Strong Technicals in Stock Indexes

Today’s strong settlement above the 6 month bearish trendline in the Dow Cash is significant for the bulls. The projected upside is 11,600 to 11,800, depending on how you measure the base of the ascending triangle.

Now I firmly believe that the July 4th weekend orgasm of negativity witnessed by the national media (both tv and print) signaled a near term low. Once again, I hearken back to my blog written then. The inclusion of Prechter’s warning of eminent disaster was almost the exact low of the move. At the time, I suggested that he invest some of his profits from his newsletter in some cheap puts. After all, if you are counseling others, shouldn’t you be eating your own cooking? Needless to say, such a short position at those levels would have produced nothing but red ink, stress, and increased consumption of tumms for your stomach acid. A short position on one mini contract of Dow at 9600 would have resulted in more than a 5,000 dollar loss.
Not a lot of money if you are raking in 1MM a year from your newsletter, but a lot if you are trying to make money from the recommendation of a supposed market maven.

I will be the first to admit that I had sold the initial test of this long term trendline. After a definitive move above this line, I have taken my loss, have gotten long, and am looking for a chance to now to get long more, when the inevitable re-test of that trendline gives us s chance to get long at those levels again.

One caveat, trading around a trendline can give you a nasty road rash. A trader can chop himself up rather nicely buy buying or selling breakouts above or below the trend line.

That being said, I certainly would not want to be short against this trend line. The last 3 trading sessions have confirmed a repudiation of trading below this trend line.

As for the grains, today, we had a powerful settlement above 1075 in SX new crop beans. Buy dips at this point. If the rally is for real, we could have another 2 dollars coming our way. Similar to the rally we had through harvest in wheat. It will make no sense fundamentally, but if this market wants to run, I want to be on the side of the bulls.

I still like being long CZ above 5.00 and WZ above 7.25.

Good Trading

Good Trading

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