Saturday, November 6, 2010


The current uptrend in the Dow going back to the end of August (and I've decided that the small pullback last week didn't break the longer trend after all) has had six days of large one day run-ups. Five of these were followed by a narrow range day closing near the preceding day's high. After yesterday's big gains, that's exactly what we saw today, ending up a mere nine points, and pretty much what I expected.

We remain in the middle of the ascending RTC and my long hat remains on. November, at least so far, is living up to its historical reputation as one of the best months of the year for the markets.

Friday, November 5, 2010

April resistance breached

Wow. After today's 220 point pop in the Dow, I'm certainly glad I had my long hat on. In fact, this gain was so great that it completely moved above the RTC I had started yesterday and made me rethink the past week's action. Therefore, I've gone back to the uptrend that started at the end of August.
It looks like we are now solidly in a continuation of that pattern. Today's action blew the doors off the stubborn April resistance level of 11,258 with its close at 11,435. It also looks like the third time was the charm after the two previous failed attempts on 10/25 and 11/1. Next resistance isn't until 11,917. The uptrend remains in force, though I wouldn't be surprised to see at least a bit of consolidation tomorrow after such a dramatic move today.

No trades today - I was busy with other obligations that kept me away from my screens. I was gratified to see everything I owned up nicely when I returned, including CIM which recouped almost all of its losses yesterday and returned me to a profit position. LOW also continues to move up. I plan on letting this one run a while longer.

Thursday, November 4, 2010

Uptrend Intact

As expected, the Dow continued moving up today and remains in the upper half of the new ascending RTC channel as shown here. Although the candle looks like a hanging man, I tend to discount that since the long tail is largely an artifact of the "ringing" caused by the Fed announcement this afternoon. The Dow went into its usual Fed day antics right after that time before finally settling down for a sedate 26 point advance. So my long hat remains on.

No trades today. CIM decided to reward its investors today by diluting their shares with a huge new offering at 3.86. Thanks a lot, CIM. CIM instantly dumped to that level down from 4.04 the day before taking all my profits with it. Fortunately my entry point is 3.99 so the damage was limited. And I am really only in this stock for the dividends, so all is well - for now.

Wednesday, November 3, 2010

Confirming uptrend

I was not surprised to see the Dow up today, but I was a bit surprised it rose as much as it did, +64 points to close at 11188.72. However, this does confirm what I wrote about yesterday, that last week's short downtrend is over. I have now started a new rising RTC channel and today's close puts the Dow above the top line.

So what to make of this? Today's market results weren't due to the election since there were no political results in by the close. And the futures are essentially flat as of this writing (1 AM Eastern) so no guidance there. Perhaps the election results really were baked in after all and the market just took tomorrow's gains today, or perhaps this was in anticipation of what the Fed is going to do tomorrow. Either way, I will continue to keep my long hat on. I don't really see anything bad coming out of the Fed tomorrow and the election results that put the brakes on Obama's anti-business agenda can only be good for the market. Also, note that November is historically a very strong month for the markets.

Today I managed to buy some more DHY at 2.96, which is where it closed. And my faith in Lowe's was rewarded with an impressive 3.45% gain to close at 21.92. This move took it outside of its descending RTC channel going back to October 21st. Technically, this is only a bullish setup and not a trigger since the candle did not open and close above the RTC line, but the magnitude of the gain is good enough for me. I'm looking for more short-term upside from LOW.

Tuesday, November 2, 2010

Downtrend Over

Today's puny six point gain in the Dow took us right off the right edge of the steep downward trend established only last week. According to the RTC method, this means that downtrend is over. What really strikes me about today's action though is the unusual size of the doji candle - a range of 182 points between the high and the low for only a six point difference between the open and the close. This represents the second recent rejection of the April highs. Unlike some, I don't consider this to be particularly bearish. It often seems to be the case that big resistance levels take three tries to crack. Third time's the charm, as they say.

The only thing that's clear about this market is the extent of the indecision, fueled obviously by tomorrow's elections and the upcoming FOMC follies. According to the RTC, we should not be looking for a major decline in the next day or two. It's pretty obvious that the action in the next two days will be dominated by the election and the extent to which the eventual results are or are not already baked into the market. We'll see. For the time being, I'm still mostly standing aside.

Today I tried to buy some more DHY but it ran away from me and I couldn't get executed. ("Ran" is perhaps too strong a word, but I just wasn't willing to chase, even a few pennies). What I did do is buy 100 shares of LOW at 21.49. In retrospect I should have waited, since it closed at 21.19. But it's looking oversold to me on both the RSI and stochastic so I'm going to give it a chance to perform.