Archive for November, 2012


November 8th, 2012 No comments

It was a bloodbath for stocks and commodities today with the Dow losing over 300 points, cracking through that all important 13000 level. But you know what was up? Gold, Guns and Ganja. $HUI (Goldbugs Index) +1.83%, $RGR (Sturm Ruger & Co Inc) +6.81%, $SWHC (Smith & Wesson Holding Corp) +9.62%, HEMP (Hemp Inc) +8.70%, $CBIS (Cannabis Science Inc) +14.88%, and $MJNA (Medical Marijuana Inc) +22.04%.

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The Dow’s Downward Trend

November 5th, 2012 No comments

It’s been a while since I blogged, so a quick look at the charts and an update is in order. Recall my last posts over a month ago stressed patience. There was a lot of choppiness in the markets, so I waited on the sidelines until a clear picture emerged. Remember back on 9/6, the S&P broke to a new multi-year high. The move was confirmed on 9/13 by the Dow at the same time the S&P continued making new multi-year highs. That breakout level at around 1425 for the S&P and 13350 for the Dow is a key price level. On 10/10, the Dow pierced back down below that level, but the S&P did not fall below its corresponding key level, so the move was not confirmed, and sure enough, a few days later, the Dow spiked up again.

But on 10/23, both Dow and S&P did fall through their key levels, indicating a confirmed downward move. This on the day of an FOMC meeting to boot. This was a legitimate news-based move, and if you were really quick to see the direction following the news, you could have traded either to the down side. Notice, though, that on the way up, the S&P was the first to breakout, and on the way down, the Dow was the first to break down. The Dow is clearly trading weaker than the S&P, so this should be kept in mind when deciding which to trade. You want to pick the leader–the S&P when going long, the Dow when going short.

My trade on the Dow came just this past Friday. The Dow’s initial pierce of the key price level and the low made following the FOMC created two price points to draw a trend line. With the markets now trending downward, my strategy was to wait for a good spike, wait for the momentum to shift from upward to downward, then enter on the short-side and simply sit back and allow the Dow to regress back to the trend line. I was prepared to hold for a week if I had to, to give it time. But it so happens that after I entered my position, the Dow dropped 140 points before the day was out. That was good enough for me, so I exited the position. I could have held on a longer and squeezed out more gains, but at that point I felt I had more to lose than gain.

Gold and Silver have been mid-range and choppy, but they’ve come down now almost to their breakout level from the end of August. This could be a turn-around point for them, but there’s no point in playing guessing games. Until the turn-around is clear, or a breakdown, I’m not interested in trading gold or silver.

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