Halfway Down

Halfway Down The Wave

Today's decline was expected by the RumWave.  We look to be about halfway done with the down move, but may see a pop tomorrow based on the daily scores.

The 4 hour score looks like it is ready for a bit of a relief rally after the last few days.  The RumWave score has crossed out of the "red" territory.  However, it is not time to go long until it turns green and I post the green light.

As a follow up to Friday's post, here is today's EUR/USD chart.  The 4 hour chart score was calculated at 7pm CST.  Since currencies are traded 24 hrs during the week this score is only valid at one particular time.  The Daily chart score is better than yesterday, but still not signaling good potential for an upward move.

If you would like me to throw your favorite stock into the score system, post a comment below with the symbol. I'll take the first 3 and post them on tomorrow's update.

The 4 hour chart above matches with the daily scores, the slow stochastic and %B studies show that the market is relatively low from a technical standpoint.  This supports the idea that tomorrow could be an up day.

 The Daily chart is still discouraging, suggesting that the downtrend still has room to run.

Introducing the UltraWave

Regular site visitors probably noticed the different colors on the scoreboard background.  Although I have stated several times that shorting this market isn't a good idea, I back tested what would have happened if I bought SDOW (3x inverse DJIA ETF) when the "sell" criteria were met.  Overall, it increased my returns on the portfolio.  However, there were several instances that it did not make any money or actually LOST money (around 4%).

Right now I have positions in SDOW because I think the bullish impulse that just ended was really "steep" for lack of a better term.  Correspondingly, the RumWave historically shows an equally steep decline in similar past instances.  Coupled with the fact that summer trading is usually quite volatile, and the fundamental problems in Europe have not been solved, I feel comfortable being slightly short here.

The scoreboard now includes returns from SDOW since last Friday.

If you have not made a short purchase, I recommend you wait it out for the opportunity to go long.  It is just too late to jump in here, I think.  For that reason, I'm putting out the Yellow light recommending a HOLD.  If you are still in long positions, I'd still recommend selling on a rally tomorrow with the expectation of buying again in the next week or two.