Testy Tuesday – Letting off Steam Or Sending a Warning?

It was fun because we were short-term bearish and we finally got a bit of a sell-off.  During yesterday's live Webcast, in fact, we had just shorted the Russell Futures at 1,060 in PSW Member Chat and, as I was demonstrating the Futures trade on /TF, we were already down to 1,052 and up $800 per contract.  We never got a strong bounce and the next leg took us down to 1,138, stopping out at 1,140 for a $2,000 per contract gain on the day – wheeeee! indeed.  

Our very bearish, very aggressive, Short-Term Portfolio positions popped from +18,000 on Friday to +$42,000 but we closed that one and we're going to stick to more conservative trading this year, rather than endure daily $24,000 swings, even when they are in our favor!  We already have a more conservatie virtual Short-Term Portfolio in our seminar series and, as planned, that STP popped 2.3% as it was the bearish offset to our Long-Term bullish portfolio, that fell back 0.3% to +0.2%.  

We'll be doing a full review in today's Webcast at 1pm, which you can sign up for here.

Meanwhile, the question is, how worried should we be by this little sell-off.  Looking at this Dow chart from Zero Hedge that compares the current Dow to the Dow movement just ahead of the great crash of 1929 - it does kind of look like we should be concerned, from a pattern-recognition standpoint at least.  Even a bounce today is expected, according to the historical chart, giving us false hopes before the big drop in a week or so.  
Last Tuesday we predicted how far the indexes would fall using our famous 5% Rule™, and they were the 1.25% and 2.5% drop lines at:

• Dow 16,300 and 16,100

…

You must login to see all of Phil's posts. To read the rest of this article now, along with Phil's live intra-day comments, live trading ideas, Phil's market calls, additional member comments, and other members-only features - Subscribe to Phil's Stock World by clicking here.
To signup for a free trial membership, click here.