Wednesday, October 27, 2010

Update on SPX Bearish Wolfe Wave

Yesterday I presented the targets and stops for the bearish Wolfe wave that developed. Target is the 1168.20 level and stops are the red trendline. The numbers on the chart are Wolfe numbers. Not drawn would be Elliot wave numbers, and by my calculation we are currently in Elliot Wave 4 since this morning and Wave 5 should start before the close today.

Disclosure: I am long FAZ, UUP, DZZ, QID; short WFC, AMZN. These holdings may change before the close today, but UUP is a longer term holding.

Tuesday, October 26, 2010

$SPX 30-min Bearish Wolfe wave

On short term basis the SPX is bearish. Stop is the red trendline.

Friday, October 22, 2010

Update of GLD Bearish Wolfe wave

A couple weeks ago I showed that GLD was giving us a test of top. As of today, the weekly is showing a bearish Trader Vic2B reversal which is consistent with a developing Wolfe Wave.

I sold all my longs since January and even starting a tiny position in DZZ (ultra-short GLD). Shorting individual miners could be another strategy-- many are exhibiting bearish patterns as well.

QQQQ: Bearish Wolfe Wave

QQQQ on 65-min chart is showing a developing Bearish Wolfe Wave and also a double top formation. If trendline breaks, enter short (or long QID) with target 48.80. Stop 51.75

Thursday, October 21, 2010

Dow Dogs Update: 19.5% Gain

I've been holding the four Dow Dogs since February and yesterday sold the three holdings with the greatest stock price appreciation. I realize this subverts the buy-hold strategy, but I'm gonna take my double digit gain and go to cash til January.

Dupont (DD) and Verizon (VZ) have been beasts, sporting over 4% dividends and outperforming the SPY in style. As I mentioned in February, my experience is that one holding will make up most of the gains, and this year DD has been the driver, with a 46% gain. Kraft (KFT) was sold as well with gains similar to the SPY at plus 10%. Only MRK has underperformed the index, breaking even for the time period, but it's 3 dividend payments have assuaged the pain.

As of today, the four holdings have returned 19.5% including dividends, versus the SPY which has returned 8.8%. Remember these were bought at the February market dip, so the returns are a bit better than YTD.

Since I'm always looking for an easier, cheaper way to get returns, I compared the Vanguard Dividend Appreciation ETF (VIG), and this was up 11%, and although the management fee is higher than SPY, the returns are similar or slightly better. The Dow Dogs strategy is really not going after index gains, however, it's trying to find the racehorse with a low risk portfolio. This year's Secretariat has been Dupont (DD).

With a nice gain for the year and elections coming up, I think it's a wonderful time to sit on some cash.

As an aside, if the Dow Dogs were chosen today, the picks would be ATT (T), Merck (MRK), Pfizer (PFE) and Kraft (KFT). Remember we throw out the highest dividend producer with the thought that there may be something fundamentally wrong with that company. In Verizon's (VZ) case, however, the higher yield is due to a recent dividend raise and not a stock price drop, but don't try to overthink it-- the strategy is designed to be simple and safe.

Thursday, October 7, 2010

Gold: Bearish Wolfe wave...

developing on weekly? Do not short this too early, but here are the targets if it breaks down. This works like a test of top. 127 would be a point to consider lightening any long positions.

Disclosure: I'm long GLD.