DID YOU READ MY FINAL WORDS?

At the end of yesterday's post I mentioned we should be looking for a short in Bonds and as you can see above I took a trade there yesterday. I am not a big fan of going against trends like this but on a weekly basis this is more of a retracement in a downtrend that the commercials have been selling. As a result, when we got the false breakout to new highs that reversed immediately, I thought it was worth a swing.

You can see a problem with my little experimental indicator at the bottom that I have mentioned in the past. At times it shifts into the opposite mode just on one bar against the current trend. I don't like that aspect of this thing, and would not likely go long in a situation like that after just one bar. Of course there are exceptions, but generally speaking I would not. I have not spent much time messing around with this lately so it is not improved any from when I first showed it. Maybe this is just what it is and I have to live with it.

We will just have to watch here and see if this is just a very short term trap reaction or something bigger. It is unknown at this point, it is just another trade, ho hum. I like to take ETF trades along with these but as is typical, this thing is already out of the barn and the ETF is going to gap hence be way late so it will be a pass.

Next, the DX. I am just not sure on this here. My plan has been to buy over in the area we are in generally, and I still might, but the pattern that we are now tracing out if more of one that appears we might get more of a decline.

You can see my indicator is acting more normally here climbing up gradually into a buy zone. It does appear the currencies might be setting up sells in a day or two, so this all could fit together, but the next chart is what bothers me about this. I went back and found the prior rallies like this that went up sharply in downtrends, and then what on average happened afterwards. You can see we worked lower for about another week.

Since we are now up into weekly resistance, I want a really defined buy signal to go against the weekly trend and get long. I do not see it yet. I might just play the individual currencies instead, the patterns in some of them appear to be setting up sells a bit better than this looks like a buy. I do not like trading when I am not sure, it usually does not work out too well.

I had also mentioned I had been buying some ETF's on the decline, since I was looking for a bounce in the Bernanke's. The next chart shows one I did that I just exited. Statistically buying into declines in up trends in equities tests out the best of anything you can do. The problem is where to have the stops which determines position size. No stops bring back by far the best results, but that leaves you with unlimited exposure on the down side which I don't like.

You can see the XLB chart here where I bought on weakness and exited at the close yesterday on strength. I am playing around with this idea, and wanted to put some real money into some trades to do it live. It is a work in progress. I would prefer not to go in and out this quickly, but the current rules I have which are not finalized called for it in this case so I followed them. It was a profit obviously, so a good result, but only .75 per share so not a home run by any means.

Overall I think we continue to work higher in most things today. It does appear that we are setting up nicely for a June high in alot of markets, but it is always possible the PPT will figure out a back door way to continue pushing all of this beyond that date. We will have to see when we get there.