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I think the Euro is going to retrace to near the tinted area and then resume falling away. This means: short-term, long; medium-term, short. I am a dollar bull now. And a crude bear. But for the short term, I'm a dollar bear and crude bull. Yes I am.
The $INDU is approaching both a retracement line and a trendline. Could it bounce here? Maybe. But if and when it breaks these, the downtrend can resume in earnest. I am hanging onto my $NDX position and have sold my $RUT position for a nice profit. My oil and gold longs are doing great, although I have taken profits on my ABX calls.
My strategy right now is:
This is going great so far. I am delighted with gold in particular. We will resume a major downtrend, but not until this retracement is done. This morning is going sensationally well on all fronts.
It was also good to see that, after weeks of grinding away in a tight range, Bank of America (BAC) finally broke beneath its retracement line.
As an aside, I'll mention that early today I closed my $RUT puts at a small profit, simply because this index is behaving too strong for my liking. If the Dow is down over 100 and the $RUT is actually in the green, I've had enough. I don't trust this index right now, and I didn't want to extend the risk.I've got plenty of other good positions and don't want a laggard in the bunch. (Update: After posting this, it dawned on me what a moronic reason that was to close the position, so after examining the chart again – – and looking at Evil Speculator's post! – – I re-entered. I was going to delete this last paragraph since I undid my decision, but I knew you guys would crucify me.)
I've been trading Deere successfully in recent weeks, and I was pleased as a put-owner to see the graph this morning.
For me, this is a reminder of an important lesson I've learned as a bear lately: don't underestimate just how far a stock can go down.
The thing that kills us in bull markets is underestimating how high a stock or index can go up. But now that the shoe is on the other foot (or paw, that is), we all need to understand this is a two-edged short. Don't leap at the first sign of a profit, even if it's a good one. Wait for a strong technical argument to make an exit, and recognize that, when you're dealing with stocks that have climbed hundreds of person, there is plenty of open air through which they can fall.
I'm holding on to these puts. That trendline is a long way from here.
