Wednesday, July 29, 2009

Wave 2 in Latter Stages, at Least Short Term Decline Due; July 29. 2009

I updated my long term S&P futures chart (see right side of blog and above) which has followed my projected path (see red lines) the past few weeks. If it continues to do so, we are due for a short term setback, followed by one final strong rally to the 1000-1100 area before forming a major top that will be one for the history books. Any significant decline from this point will have my full attention. I will be looking for breadth, volume, sentiment, and most importantly - wave structure. But until the evidence suggests wave 3 is underway, I will plan for one more final strong rally where the bulls will give it everything they have to push this market to fulfill their new bull market dreams. But that's all they will result in.....dreams. It will lead to the biggest decline we'll see in our lifetime.

I'm watching.....................wating.


Gustavo said...


I agree with this look of the market.
And I am planning go down for the long time with all my forces.
Ultimately I was seeing many rumours about of discontinue leveraged ETF's, and in forex the leverage was down too in United States.
I currently have a little position in FAZ and I in doubt about buy some more now.

My question is:Wich are the instruments you think have the best potential of return to go down?

Thank you!!!

Todd S said...

In my opinion, the best securities to short the stock market are the SH (short S&P ETF), the SDS (double short ETF), or short the SPY. The problem with the SDS is that it uses leverage, so there's a possibility there might problems with this security when the big wave 3 is well underway.

When the S&P breaks below 600, I would be cautious using high leveraged vehicles. Most use futures and options contracts to obtain that leverage, and another severe drop in the market might break the futures and options markets completely. This means the leveraged ETFs will be in big trouble.

To sum up: the best securities to short the market are to short the SPY or buy the SH to short the S&P.