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Over the past month there have been many great shorting opportunities for students that follow the Safety in the Market trading system. I follow the same system and have no secret methods –just the basics. Many good trades were available for all to take. The question is did you get your piece of the cake?
If the answer is yes, then congratulations and job well done. If the answer is no, this article might shed some light on the reasons why and on where this market could be heading. Before you read on, it would be instructive to revisit my article in the 22 June 2007 Trading Tutors Issue #213 to bring yourself up to speed.
In the June article I was calling for a higher high in July 2007. Dates and price forecasts for this high were also given. I postulated that we would enter a bearish phase from the July high which would terminate in October 2007, 90 degrees apart.
Chart 1- Daily Sector Analysis
click chart for more detail
click chart for more detail
Chart 1 illustrates the current state of all sectors. We can see that there are only two sectors that have managed to stay above the March 2007 lows. A yellow circle indicates the March 2007 lows. These two sectors are the Materials Sector XMJ and the Energy Sector XEJ. This should come as no surprise as these two sectors have been the strongest for the past six months. To see them hold above the March 2007 low should have also come as no surprise to the astute trader.
Taking a look at these sectors all at once gives you a better overall view. At a quick glance we should be looking for the 50% danger zone. Most of the sectors are currently around this very important level. Some – like materials, energy, financials and consumer staples – are above. For the sake of simplicity let’s agree that we are at levels where we should watch for some kind of signal that the downward trend will recommence. If we see this danger level acting as support, then further upward movement should be expected.
Over the past few months many financial forecasters have put their views forward to the public. As a trader first and foremost, it doesn’t matter to me if the correct call has been made by these forecasters. What matters is that you stick by your analysis and trade your plan to the letter. A lot of traders know what it’s like to go over the edge and stare at disaster by getting caught up in the noise.
Keeping the Dream Alive
David Dixon
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