Thursday, September 9, 2010
Since our May 12th Maximum Risk Level #5 High Alert! (final and highest risk level) when the DJIA was at 10,896 to today’s lows of 9614.32 (so far), the broad index and leading economic indicator has shaved off 1,282-points. This is an approximate 12% decline to date in less than 1-trading month. Just prior to our a April 17th Wealth-Alert Level 4 of 5 - Long Term Head~Shoulds - Raise Cash, Elivated Risk, when the DJIA was at 11,143 the leading index has seen a drop of 1,529-DJ-points or an approximate 14% decline . Since the alert, the indices did not go much high! Our raise cash call was within 1-week of the US equity indices rally highs and we believe those highs should last for some time to come! We purposely we allowed for some reasonable period to review positions to pull the triggers and go to cash with our calls. Of course, a 14% decline requires an approximate 16% rise (1521 / 9621) to break back even and the spreads between the fall vs. required rise percentages only increases as the market drops further. Why ride your portfolios down, just to hope to make it back up? Where do we go from here?
We suspect that this recent move down is not yet complete! Next week might provide some support, barring a short-term bounce lasting a couple to a few days, the current decline has most probably not concluded. Watch for short-term capitulation-selling days perhaps around the range of 9362 to 8915 DJIA levels. That's a +400 point range but with recent daily swings, this could be an intraday move. We will not be surprised if perhaps a rather strong short-term rally builds after reaching those levels but it is not necessary.
Remember, the current approach is Sell the Rallies, continue to build cash. Stay tuned here with us and we will attempt to provide forward looking exit points. You will note that we are not providing trading recommendations, to willy-nilly buy or sell based on some opinion of some chart method(s). Why, because for all our many years of experience we have found, "the charts, they lie" but not all the time, only when it really counts! For if building wealth was just a matter of studying charts and becoming an "expert trader" than everyone would do it woun't they! The truth of the matter is the vast majority of ALL trades loose money.
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HAVE A SAFE AND HAPPY 4TH OF JULY HOLIDAY!
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