The Steam has run out.......

All data points to a market correction!

If you check the chart data for equites, gold, and the USD they all seem to fall right into line for a market correction. I'll show you what I mean....

On the DJIA chart below notice the areas that I've circled. Up top you'll see the relative strength Index(RSI) which has just begun its decent from a huge peak; a good sign that some weakness is to come. Also notice that the MACD lines at the bottom of the chart have just turned down from a serious peak as well, and they have crossed paths, usually a sign of a downturn in the chart. The Dow has been losing some momentum in the past few days and this is the first time in five weeks that it closes down at weeks end. All of this paired with some not so good retail sales and some scattered negative sentiments should point to a market correction.


Typically when the markets turn down, the Dollar becomes a safe haven and gains ground. So again if you look at the circled areas you'll notice the corresponding evidence in the RSI and the MACD. Looks like the dollar could have a rally; how big I dont know.


All of the inverse evidence can be seen in the gold chart below, as it moves opposite the dollar. The RSI still shows above average strength however the chart is for the 13th of august and doesnt include todays negative closing. I believe that the government is going to pull the country from this recession by any means necessary(increased gov. spending). Likewise inflation is bound to follow once the trend begins, so I think gold is a great asset to any portfolio however any purchases should be postponed until the price comes down a bit with this correction. Again I dont know how extensive the correction will be given that there is still a major mortgage crisis unfolding, and we all know how bad news can effect the markets.


I positioned myself in Proshares Short Dow 30 (DOG) to try and gain from the downturn. There is an ultrashort position named DXD and also there are financial short positions which are SEF and SKF. This fall we're going to see the first major spike in option Arm resets, so a real estate short could be in order as well. All though it must be timed very well, for minimal exposure.

Market Pop could Boost Dollar

The market rally may be very close to hitting its peak. There are alot of mixed feelings about the markets which seem extremely overbought. Is there really enough supporting data to jusitfy the extended rally? Irrationality seems to have taken the reins recently as markets surged higher on only better-than-forcasted earnings and positive words from the fed. There seems to be more supporting evidence against a recovery than for one, which is why I think that our rally could return to bear market before long. The third quarter could still hold positive earnings for some businesses, especially those that benefit from the cash-for-clunkers programs and the like. The second wave of the mortgage crisis will most likely amplify the downturn as negative sentiments and bad news mix to create a greater sell-off. move into short positions on the Markets and Financials, Real Estate shorts are a good position as well. I may also buy a small stake in Atlantic Energy Solutions(AESO) as it seemed to perform well during the last market downturn.