Trade Ideas for 09/04/09

Some late-day strength in the market, but so far the bounce has been more sideways than up. Assuming last Friday's high was the peak of the bear market rally, so far the move down appears to have unfolded in 4 waves:

When this bounce ends, there are a few downside targets just below Tuesday's low: the August lows around 980, the 50-day moving average around 970, and the June highs at 956. Wave 5 could be shortened and barely make a lower low, or it could extend, but generally the 50-day moving average requires at least a couple of attempts before it gives.

Note that there are always alternate counts: the move down could be much more powerful than illustrated, with the labels being 1-2-1-2 (i.e., extended 3rd wave) instead of 1-2-3-4. However, since 4th waves tend to be flat, my guess is that the move down has been as labeled. With that in mind, I would consider selling partial short positions as the above-mentioned targets are met, leaving the majority of positions intact in case the move down picks up momentum.

Today we sold FXP for a profit.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Addl Exit Guideline	Chart
SDS	44.12	45.22	+2.5%	42.99	N/A	Chart
TWM	32.36	33.39	+3.2%	31.32	N/A	Chart
ARIA	2.26	2.26	0	2.13	N/A	Chart
VXX	57.34	59.71	+4.1%	58.42	N/A	Chart
V	70.44	70.91	+0.7%	69.27	N/A	Chart

Today's bounce provides some entries into more short positions. Again, I would consider lightly selling partial positions as the S&P hits the aforementioned downside targets.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
DUG (Ultrashort Oil & Gas)	17.12	16.69	15.99	Chart
SKF (Ultrashort Financials)	29.92	28.36	26.43	Chart

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