ONE YEAR ANNIVERSARY!!!

It has been exactly one year since I started this blog for my students. We now have over 100 followers and lots of success stories. For those that are new to the blog, I encourage you to read over the archived blog posting. There is a lot of market commentary and information that is not generally covered in the courses. There are certain events and market indicators that I will explain and put into the blog. You can significantly increase your market knowledge by reviewing these postings. You will also see several of the good calls over the last year as well as some of the bad calls. Overall, you would see that by following the blog postings (and applying the trade and money management knowledge from the courses), you would have made a lot more money than you would have lost.
I'm sorry for the lack of blog postings over the last two weeks. With the exception of a couple of trades mentioned in the blog, I have mostly been sitting in cash. I will explain my cautious outlook in today's blog posting. The trend has turned back up according to the trend analysis steps I taught you in the course. There were clues that backed up the rally including several breaks above different resistance levels. I chose to ignore those clues because of the severity of the sell off back in January and the lack of volume in the recent rally. I've accepted the fact that I've missed most of this rally. It really doesn't concern me because I sat out based on price patterns that have led to very bearish moves in the past. The fact that these price patterns didn't lead to a bearish trend this time around just results in an opportunity cost in missing the rally. I've had a few trades get stopped out, but I haven't had much of a draw down during the last month. It's mostly been an opportunity cost. I'm patiently waiting for the next sell off to decide which direction I want to trade next. If there is a controlled sell off (bullish ABC pattern), I will probably look to get into some bullish trades and take advantage of the uptrend. If there is panic in the sell off, I will probably look to go short again. There is no doubt that the easy money over the last year has been made from the long side of the market. There are...however...a few reasons to be cautious right now. The first chart I will show you is the long term monthly chart of the VIX. Notice the last times that the VIX was down around this 17 level. 1998, 2000, the fall of 2001, from 2003 to 2007 it actually dipped below 17, and finally 2008 and here in 2010. With the exception of the bullish run from 2003 to 2007, can you see any correlation to the other dates? How about the crash of 1998 (Asian crisis which crippled Japan)? Or the internet bubble burst of 2000? Or the September 2001 terrorist attacks? Or the financial collapse of 2008? These are all major market corrections. Here in 2010, we are back at that 17 level in the VIX. Will we have a major market collapse like in 1998, 2000, 2001, and 2008?...Or will we have a sustained bull market (probably fueled by false stimulus...like government bailouts and subsidies rather than the real estate bubble) like in 2003 to 2007? Like the rest of you, I don't know the future. Which is why I'm preparing to trade it either way. A more recent trend to look at is the distance the market is from the 50 day MA. Look at the last 9 months. Each time the SPX has moved a certain distance from its 50 day MA, it has made a move to come back towards it. We are currently very near that distance. Also, keep an eye on the DOW Jones Transportation Average. It can sometimes be a leading indicator of the market. If you look at a chart of the Dow Transports, you can see that it made a strong move up during this last bullish run. If you start to see weakness or selling in this average, it could be a leading indicator of a possible market sell off. If it keeps moving higher, it could be an indicator of the strength of the rally. The sectors that make up in this index include the airline stocks (AMR, LUV, JBLU, CAL, etc), railroad stocks (CSX, NSC, etc), and airfreight stocks like UPS and FDX.