Saturday, January 30, 2010

The Dow and Nasdaq are showing who wears Short, Shorts!!!


Just a few weeks ago on 1/11/2010, Alcoa reported earnings and boosted guidance for the new year, and like the coach of a playoff winning team was doused with a big bucket of Gatorade. The last 10 days of trading have done nothing but produce mostly negative days with charts being destroyed merely days after showing signs of strength. What is the sudden cause of this exodus? My guess is that reality is settling in that business only grew thanks to government bailouts and major cutbacks by companies with no growth on the horizon. Now the threat looms that the money will soon be taken away and the consumer is not only strapped and broke, but now face the true fear of a tax increase coming soon to a 1040 near you. So as companies report and tell the world how things look great, most consumers and investors alike are drooping their cups of Kool-aid and leaving the market to salvage what gains that have already recouped. You have to know that something is zany when BRK.B becomes a momentum stock over thees last 10 days. Here is a chart of The Dow represented by the DIA, If you look closely at this chart you can see the incredible gains from March of 2009, and as this chart was building it was making that wall of worry bigger with each tick. Like Jack and Jill the DIA is now rolling down the Hill and the pain train for longs should slow down around 8865($88.65 for DIA). So for you number gurus out there that means we have 1190 of potential down side still ahead of us. So break out the Nair and join in the Chant "Who Wears Short Shorts?, We wear Short, Shorts.
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