SHORT S&P 500, LONG DOW 30
This is what we said on 15 NOV 2008
If there is any BULLISH REPRIEVE, it should be now. And I don’t think BULLS would like to waste their few quarters of chance they need to survive in an otherwise long secular bear market. There is one more intermarket reason. Though S&P has historically underperformed DOW, the index has a performance – underperformance cyclicality against DOW. The pair has also hit a CYCLE low, both on an intermediate and primary basis. This suggests that the broad 500 blue chips can’t underperform the top 30 blue chips of the world any more. And what do we need for a turn around? We need the broad market to rise. And this is what we feel should happen.
What happened, markets not only bottomed but the broad S&P 500 pair against DOW made 10% non leveraged in 200 days. This means 18% on an annualized basis, enough to excite the best of the fund managers in the world. Making money buying DOW and selling S&P500 is what TIME FRACTALS are all about. They not only indicate about market direction but also explains it using pairs.
Now starting 14 JUN the markets hit resistance and S&P 500 has also hit a performance cycle high against DOW. What does this mean? This means that the broad market may continue to underperform for atleast a few months. When broad markets fall against blue chip, rises become shallow and unsustainable. Another interesting aspect to be observed here is that the markets are up 3% from the GOOD, BAD and UGLY (24 MAR 2009 WAVES GLOBAL update) caution we raised. It’s only now that the broad market has turned lower not only against DOW but also under its own weight (CYCLE). This removes any doubt for us that the path of least resistance remains lower irrespective of anything.
Sub 8,500 we continue to hold our negative views on global Indices. Sit tight.
Enjoy the latest WAVES.GLOBAL
*This is a perspective product and not a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager to execute these pairs. Also please keep in mind, we are just illustrating entry points here. For exit time horizon please subscribe to our weekly ECONOHISTORY product.
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WAVES.GLOBAL is a perspective product published on Monday. The report highlights top GLOBAL indices and emerging market indices viz. Dow Jones Industrial (.DJI), S&P 500 (.GSPC), German DAX (.GDAXI), Russian IRTS (.IRTS), Shanghai Composite (.SSEC), Nikkei 225 (.N225), Brazil BOVESPA (.BVSP), Indian Sensex (.BSESN). The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools, sentiment indicators and other alternative research tools like INTERMARKET to spot outperformers and market trends.
REUTERS RICS: .BVSP, .IRTS, .FCHI, .GDAXI, .GSPC, .DJI, .N225, .SSEC, .BSESN