Update

By: Patrice Johnson | Sun, Dec 27, 2009
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Re: long-term, intermediate-term, and short-term trends and equity holdings.

12/27/2009 12:29:43 PM

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LONG-TERM TREND (> 1YR) OF THE MARKETS: DOWN -

(See Long-Term Chart of the Dow Jones Industrial Average since 1974 for further details)

THE J.E.D.I. WAY'S LONG-TERM (or POSITIONAL) HOLDINGS [> 1yr]:

ProShares Ultra Short Gold (Ticker Symbol: GLL)
ProShares Ultra Short QQQ (Ticker Symbol: QID)
ProShares Ultra Short Financials (Ticker Symbol: SKF)
ProShares Ultra Short Industrials (Ticker Symbol: SIJ) NEW! (AS OF 12/7/09)
ProShares Ultra Short Real Estate (Ticker Symbol: SRS) NEW! (AS OF 12/7/09)

Note: The above portfolio was selected based on my analysis of the MONTHLY CHART below of the Dow Jones Industrial Average.

INTERMEDIATE TREND OF THE MARKET (Three weeks to 1 Year): UP

(See Weekly Chart of the Dow Jones Industrial Average for further details [below the long-term chart of the Dow Jones Industrial Average])

THE J.E.D.I. WAY'S INTERMEDIATE TERM HOLDINGS (3 weeks to 1 year):

NONE.

Note: This was based on my analysis of the WEEKLY CHART below of the Dow Jones Industrial Average.

SHORT-TERM TREND OF THE MARKET (less than 3 weeks): DOWN

(See Daily Chart below of the Dow Jones Industrial Average for further details [below the Weekly Chart of the Dow Jones Industrial Average])

THE J.E.D.I. WAY'S SHORT-TERM HOLDINGS (less than 3 weeks):

NONE.

Note: This was based on my analysis of the DAILY CHART below of the Dow Jones Industrial Average.

LONG-TERM CHART OF THE DOW JONES INDUSTRIAL AVERAGE


Larger Image

IMPORTANT ALERT: The fact that prices crossed through a major trendline is EXTREMELY SIGNIFICANT. Just before every major war, recession, and depression in the past and just before the 911 Terrorist Attack on the World Trade Center Towers, prices on the Dow Jones Industrial Average formed what was known as a "DOUBLE TOPPING PATTERN" (or a Diamond Shaped Pattern). This time, however, the Dow Jones Industrial Average crossed a very significant long-term (or Major) trendline on this monthly chart which is indicative of somehting very apocalyptic taking place in the months and possibly years ahead.

THE CHARTS ARE NOT JUST A TOOL FOR MAKING MONEY, BUT WARNS OF IMPENDING DANGER OR INSTABILITIES IN THE MONTHS AND POSSIBLY YEARS AHEAD.

While it is not good to be 100% in cash earning little or no interest (at this time...note: This may change in the future), neither should a great deal of your monies be in stocks that do well when the markets go up. Why? Because the long-term (or Major) trend of the overall market is DOWN not UP! anymore and could be this way for many months, if not years!!!!!!!!

NOTE: When the major trend was up (that is when prices were trading above the long-term trend-line above), we bought the dips above it and sold the rallies from 1974 to 2007. (vis-a-vis "bought low and sold high")

Since the major trend has changed from up to down, all rallies beneath the major trend line should technically be sold! And then bought back when the market dips. (vis-a-vis "sell low and buy to cover even lower") otherwise invest in ETF stocks whose prices go up when the markets go down like or similar to the ones in THE J.E.D.I. Way's LONG-TERM PORTFOLIO. This strategy should be used in my opinino until the resitance line on the monthly chart becomes support (or until prices on the Dow Jones Industrial Average closes above 14,175 and stays at or above this price level for at least three consecutive months!!!)

This pretty much explains why THE J.E.D.I. WAY is holding the above-mentioned stocks for the long-term (>1 year and possibly up to 4 years or longer) whose prices goes up when the price of the DOW goes down.

INTERMEDIATE-TERM CHART OF THE DOW JONES INDUSTRIAL AVERAGE

Prices on the weekly chart of the Dow Jones Industrial Average (DJIA) have not violated its support line or resistance line as of Friday, December 25, 2009. Although one of them (either support or resistance) will be taken out in one or more of the weeks ahead. And I suspect it will be support. Thus my explanation below for this week is no different from that of December 18, 2009...the date of the chart below.

This pretty much explains why THE J.E.D.I. WAY is not holding stocks for the intermediate term (3 weeks to 1 year) whose prices go up when the DOW goes up.

NOTE: If we were long stocks, I would stay long until prices close below the trend line above (or below the 10,000 price level) and then offset 50 shares of a 100 share position during week two if prices closed below the trendline in week 1 (or closed below the 10,000 price level) then sell the remaining 50 shares of the 100 share long position during week 4 BUT ONLY IF PRICES CLOSED BELOW THE TRENDLINE (or below the 10,000 price level) DURING WEEK 3 because technically, we are suppose to be buying the dips and selling the rallies (or buying low and selling high) in an uptrend (divergence or no divergence!) until the trend changes from up to down (as evidenced by prices closing below a significant trendline or below a certain price level).

But with the negative divergence on this weekly chart accompanied by the long-term trend being down (as per the monthly chart), I would utilize the price information in the DAILY CHART (below) to get me out of long postions in stocks that go up when the DOW goes up.

SHORT-TERM CHART OF THE DOW JONES INDUSTRIAL AVERAGE

SUMMARY:

LONG-TERM (> 1 year) -

The J.E.D.I. Way is bearish long-term since the Monthly Chart (above) of the Dow Jones Industrial Average shows that the long-term trend (>1 year) of the market has changed from UP to DOWN as evidenced by prices closing and trading below its long-term rising trendline which is currently resistance. Therfore we will be maintaining long positions in the stocks listed above whose prices go up when the price on the Dow Jones Industrial Average decline.

INTERMEDIATE TERM (3 weeks to 1 year) -

The J.E.D.I. Way is bullish but cautious in the intermediate-term (3 weeks to 1 year) since the Weekly Chart (above) shows a negative divergence between prices and our special indicators (Volume, Stochastics and RSI) which together suggest that it is possible and probable that a downside reaction will take place in one of the upcoming weeks ahead that could decide whether the next intermediate-term trend will be SIDEWAYS or DOWN.

Therefore, The J.E.D.I. Way will not be long any stocks in the intermediate term that goes up when the price on the Dow Jones Industrial Average rise.

SHORT-TERM (less than 3 weeks)-

The J.E.D. I. Way is NEUTRAL in the short-term since the Daily Chart (above) shows that the short-term trend is SIDEWAYS as evidenced by prices trading in a range between 10,200 and 10,500 in the Daily Chart.

Therefore, The J.E.D.I. Way will note be long any stocks in the short-term that go up when prices on the Dow Jones Industrial Average rise until prices violate short-term resistance at 10,600...if it ever does.

Until next time, thanks for listening, have a great week and good luck in your trading.

Best Regards,

 


 

Patrice Johnson

Author: Patrice Johnson

Patrice V. Johnson
The J.E.D.I Way

Patrice V. Johnson

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