Sunday 27 May 2012

Pause for breath?

The volume spike gave due warning of a change. Initially it showed a change of direction and, as I expected, the market rallied on Monday. Since then there has been an almighty tussle between the bulls and the bears. On Tuesday the Dow was pulled up and down but closed more or less unchanged. On Wednesday the bears were out but lost ground seriously as the day went on and once more the close was unchanged. Thursday was mostly the bulls' day though bears fought back in the afternoon before losing out in a late rally. And then, at last, Friday saw a dip.

So the volume spike seems to have presaged a pause in the sharp decline that has been in place since the beginning of May. I cashed in my shorts with a hefty profit on Monday, but was a bit too quick to get back in when the market weakened on Wednesday. So I sacrificed some of the money I had made. I have nipped out and in and am now back in to my short positions.

Having made the judgement that we are in line for further falls I have put money on it. You have to go back an awfully long way to find any evidence that there should be support for the market at this level: February and April last year. My guess is that support is temporary. As ever, if I am wrong I will pull out.

My other investment was made on a whim. The ghastly Eurozone crisis festers on, so I have bought a chunk of gold. Apart from anything else it keeps some money out of the clutches of banks that are vulnerable to any currency disaster. So far the investment is not too bad. Nothing spectacular but I might have caught the bottom by a fluke, not by judgement. So I sit and hope I'm right. Roll on next week.

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