On July 2, the Dow cash posted a 10 month low at 9614. CNBC and all the major media pundits were decrying the “failure” of 9800 support. Please go back and read my blog then. I was bullish just out of spite for their bearishness.
Between Jul 2nd and THIS MONDAY, we rallied up to a high tick at 10719, for a 1,105 point from trough to apex. All we got was crickets, or a dozen pundits saying that we should not be rallying, but for 5 weeks we rallied against the wall of worry.
Today, with a 250 point down move, as of this writing, the sharks were out in the head lines. Beginning of the end, sell everything, stock up on canned goods, buy an electric generator, make sure you have plenty of duct tape…. I am convinced there has to be a good money making program that does nothing but fade the general opinion of TV news shows, AM Radio Talk Show Hosts, politicians, or in general your run of the mill fear mongers.
So, that being said, after a 6 week, 1,105 point rally is it that fascinating that we’d have a correction? Most of Europe is heading off to Summer Vacation or well into their vacation already. That spells lack of liquidity. A case in point was the bond trade yesterday after the fed announcement. That market swung like Tarzan after 20 beers, I would argue principally because a lot of larger players are on vacation.
So, what levels do I like buying on the Cash Dow, if we continue to break. First would be 10,300, Second would be 10,168, (my favorite 50%),and then finally, the 62% retracement at 10,037. If we did trade down to the 10,000 level, for sure you will have TV pundits and commentators pulling their hair out in worry. Especially as we are approaching the dreaded OCTOBER. Everyone knows nothing good happens in stocks in OCTOBER.
My advice, take it all with a grain of salt, but fade the national media emotions every chance you get.
Good Trading