Tuesday, October 23, 2012

All routes heading south

As mentioned in my recent posts the major US indices have been the weakest, with the Nasdaq leading the way. Today both the Dow and S&P have triggered short signals. The DAX also briefly gave a short signal before trying to rally (Dow and DAX charts below). The FTSE has not given a short signal as yet, but is now a lot closer to doing so.

Other instruments such as gold and silver are already on a short signal (refer to this post). Today crude oil and Cable also gave short signals (charts below).

It would appear that an awful lot of markets are now heading south, and trend followers will be loading up on short positions in these instruments. As a result of the weakness in the indices the bias in individual stocks has also switched to the short side, and being lightly invested we are in a position to profit from the new signals being generated.

Trend followers as a rule have had a disappointing year to date - the majority of well know CTA's and hedge funds are currently showing a small loss to the end of September. Remember though the old maxim that one big trend covers all the small losses and the surplus generates the overall profit in a year. In 2008-2010 this was relatively straightforward. 2011 was a lot more difficult. This year has had periods where it has been possible to generate profits by trend following individual stocks, but the general market trends have been relatively short lived. Maybe this one will be the big trend of the year...

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