How are my Hedgers?…I’m not doing so well, I’m sure writing about it would make me feel better but this isn’t what H.A.S. is all about so why don’t we move on and talk about the markets. But firstly, if you haven’t already please read my Bear Flag article first, things are starting to develop and we could easily reverse anytime this week. Seeing as I’ll be leaving for vacation soon I decided to make a morning post before leaving. Today is August 25, 2008 (10:30am) and the chart I’m posting is a daily live chart of the S&P 500:

The parallel black lines illustrate the bear flag but your attention should be set on the blue line. The blue line should act as another point of resistance…as you can see we have already hit our head on this line. We should shoot sharply down from here and even crack the bear flag lines in the next few days, but I have a feeling we might touch 1300 first before shooting down. I am currently in TWM, the Russel 2000’s ultra short ETF; but I’m thinking of getting into some SDS, S&P 500’s ultra short ETF if the price is right. I’m hoping the market recovers a bit before I leave on vacation.

I know many peeps are still long, and other bloggers are calling for bottoms…but I would strongly suggest getting out of most of your longs…after all I’ve never been wrong, I know this is a bold statement but correct me if I’m wrong. Eventually this market will test everyone’s pain tolerance again, how much can you lose before selling out of a stock? Why let that happen when you can take your quick profits today? Remember, don’t turn a short term trade into a long term trade because of your foolishness.

I won’t be back from vacation until September 2, 2008 but I’ll reply to your comments at that time. For the time being, feel free to have some discussions amongst the other Hedgers, I know you’re out there…don’t be shy, we’re all here to help one another to make some money Oh and I did mention this before, but I’m looking for a few writers for H.A.S., if you have experience with technical analysis and would like to contribute valuable information to the net drop me a note.

Oh and for the time being while I’m gone, check out the ever so entertaining Jefferson Krull at Hit The Bid.net

Richard
richard[at]hedgeagainstspeculation.com

I wanted to post this up yesterday, but just didn’t get around to it. So yesterday’s chart (August 19, 08) indicates a bear flag…a bearish signal!

A bear flag is a sharp, strong volume decline, several days of sideways to higher price action on much weaker volume followed by a second sharp decline to new lows on strong volume. Here’s an example:

Something similar to the illustration above is likely to happen in the S&P500. Sellers are coming in as people start to realize that the markets aren’t making any progress past the MA(50). We had an up day today, but I would strongly suggest taking profits off the table to position yourself on the short side. The next leg down may have just started. I’ve also noticed that institutions are selling into buying this past month. This is a sign that more bad things will happen and that institutions still lack confidence in the overall economy.

Let’s take a look at the trend lines I drew again…the parallel lines indicate the bear flag, if we had closed below those parallel lines today (1260ish) the bear signal would’ve been confirmed. We however got a little bounce today (sorry I don’t have that chart on me) which gives us traders some room to go short. I’ve also noticed decreasing volume in the S&P, this isn’t surprising because it is the summer season after all…but this can also indicate decreasing interest in the market.

A lot of bloggers are calling for bottoms, but this is impossible to do…bottoms are a process. The path of least resistance is still lower, so I don’t think calling 1200 a bottom is fair. As mentioned in my previous posts, this uptrend should only be a brief one, I would call it a relief rally before another long leg down. If we were to continue to breakdown, I would take this one seriously. All in all, I don’t believe we have bottomed yet, we are likely go lower so I would consider those bear ETFs again like SDS, QID, and TWM.

Richard
richard[at]hedgeagainstspeculation.com

Now I’m not sure if yesterday was the start of a new leg down but it’s a possibility. If I weren’t so invested in oil right now I would be shorting or at least hedging myself from any downward risk. Of the indices, the NYSE looks the weakest and this index should continue to act weak if oil continues to bounce back…which it should because it looks like it has been oversold. As mentioned in a previous post, the indices are reaching its 50 day moving averages. This is an important mark because if we were to break past this level on strong volume the momentum would continue for the bulls.

The S&P500 did close above the MA(50) but it hasn’t been following through the last couple days. This is a definite sign of weakness and I would be slowly getting out of long positions in these next few days. After noticing how weak the NYSE was, I decided to get out of McDonalds (MCD) at $66, and I’m glad I did. 

Sorry for the short post, but I will update you guys once I get a clearer picture of the markets. For the time being, I would suggest that you slowly pocket your gains before fully investing yourself again on either the long or short-side.    

Richard
richard[at]hedgeagainstspeculation.com

So as some of you may already know I just came back from Vegas and a golf trip. I do apologize for the lack of posts but not too much has changed since my last post.

The S&P500 has retraced back to its MA(50), or at least it’s close to its 50-day-moving-average. This took a week longer than I expected it to, but after a sequence of up and down days we’re finally there. I’m disappointed I didn’t make much during this bounce, in fact I pretty much broke even. But breaking even in this bumpy market isn’t all that bad.

So the Federal Reserve left key interest rates unchanged at 2% for the second straight meeting. This along with oil pretty much ruled the markets today and gave it a little push up. Crude plowed through the $120 support level…Bloomberg said this is a bearish sign. Bloomberg also says if it breaks the 116 level, it could fall to 100, where there is a history of consolidation. Falling to 100 wouldn’t surprise me but I think the days of oil below 100 are over. Lower oil prices should yield higher indices, but I would be careful this coming week especially as we approach the MA(50). We are in a bear rally but I would be careful to go full steam…I’m getting prepared for another leg down.

Oh and traders, if you’re interested in being a guest writer on Hedge Against Speculation send me an email

Richard
richard[at]hedgeagainstspeculation.com