Monday, August 3, 2009

I Told You So in May, and Sucker's Rally Continues!

Sorry about bragging. I don't get to do it often. Back in May I wrote this post:

Case for Sucker's Rally to Continue (5/17/09)

In it, I wrote:

"To be really a "sucker's rally", the rally has to threaten to fill the huge gap down created in October 08. Right now, it is nowhere near it. The good place on the chart to achieve that goal seems to be 38.2% retracement from the bottom on Blue Fib, which pretty much coincides with 61.8% retracement from the bottom on Green Fib. That's about 9300-9400. At least Dow should go above 9000 to really sucker in the retail investors."

Well, surprise! It's happening. The huge gap from October 08 have started to get filled. So I decided to revisit the Dow Jones Industrial Average weekly chart.

I continue to like what I see, except the volume. RSI indeed threatened to backtest the downward trendline since 2007, but only a remote threat. MACD is finally over 0, and long-term extra slow stochastics (set at 60, 3) is going toward 50. I still believe this is a technical, bear market rally, but the stochs may overshoot and stay above 50. What I particularly like is the crossover happening between 13-EMA and 34-EMA. It hasn't happened since the downward crossover happened in December 2007. As 13-EMA is about to go above 34-EMA, both EMAs are turning UPWARD, which I think is very bullish.

My first target, 50% Fibonacci retracement from Oct 08 high to March 09 low (around 8800) is now met. My second target is the same I stated in May - between 9000 and 9500. Particularly around 9400, where 61.8% Fibonacci retracement from Oct 08 high to March 09 low almost coincides with 38.2% retracement from Oct 07 market top to March 09 low.

If it should ever clear that level, Dow could go on to actually fill the Oct 08 gap, which would be about 61.8% Fib retracement from the market top to bottom. That would bring Dow to 11240, 20% increase from here. Nasdaq is already climbing the gap wall half-way. Time-wise, I'm thinking October as a potential top.

(This run actually feels like the similar run back from March 2007, which topped in October.)

I'm still holding what I held in May, except FAZ which I sold what remained of it @4.90 (pre-reverse split) and bought NRO up to the equal $ amount. NRO is up 15% since, while FAZ is down 35%. Green shoot indeed, when a stock that invests in commercial real estate jumps in price like this. Overall, my portfolio is about the same level as May, as my portfolio is commodity/resource heavy and those stocks just got back to the May high level. Oh well. That shows I'm a lousy trader, but at least I didn't sell at the recent bottom.

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