Some of this week's most insightful and timely vibes.
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Monday, November 30, 2009
The Biggest loser - Part 2 Smita Sadana
I have talked about the ongoing divergence between the SP-500 and the Russell. Currently, SP-500 is 1.8 % below its recent high while the Russell is 8.5% below its recent high of 623.3.
I discussed these bits of information as potential actionable ideas on 11/19:
"So, if you shorted the Dow (as a hedge or otherwise), are you feeling 'cheated'? The Dow has been the strongest of all and Russell the weakest.
Most of these thoughts come from experience, of course. I remember a time when many years ago, looking at good action in techs in a market correction, I loaded up on the Semis (since these are usually techs on caffeine). What I didn't realize was that the Semis had been laggards coming into that correction and being the biggest loser didn't necessarily translate into being the biggest winner.
Opportunity loss was a fixed dollar amount, but the lesson learned was priceless…
Again, such correlations might not be valid at all times, but till they are, it's important to play by their rules!"
So, one way could be to let go of the small caps in favor of large cap stocks, by going long an index like SPY and short the Russell. Once again, one would be playing strong and weak sectors.
These divergences have lasted for 1-2 months depending on the kind of divergence in play, and that historically has ushered in a tradable market correction.
Editor's note: Smita had positions in Russell at the time this Buzz was published.
Tuesday, December 1, 2009
Concerns Regarding GS David Weigman
Editor's note: Minyanville welcome's David Weigman, our newest professor.
Regarding GoldmanSachs (GS), it broke 1of 2 possible uptrend lines (trend lines are somewhat subjective, so I tend to look at every possible interpretation)
Trend line broken now acting as resistance as yesterday's rally stopped short of re-taking it
Horizontal line support at 68.01 was violated, recaptured and now violated again
Relative strength broke 40 – usually support for bullish charts
Earlier I buzzed about the time/price harmonic in Apple (AAPL) with today's price 'squaring' the date of this years record high in October.
AAPL turned its daily chart up today and has rolled over.
Follow through from a potential third lower high on the daily chart since the October high implies a fast move lower: 3rd lower highs do a good job of identifying what I call Power Surge patterns (and vice versa…3rd higher lows do a good job of identifying upside explosions).
Such was the case on the weekly swing chart of AAPL at the July lows counting from the the January low. See weekly AAPL here. Click to enlarge
Editor's note: Jeffrey had positions in AAPL at the time this Buzz was published
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