Sunday, August 31, 2008

$RUT Update for 08.31.2008


Monthly chart shows the bulls managed a higher higher over the month before, and also managed to close the index well above the previous month's high, despite profit-taking towards month end. The 765ish area is a key LIS that the bulls need to clear in order to go higher. IF this becomes resistance, THEN look for new low to be made.

Weekly chart shows the index stuck in consolidation. Last week's trading activity resulted in a spining top/doji, with indecision between the bulls and the bears.

Daily chart shows the slightly higher high made last month (August 2008), where profit-taking took place. The index managed to close above its 8ema, 34ema, 89sma and also 200sma. Is this a bear market rally, where smart investors/traders are selling strength? Only time will tell.

1 comment:

richard said...

My investment maxim is simple: in a bull market be a bull; in a bear market be a bear. In a bull market, one buys on dips; in a bear market, one sells into strength.

Indeed, one should be selling into ths strength manifesting in the Russell 2000.

Although the Dollar is trading higher, the Dollar Rally in stocks is over as the financial sector, IYF, having risen to 50 day support is falling sharply; and as is seen in the ratio of US Stocks to World Stocks, VTI:VEU and VTI:EFA, turning lower on August 15, 2008.

The fall in the financial sector has caused the Russell 2000, IWM, $RUT, to fall, causing a doji candlestick to form at 73.83 which is immediately below strong resistance at 74.00. Support lower for the Russell is found at 73.40, 73.00, 72.00, 70.75, 70.11.

The chart of the Russell 2000 Value share compared to the Growh shares, IWN:IWO, shows a dark cloud cover candlestick on August 15, 2008 and a lollipop hanging man candlestick on August 29, suggesting that the value shares, IWN, are now going to start to fall faster than the growth shares, IWO: this is going to really propell the Russell 2000 down fast.

The Russell 2000 shares, IWM, "get goosed" more than other shares by how well or poorly the financials are doing.

This "goosing" by the financial sector is seen in the chart of the Russell 2000 value relative to the Russell 2000 growth, IWN:IWO, where through the Financial and Dollar Rally, the IWN shares have risen backet up sharply coming up to just over the 200 day average.

So getting back to the main point here, one should be selling.

While one could sell the Russell 2000, one should consider the evidence in the linked article that Kondratieff Winter has set in.

And that being the case, sell the weakest part of the stock market, that being the financials, via going long SKF.

I recommend that one be invested 1/3 long SKF in a trust account, and 2/3 invested in gold at BullionVault and GoldMoney.