| Original Message |
Howard
Posted Aug 10, 2005 11:46 PM
Hello all,
I've told you before about the hedged short position I've had with DIA hedged by long CEF. My thought was that if the market was just going up with the money supply then the price of gold should rise with inflation so that the ratio would not rise while the Dow by itself might make new nominal highs.
I'm icluding the chart here for anyone's comments. I'm probably putting too much into this but here's my thinking:
The horizontal line at around 20.75 represents the spot where the down trend from 2000 would intersect this week. Several points I see here. There is a long downtrend about to intersect with a two year old up trend. There is a two year old ascending triangle. The lows in the RSI are getting higher. The downtrend in the stochastic has been broken while the up trend remains intact.
The only thing I see about this chart that is negative (from what I've learned from stockcharts) is the decreasing volatility and the decreasing money flow (which however is still positive). I've held this position for a long while and it's allowed me to hold a short position on the DIA where I would have been taken out at my stops without the long CEF positon. I'm thinking that a real breakout above 21, with a new high in the RSI would probably indicate that the market is climbing faster than would be accounted for just because of the inflationary money supply. As much as I think it "shouldn't" happen, I've learned from Larry to listen to the market even if I think it's wrong. I'd like your thoughts if you have any interest in this. Of course I'm hoping for a breakdown instead but the market's not taking my emails so I doubt they'll do what I want just because I want it.
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