The Dow is the only major index in an uptrend. The Dow leadership speaks to the defensive nature of most traders right now.
I’m crazy. I am betting on a swing move down in the markets. I’m playing this swing move down profit thesis via TVIX which I purchased today in my own trading account.
If something bad happens within the next day regarding Iran or something happens in Europe, fine. That will help fuel the swing move down. But really, this is not a fundamental play so I don’t really care about the news or anything. This is a technical play only on a natural swing move down that I’m willing to bet is coming.
From a fundamental analysis point of view regarding seasonality, it could be really, really, stupid. I mean think about it. I’m betting on a swing move down during traditionally one of the strongest weeks of the year: the last trading week in December or the Santa Claus rally week.
The Nasdaq has a downtrend rating and it’s leading the market lower. It has broken below its 200 day moving average.
The S&P 500 has a very weak uptrend rating. The previous resistance zone from 1267 to 1300 has been tested four times since October and each time the market has bounced down off this level.
The Russell 2000 has a downtrend rating. Did you notice that it lead the market lower today? That’s something we haven’t seen on the last two previous swing move downs. When small caps lead large caps lower, it suggests we could see a good swing move lower.
Gold has a downtrend rating. I was sad today folks because I found out that a gold bug I talk to has continued to buy gold on the way down. He bought gold at 1700 when I told him to book profits and move to the sidelines. He bought more gold today at 1550 even though I warned him about the danger of a dead cat bounce and roll over below the 200 day moving average line. His original plan was to ride gold up during its seasonal strong time of year which is October to December, then sell in January which begins its seasonally weak time of year. His logic was that since gold did not run up in the 4th quarter, the run up will probably come a little later this year. That’s stupid and kind of sad. To a gold bug, gold is always a good buy. But you, a stock trading master, know that nothing is always a good buy. So now, this gold bug is throwing good money after bad and doubling down in order to lower his cost basis. He should have just listened to me and sold when I told him at 1700. He would be sitting on the sidelines with good profits and waiting for gold to go back into a strong uptrend to buy it again.
The U.S. dollar is in an uptrend which is putting gold into a downtrend. Europe appears to be headed into a recession. This is pushing the Euro into a strong downtrend. As the Euro goes down, the U.S. dollar goes up.