Above is a 3 year weekly chart of the russell 2000. This was trending up gently all along and then broke this line at the beginning of 08. We have tried to get back above the line and failed. I believe, if there is another rally (our guess is either tomorrow or on friday), the $RUT will have resistance around 770.3. Our guess is this tryst will fail too.
Momentum indicators are mixed and are not very helpful here.
In case, RUT gets back into the channel, we will change our stance to a slightly bullish one.
The Russell 2000 will fall fast and hard now that the Dollar Rally has ended.
ReplyDeleteThe chart of the Russell 2000, IWM, for the last three days, looks very much like the chart of the US Dollar, $USD, for the same period.
The 8/12/2008 Greg Michalowski USD JPY Chart shows a complete breakdown -- it shows the USD JPY is a "failed investment instrument".
Lacking liquidity from investing long via 0.5% interest loans from the Bank of Japan, disivenstment will be coming out of all stocks globally and especially the fianancial sector and dollar driven Russell 2000.
The yen carry traders will be selling the financial sector to take profit and the Russell 2000 shares will fall rapidly.
In addition to the Russell 2000 shares, these recent high flying consumer, value and financial ETFs will fall quickly as well: UYG, RKH, TKF, PJB, IXJ, XLF, URE, BBH, IIF, PBE, XHB, ICF, IHF, PXN, RWN, IFN, SMN.
Having passed through Peak Currencies and just now through Peak Dollar, wealth will be preserved by investing in gold and a limited amount of short selling.
Please consider beginning coverage on three following ETFs and ETNs ... DGP, SKF, FXP
DGP ... 200% gold -- it's oversold
SKF ... 200% inverse of the financial sector -- it's on its way up again
FXP ... 200% inverse of China -- it has left the launch pad, it is liekly going to fall lower in a correction any day, before it continues dramatically higher.
Hi Richard,
ReplyDeleteThat is a good point. I agree with you that the YC trade is unwinding and quite forcefully and investors/traders are getting whipsawed. My post was meant to be taken in the nearest term, until this weekend. I agree that $RUT is extended. But if you notice the russell loves to make double tops, double bottoms etc.
In the intermediate term, the TWM is an attractive vehicle.
SKF - is difficult to predict (for me at least, though I have traded it in the past) since it is very news driven. The swings are very violent too. I will be conservative, unless I see an absolute peach of a trading opportunity.
FXP - I have already posted on FXI which is the inverse of FXP, I am bullish as of now on the FXI. I think we are in the process of forming a bottom in FXI.
DGP - I am bullish on gold in the next 2-3 week time frame. I would prefer miners to the commodity itself, since the miners have shown the bottoming process, the commodity not yet. It is somewhere there but not yet.
Good luck to you.
The dollar will rally one more day.
ReplyDeletedollar
Don't do a three count on the USA just yet. All stocks (including POT and MOS) aren't going to zero. The party isn't over. Be cautious, hedge, diversify, use stops, preserve capital, but listen to Cramer and stay in the game.
Wow! what a drubbing gold and silver are getting nice!. I am inching to buy some silver/gold here. I can convince myself TA wise as for silver's and gold's support.
ReplyDeleteThe unknown factor is right now how many commodity hedge funds (which are leveraged upto their noses) are blowing up and receiving margin calls. Natural gas' story was something like that I believe.
I think UNG will rebound on monday or tuesday by fib calculations. Only time will tell if that theory holds any water.
ReplyDelete