Wednesday, June 1, 2011

6/1 Daily Commentary

Yesterday I was able to position DXD and SDS near the top using the envelope of the DJI critical M/A. It doesn't normally work out that I can enter orders that deep into this M/A.  However, the short-term timing component of I1 indicated strength would continue, so I was patient.  This component remains in topping mode for another 6 sessions, but I will ignore it until then and use it to time the next trading bottom (June 23).  Raw I1 slows it's descent on June 23, so I'll use this day to take profits for the trading portion. 

Between now and June 23 I want a rally to get positioned with more short ETFs and maybe a short futures position.  I'll use DJ futures 10-minute, 76-unit M/A, SPX 15-minute, 54-unit M/A, SP futures 30-minute M/A.  I'll position as these are touched and if a rally penetrates deep into their envelopes.  Jobs report Friday should produce a wild swing up if data comes in not horrible.
The DJ futures 10-minute, 76-unit M/A has a .3% envelope.

The longer-term sell signal that I1 issued mid-May is clear. 
1) Raw I1 declines until mid-August below 0.  Subsequent rallies into November peak at 3 or below, indicating tentative rallies and potential new lows on the I1 declines.
2) 30-day I1 peaked at a relatively high level and did not decline below +6.5 until this week.  This indicates a steady decline into late August.
3) Cycles match this decline into August.
4) Now I have the critical M/A and SP futures 30-minute M/A in my favor.  Returns to the 30-minute M/A, the DJ futures 10-minute, 76 unit M/A, and even the DJI 150-minute M/A are shorting events if I am not at the level of exposure that I desire.
Due to the above, I bought short mutual funds several weeks ago.  I don't use these unless I am convinced that a decline will continue over a period of months.  This provides me with a holding psychology and makes me comfortable with "I don't care what happens" money.  Trading futures and ETFs is so liquid that I feel the need to have a long-term position.

Silver got clocked along with stocks, but gold is swimming toward it's old highs.  I count gold as requiring a nominal new high.  When I get it I'll short the metals again.

The dollar may be worth buying again as an adjunct to short stocks.  I'll post on the dollar tomorrow.

1 comment:

  1. follow-on to Anon's comment requesting a post re your MA's: Have you ever considered teaching a seminar re your methods? Could be low key, small group of traders... maybe at your place! After class we could help you with the water tank. :-)