This Rally Is for Selling
Last Thursday, you'll recall, the Dow Jones Industrial Index bottomed at 13039.86, just pennies below its .382 retracement of the rally off the June lows. From there, we had a pretty good bounce into Friday morning's highs, and then another shakeout to a slightly higher low of 13040.17, which formed a neat double bottom with Thursday's low, and, again, just fractionally below that .382 retracement level. Then another pullback yesterday that held 12 points above the double bottom, and this morning the Dow shot back up to 13,274, a rebound of 234 points off of last week's double bottom.
I bought into last week's pullback as I said I would (on Tuesday) and as the market pops back up, I am selling some of these positions, primarily in the Dow. At Rydex (now Guggenheim Investments), I sold all of my Dow positions at the morning pricing of 13,257. So far, that looks like the right thing to have done. I'm still net long (up to 50% levels), but out of the Dow. For option accounts at Interactive Brokers and OptionsXpress, I have been hedging bullish bets by writing some out of the money December calls in the DIA after buying the December 129 calls into last week's pullback. So now, these are mildly bullish spreads....397 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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