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Wednesday, January 26, 2011

Daily Doc! Jan 26 2011 Two For One - Good Read

      Day Trader – Trading Plan 26 January 2011

Yesterday important support and resistance were discussed. The ES could not break 1292 and retreated pre-market from this area. 1283.50 as important support, and pointed out, was broken and 1278-1278.50 support was held.

After visiting the important support of 1278-1278.50 the futures were very volatile and ended on a higher note.

Short term the market moved back to up trend but 1292 must be broken to the upside to keep the bulls going. I doubt that will happen before FOMC release. My opinion is more of a 2 sided action until the release is out.

1290.50-1292 would be for me a short entry and since expecting some volatility, I would exit at first support 1283-1282.50
Having said this, a stop above 1292 is required as a break could open the door for bulls to aim for 1297.50-1299

Watch out for break of 2310.50 on NQ as well. It must go in tandem.

I doubt that 1282.50 will be broken before the release, so if it is hit before FOMC release, it does offer a long entry with a tight stop.

Should we see 1297.50-1299 before the FED release, this is an area I would like very much to go short.

Whatever breaks after release and sticks ( either 1292 or 1282.50), it is best to join as I expect a very strong directional move today.


Good trades to all


Portfolio Logic

Yesterday I pointed out the weakness of risk capital smaller emerging markets. It was clear that since November 2010 these markets are in a down trend and more down side is likely.

Let me repeat it again -> Funds tend to sell risk capital of emerging markets first before they do the very same in developed markets!

I was explaining in November 2010 my opinion and action to slowly reducing exposure in Equities. ( long term buy signal was August 2009)

Summary of Reduction of Exposure

- end October and early November emerging markets
  e.g. 50% of holdings

-  6 December 2010 exit all CDNX stocks held
   e.g. high risk junior miners & explorers

- 6 December 2010 exit 35% of all large & mid cap precious mining

- between November and December 2010 reduction of high yield bonds
  from 15% to 5%

- 1st week January 2011 exit 35% of all large cap Oil & Gas / Energy
   holdings

Portfolio is running 40% equity core positions (mostly Commodity Sector)

- between November 2010 and January 2011 purchasing shorts .
   Emerging Markets 7.5% , Basic Material & PM Sector 7.5% and lately
   EU Market and US Market Shorts ( 1265-1291) of 5%.
   A total of 20% Shorts !

Cash level is running at 35%

Portfolio Plan:
I am planning to slowly sell the PM Sector shorts very soon. Basic material shorts a little bit later. Emerging Market and Developed Market Shorts remain until further notice.
I am considering to add 2.5% more US Index shorts later today.
e.g. NDX, RUT, SPX, DOW
Gold
Buying opportunity between 1300-1265 USD

PM Stocks
We should see a little bit more downside, but with Gold 30-70 USD away from a potential bottom, the downside here is limited. Suggest to pick your favored PM stocks and monitor any positive volume.

I started already to take up humbled positions in NEM, ABX, IAG last Thursday & Friday, 20 & 21 January 2011.

Summary:
Gold - > still has a valid sell signal
Silver -> still has a valid sell signal
HUI  -> still has a valid sell signal

USD/EUR -> $ may bounce from here as it is short term oversold.

Stocks still outperforming bonds -> will change soon

Bonds still on a valid sell signal -> may bounce very soon

VIX volatile yesterday

Natural Gas has a valid intermediate buy signal

Dow & SP500 have no sell signal yet !

Remarks:
I do apologize in advance for my rather humbled English language & grammar skills as it is not my mother tongue.

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