And watch the basket. This is a quote by Warren Buffett.

Well, the first part I did (notice that he doesn’t say “put all your eggs in a basket…”). I loaded my basket with SPY puts (January, 80 and 75), S&P Ultrashort (SDS) and I took one of the ideas from Tim, shorting Abercrombie (ANF) because the chart seemed as attractive as Mr. Knight’s rationale.

Now I have to watch the basket so it won’t fall and screw my eggs:

A couple of words on the above chart, which is not entirely self-explained. First of all, there’s no clear confirmation of a short-term reversal according to the criteria I use: today’s close was above the three DMA’s (3×3, 7×5 and 25×5), Stochastics is giving a sell signal but still in positive territory, and MACD is giving a buy signal and in full positive territory (indicator line and signal). So, why am I shorting? As I said in yesterday’s post, I would be anticipating my own indicators based on spiral dates projected shown in this chart, which makes the case of a top between the 16th and the 19th. Yesterday, 17th, I decided to open a little position. Today, watching the 5 min chart, I felt comfortable enough to increase my position and, as I did it, I soon saw some profits. The drop dragged SPX to the convergence between DMA 3×3 and 7×5 and close to DMA 25×5. This kind of movement, along with Stochastics and MACD positive, gives me the sense of weakness. It’s ok if tomorrow we go above yesterday’s high (918.5), but it won’t be ok if we go above that level anytime next week.

At this point my basket is loaded and doing fine. Next week will be more important than tomorrow for my outlook and edge.

I like your analysis - although I still have learned the cycles. You knowing itmakes you understand the importance of dates; like this one: “It’s ok if tomorrow we go above yesterday’s high (918.5), but it won’t be ok if we go above that level anytime next week.”

Thanks.

Comment by DalalStreetKing — December 18, 2008 @ 11:25 pm

You are on a roll Moontrader, keep it up bro. Great post.

Comment by toad37 — December 19, 2008 @ 12:13 am