Tuesday, December 30, 2008

Rally Invalidates 5 Wave Decline; Dec. 30, 2008

In overnight trading, the Dow and S&P futures broke the beginning of the proposed 5 wave decline I labeled yesterday (see above chart) invalidating the wave count and conclusion that the trend was now down. With another failed test of prior support area in the 850s again yesterday, it's possible the rally to 950+ is underway. However it needs to get moving quickly because indicators and time are really not supportive of this move at this juncture.

I have not changed my strategy of holding fully short, and am prepared to add to my short positions on any significant rallying.


Michael K. said...

I can't decide if I should wait til the S&P hit 850 or just take a risk. Do you think Jan. 5 will be a big volume day? since the big boy are returning from the holiday

Todd S said...

The only thing I have strong conviction of is that this entire rally from 740 in the S&P is a correction and the market will fall hard again. This means that within the coming weeks/months, that 740 should be tested again. It's up to you on how you want to position yourself for that if you agree with that analysis.

Michael K. said...

Hey Todd, you should short FAS. I can't because my mom won't let me have a margin account. Its less riskier because if FAS gain 50%, all it need to do is lose 33% to break even.

And when the new low hit, short FAZ.
I been looking at UYG & SKF chart. So I just thought I might say something. :)

Todd S said...

Thanks, but that's a bit too volatile for me for the position sizes I take. Plus, I don't analyze the financials or smaller indices so establishing risk and profit targets is difficult.

Thanks though.