11/06/2008 2 double bottom chances

Welcome to my new blog. A little history on myself; I've been trading for 12 years and still learn something new almost everyday. In 12 years, the most striking thing i've learned is that each bull and each bear market is different yet history repeats itself without fail. Moving on to the market....

The major indicies are down 10% in 2 days. Is this a "market no like Obama" move? or is this just the market pulling everything back off after ramping to give McCain a little at the polls?

well.. the answer is that it doesn't matter... what does matter is that the market has 2 chances at a "double bottom" here;


1) The October 10th bottom... S&P 848... DOW 7773

2) the 2002 bear market lows.... S&P 780... DOW 7175


Between S&P 848-780 is a PRIME spot to really scale into this market for at least a bounce.

The market though likes to play tricks on you. It's likely we touch one of those price points for a total of 2 minutes before a large reversal. So you have to scale into a long position very carefully.

Ultimately, this market is likely to go lower than these targets, but we are due for a bear market rally. The MOST POWERFUL rallies that exist. You DO NOT want to be caught short in a bear market rally.

My current positions;

91K possible investment;

4000 shares of UYG now averaged at $8.65 (my only current position)

I plan to add another 1000 shares of UYG near S&P 848 (if we get there)

I also plan to add 1000 shares of DIG near S&P 848 (oil will rebound heavily in a bear market rally)

IF 848 gets taken out... it will be time to sit and watch. At that point I will be nearly 50% invested sitting on a small loss.

The next double bottom potential will be key at S&P 780. If the S&P closes below 780 and stays there the following day. I MUST take my loss and wait. Because the target becomes something MUCH lower. Something near S&P 550.

Now.. I EXPECT a S&P 550 print at some point before this market truly bottoms, BUT I fully expect another bear market rally before this happens, therefore I'm playing that way.

8 of the last 13 bear markets have bottomed in October. Making the chances of at least a short term bottom and a 3-4 month bear market rally very high.

Remember, you must know your targets and respect them. This kind of volitility just begs you to trade 10 times a day, but this kind of volitility will rip you to shreads if you aren't careful.

Some charts;

UYG (ultra-financials) .... As of the close it's sitting on the 78.6% Fib retracement.. the last retracement before testing the first double bottom. If UYG takes out 8.01$ to the downside, then you know will are going to the to test the first double bottom potential at S&P 848.



DIG (Ultra-Oil and Gas) ... As of the close it's sitting on the 61.8% retracement. I want to put at least a toe in the game here and I might. But it might see the 78.6% fib like UYG at 27.44$. IMO, it WILL NOT break the potential double bottom at 23.33.



These two stocks are doubles IMO in a bear market rally. Either could be more than a double. This may not sound like much to those of you that trade options, but my risk profile is also significantly lower.

Good luck trading. Tomorrow is the jobs number, the reaction could be key. WATCH 848 on the S&P.... If it falls, it falls. But that is why scaling in slowly is important, because we get a chance at more shares for cheaper.

780 is the line in the sand. Below that for more than a day and losses must be taken.

See ya tomorrow. Hope I hear from you all often.