Watching the cable business shows this morning, and as I suspected and wrote a few days ago, the talk is abuzz of the “dollar-carry trade unwinding”. As the Swine Flu has yet to turn into a pandemic, and the sub-prime crisis has lost its sex-appeal, this undoubtedly will be what we are inundated with over the next 3 to 9 months.
Also, I continued to be amazed every time the Dow breaks over 100 pts, watching and listening you’d think it was the beginning of the End of Days. A look at the charts shows us the SPZ was on its highs just yesterday up at the 111630 level , and the Dow was also testing the waters above 10500.
Looking at the charts, the Dow has support down at the 10200 level. With the volatility in the Dollar becoming the focus, we could snap back and forth in the Dow in that 300 pt trading range for a while. Back in the 1998 and 1999, we regularly had 200 to 300 point daily swings, sometimes exploring that range two or three times during the day. Perhaps that is what we have in store for 2010. Its a double edged sword. For traders, the more 50 and 100 pt swings during the day, the more opportunity to catch one or two, make your money, and then retire to the sidelines looking for the next opportunity.
On the down side, the rapid movement due to the computer algorithms makes it difficult to sit with winners or not have your trailing stops filled.
So far today SPZ has a high at 110300 and a low at 110000. Currently down 9.40 handles. Certainly not the end of the world. However, watching the cable news commentators, ANY correction lower is the potential beginning of the next meltdown.
And ANY rally higher is the beginning of the next leg up. After a while, its kind of a joke to listen to them. In DJZ, we have a high at 10385 and a low at 10350, down 91 pts. To put this into perspective, just 7 trading days ago we were around the 10250 level. 12 sessions ago, SPZ was down at the 1070 level during the Dubai Thanksgiving day scare.
So what’s my point? Look at the charts, ignore the cheer leaders (bearish or bullish) on cable, and look for simple chart patterns to take advantage of these moves.
The March Dollar Index jumped above the 78 level today with a high at 78.16. If you’ve been reading this blog for a while, the charts looked bullish for the past ten sessions or so, and we should move up to the 80 to 82 level. That rally will be bearish, in the short term for metals and commodity prices, and less directly, stock indexes. The moves are technical, yet fundamental news can spark emotions to catalyze the move. Today, its the tempest about the Government holding on to Citibank shares. When it was at 5.00 in Mid October, they decided to speculate instead of selling their block and reaping the benefits. Instead, the Government decided to act like every other human being out there and try for more. Now its moved against them, and the are going to sit with it. I can tell you from experience, having committed the same stupid act of holding on to a position, allowing a winner turn into a loser, that those trades never turn out well. Next move will be the wait to “get back to even”. Again, some where I have personally been, and its not a happy place. And it generally turns out negatively financially.
Jim Cramer talked about this last week, and I totally agree with his opinion.
The Government was going to sell Citi at 5 bucks back on Octber 14th and make a profit. Now Citi is at 3.24. The winner turned into a loser.
Good Trading, and remember to take the pundits on cable with a grain of salt. They are supposed to keep you glued to your screen so they can raise their ad revenue. They do that by fanning the flames of anxiety.
