The major stock indexes traded down again today on higher volume, marking today yet another distribution day.
Officially, the Dow Industrials fell 1.1% on NYSE volume of 6.3 billion shares, while the NASDAQ dropped 1.9% on 2.9 billion. The leadership profile remain weak, though remains positive for now, with 131 stocks making new highs versus 79 making new lows.
The short term momentum oscillators remain negative, non-confirming the bullish stance of the AlphaKing Trading Indicator. We have no new trades at this time.
While the short term pattern leaves the window open for a modest recovery rally to retrace some of the recent losses suffered from the peak, we have the close tomorrow as week two of a four week plunge to test and eventually break below the 200 day moving averages (purple lines in the charts below.) Thus the close next week should be much lower than current levels, and the week after closing way lower, so any rally attempt should be pretty short.
Our trend indicators are weakening fast now, though currently remain positive, so we continue to sit tight with ½ a portfolio of longs hedged with the other ½ in cash. Cycles are getting ready to turn super bearish starting next month, so we expect to be aggressively shorting this market once the trend changes for real and suitable trades present themselves.
This is a good time to asses if you want to be an aggressive trader in 2010 versus a conservative one. Conservative ones should follow the trading advisory we offer in the 401K text, accepting a potential return of 15% per year with downside swings between 3-4%. While aggressive traders have the opportunity to make 30-40% per year, downside swings move to 6-8% on average as leverage is used, with the occasional double digit drawdown. These returns and potential losses come with no guarantee, though those are what we found in testing, and any one trade can be higher or lower than the average.
There are no free lunches in the stock market, so consider carefully which type of trading you want to do in 2010. Feel free to email us via the Contact Us page at alpha king.com with any questions you may have on this, or any other, topic.
401K investors should have ½ of their portfolio invested in a stock index, or aggressive growth, mutual fund, with the other ½ remaining in a money market fund.
The Index portfolio is ½ invested in QQQQ with the other ½ remaining in cash.
Kevin Wilde, Chief Trading Strategist AlphaKing.com.
