Happy Anniversary
The Dow celebrated the anniversary of the October ‘87 crash by falling 366 points Friday
and 571 points for the week. The Nasdaq NDX fell 47 points. The market certainly
responded to our Intermediate Sell signal from the previous week. The Volatility VIX
index has averaged more than 20 in the last three months since the uptick rule was
disposed of. This is a 50% increase from the average level for the last year and may be
the new norm. Great for traders - particularly those who pay attention to volatility
measures.
Sector Action for the week was minus 2662
Only the China “Sector” was up for the week although it fell precipitously Friday with the
rest. When our indicators said market risk was high going into last week this is what the
warning was about. At the least market participants need to recognize momentum break
outs, particularly on FOMC announcements, are risky. The Dow Jones is now below the
Sept. 18th announcement levels. So much for the Hail Mary 50 basis point cut in interest
rates.
Rydex Alerts- Took profits on Bearish positions Tuesday flipped to Bullish OTC then
moved to cash Thursday.
Short term Trading indicator- Oversold
INTERMEDIATE TERM TRENDS- Bullish but waning quickly.
INTERMEDIATE OSCILLATOR - Overbought Sell October 10th.
China CZH - Number one in overall rank and the only sector staying positive for the
week.
Ultra etf’s- I will be taking profits Monday on our Bearish Dow DXD holding which rallied
nearly 5% Friday. Our Bearish Financial holding SKF is up 17% over the last week and
we will be looking to lock in that gain sometime this week.
Oil Patch XNG, OSX, XOI - With Oil trading up to $90 the stocks still sold off Friday.
Banks BKX- Last in overall rank and not yet extremely oversold. No reason to be a hero
but the two on my buy list in these situations are State Street STT and Branch Bank &
Trust BBT.
Semiconductors SOX- Has been finding some support of the last few months and I will
look to buy this sector on this decline.
Based on the overnight futures Monday morning is going to be ugly. I said last week the
market would be down this week and we took some short positions accordingly. I suspect
we will see a big bounce Monday or Tuesday but trim position sizes in this kind of market.
There is no reason to swing for the fences.
The book “Way of the Turtle” by Curtis Faith is one of the best trading books I have read
and I have a book case full of them.
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