS % holdings?

Jody said...

Thanks for reminding me!

Dan said...

Jody,

Do you still believe that long SDS on 8/20 is being on the right side for this trade?

Thanks

Jody said...

Dan,

You have a much shorter time horizon than I do. My SDS position is less than 48 hours old, and you've already asked for reassurance twice. If you're looking for "buy today, sell tomorrow" guidance, this is the wrong blog. It's in my profile on the top of the page.