Trade Idea for 11/09/09

After dropping with gusto through the end of October, the market this month has done a great job of making it seem like business as usual. And who's to say it won't be business as usual come Monday, the market on its way to new highs and a new beginning? But the second wave of an impulse does this: sows ambiguity and fosters complacency. While the major averages kicked above their rising 50-day moving averages this week, secondary indices such as the Russell 2000 and the XLF have fallen well short, and their 50-day moving averages have flattened and turned down slightly. There's no set way for this type of discrepancy to play out, but if Monday ends Wave 2, I could see the indices down to their 200-day moving averages by Thanksgiving.

On the other hand, the timing and/or count could be wrong, and this week's uptrend continues. But in terms of price and time traveled, the current move has fulfilled the right look for a wave 2.

We bought TBT today.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Addl Exit Guideline	Chart
TWM	27.58	29.98	+8.7%	26.99	N/A	Chart
CEF	13.46	14.03	+4.2%	13.93	N/A	Chart
ICO	4.36	4.59	+5.3%	4.36	N/A	Chart
TBT	48.31	47.69	-1.3%	46.99	N/A	Chart

For Monday, let's pick on the weaker sectors: the Russell 2000, real estate and financials. Note how perfectly the chart for TWM has set up: a surge up through its 50-day moving average, and then a brief retest once the average flattened out. Let's see if this setup pays off next week. If elected, set sell-stop for entire TWM position to 29.49 (or Monday's low, whichever is lower). SKF's chart displays similar characteristics, but less dramatically so. Of the shorts, GLL is more of a bottom-fish play. Our gold/silver holding, CEF, surged nicely a few days ago but has struggled upward since, and GLD (the more standard gold proxy) appears to have traced out 5 waves up. If so, it's time for a correction in gold, but maybe nothing more; thus, risk less on GLL. The long idea, BQI, is a wild mover, and could be gearing up for a surge after a bit of consolidation.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
TWM (Ultrashort Russell 2000)	31.54	29.49	N/A	Chart
SKF (Ultrashort Financials)	27.18	25.84	25.49	Chart
SRS (Ultrashort Real Estate)	10.39	9.85	N/A	Chart
GLL (Ultrashort Gold)	10.78	10.46	N/A	Chart
BQI (Oilsands Quest)	1.27	1.18	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.