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A Turning Point Ahead?

November 17, 2009

US markets are at an interesting point. Recall the chart I shared about a month ago, and wrote following-

I think now is the time for precaution; Well, if you look at the chart above, you will notice that Dow is very close to the 50% mark (i.e. losses from 07 top to the Mar’09 low). This is going to be a key resistance level to watch; successful penetration of this level will indicate that the trend is continuing; so mark it in your diary Dow 10,374, allow +/- 50 to 100 points.

Dow And Transport Nov 17 2009

So here we are, after a minor pull back, The Dow is sitting almost at the 50% retracement point.  A long unabated journey, superb performance of >+50% or so 8 months!! The markets have priced a V-shaped recovery (the chart is a beautiful v curve). To cheer bulls, Dow theory also gave a bullish signal yesterday as Transports closed at a new recovery high (though a minor one only) since March bottom were in place.

Coincidentally, almost about 2 years ago, on Nov 23rd, 2007, I posted the first bearish signal and wrote this-

I have now changed my positions to bearish (as if I am trading, I mentioned a few days ago that I am chilling-out and will trade only for fun during Dec and Jan). But hey, if you do get a bearish market, then don’t forget to mention that you were told first hand here at OptionPundit. Russell 2000 ($RUT) has already broken that level S&P500(SPX) is only a few points away from breaking that low. Nasdaq is little farther. A technical rebound may happen, but I will not be fooled by it till there is really a solid buying in the market.

Bottom line- This is to share with you an interesting market observation which seems Bullish. Albeit, If I was right 2 years ago that doesn’t mean I will be right again. So take this as an additional data point in your market analysis and take your chances.

I, personally, am not going long, at least for now.  But that’s me. We have been riding on this bull via OPNewsletter using our consistent monthly income strategies.  “Return of Capital” is more important to me than “Return on capital” and I have moderate investment return objectives i.e. from a positive month to 5-7% per month.

Profitable Trading, OP

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