Thursday, June 30, 2011

6/30 Daily Commentary

Today's rally did not neutralize the signal, bringing the technical composite only down to +6. This tells me that there will probably be carry-over into the morning. Consequently, I covered by NQ short at 2320 for a loss of 7.75 points. Also I sold 2% QID and 2% SDS in ARCA.

The technical composite is saying that I will short again tomorrow. While disappointed, this is part of the trade.  On the unexpected decline through the ND 15-minute, 82-minute M/A less 10 points I'll short NQ again.

I have the raw data for I1, the short-term timing component, the PM1 precious metals gauge, the US1 bonds gauge, the dollar gauge, and crude gauge in an Excel spreadsheet forward for next 60 days at this link.

I've been sitting on my hands over the past 12 sessions after covering shorts near the lows and I was eager to short this market (probably a little too eager).

Today played out as a strong rally with technical momentum, on a buy signal in the daily technical composite.  Yesterday I was looking for a spike today strong enough to dissipate the technical strength to neutral.  Today I bought 3% DXD, 2% SDS, 2% QID, and 1% EUO.  I also shorted NQ futures at 2312.25 and have a stop at 2324.25.  I bought 2% SDS at the close yesterday to get a toe-hold position.

The key is the short-term timing component of I1. The following chart removes the 8 day lead for simple comparison with price. As can be seen yesterday was the signal day for this component, declining below 10.5.

Here is the I1 with the 8-day lead removed:

However, the technical condition of the stock market is sufficiently strong to delay the signal until the daily technical composite declines to +4 or lower. 

I believe the dollar low is in.  When the stock market turns then the dollar will rally. 

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