Tuesday, December 6, 2011

Sell The Rumor.

Calling top or bottom is against the trend and is very risky. The reason I look for top or bottom can be explained in the following picture. I borrowed it from Philstockworld. They do a wonderful job!

The day went by as planned. Today was supposed to be my “Top”. We will know in a few days if it is really the “Top”. But I waited the whole day for the SPX to try and come closer to yesterday’s high. I almost gave up and then 3 PM rumor came to the rescue. The SPX raced higher. When it reached 1265, I added to my short position of yesterday and Twitted to my readers.  And then the markets started their downward journey. Sweet.

So have we reached the short term top? I don’t know but I hope so. All my analysis and indicators are telling me so.  I am not a chartist but the expert chartist, Tim Knight of Slopeofhope posted a chart of DIJA Tran which showed a double top today. I looked at it after the day end and it does look like a double top.

I looked at SPX 5 min and it also shows multiple top.

Another good top signal came from the fact that SPX and VIX are both green two days in a row. So we will see.

I am trying to find a good correlation between currency and risk assets and I think I found one. AUD has demonstrated the best correlation as shown in the following chart.

The interest rate was cut today for AUD and there also I think we have a short term top. I think in the next few days we will see AUD coming near or below par. That would affect the stock markets as well. Gold and silver are down again from yesterday, which I thought they would.

But I would once again like to put my 2 cents worth of warning that I am not looking for a renewed bear market or testing the October lows. This is just a short term trade. I have no bias and I am looking for opportunities on both sides. I am neither a "Bear" nor a "Bull" and I do not think fundamentals are moving the markets.

Once again, I want to thank everyone for joining my Twitter (@BBFinanceblog). Forward it to your friends and let us make this interactive with your comments. Visit  http://bbfinance.blogspot.com/  for your daily quota of contrarian thinking.