12 April 2008

SP 500 WEEKLY Chart - Bear Market Update April 12

The intra-week volatility is significant, and snapback short covering rallies are normal, and not the exception in this market.

Despite the Fed's almost unprecedented interventions, at least since the 1930's, the market trend is still lower. Look at the daily charts linked on the side of this blog to keep an eye on those chart formations.

Be careful with your leverage, and in particular the use of options, especially April stock index and 'popular plays.' With these continuing low volumes heavy trades to one side invite a violent hit from the well-heeled trading desks.

Watch for cross market correlations and inversions and use these as hedges if you wish to be an aggressive trader. This requires significant capital to maintain adequately.

Cash is a position. Contra-dollar 'cash' positions paying decent yields have been some of our most rewarding plays. There are forex ETF's in addition to actual foreign government bonds and high dividend stocks. Forex trading is triple black diamond, for experienced traders only, with the odds heavily against even a talented amateur.

Sometimes NOT trading is a very powerful tool as you wait for the odds to improve in your favor, or your gains to run higher over time in a position. We have positions contra-dollar we've not touched since early 2006.