Sunday, November 23, 2008

Trade Update: SKF

I think that Fridays action gave us the rally to sell into. We took a short position on the Dow Jones Financial index via SKF at 233.71, on Thursday 11/20, the ETF promptly shot up to 300, before falling all the way back to 240 where it closed on Friday. Now if you watched CNBC or read Bloomberg you were told that the 500 point DOW rally was on the news of Obama's Treasury insider, elitist Secretary nobody ever heard of him before Timothy Geithner. Bullsh!t! It was a short covering rally plain and simple and you will know I'm right when you see that no new money comes in and the market crashes again, led of course by the financials.

Since the SKF is a double inverse of the Dow Jones Financials and has been lately a 10 time inverse I can get a better read of things by going straight to the horses mouth with ticker symbol IYR . By looking at the IYR daily you can see the the down trend is firmly in place. If you want to day trade the SKF do it using the 15 min chart, otherwise swing trade it via the IYR chart. In other words ignore all the noise and stay long the SKF so long as the IYR maintains its downtrend, and remains under 30.

IMPORTANT: Pay no attention to the stochastics, we are in a severe prolonged down trend which means that the data is skewed in the direction of the trend. The market could stay oversold for weeks of months, just let the price action guide you.

I will be looking to add to the SKF position and will put out an alert when I do.

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