A Successful Test

What we saw yesterday was a successful test of the lows from Oct 10th. Here is an intraday chart of the Diamonds Trust (DIA) from yesterday. You can use the Spyders (SPY) or Powershares QQQQ Trust (QQQQ) too. For newbies, these are ETF's that track the major indices. They all look the same. They basically always do.

Those charts are nice but these ones are even better. Here are all three, only longer term charts (DIA) (SPY) (QQQQ). Pay attention to the period from the beginning of October until now. Notice there have been essentially three times we have gone to those lows and then headed back up? It means we are in the process of bottoming. Yes, we can head lower again. But unless something dramatic happens, the Dow is not going to 5,000. 7,000? Maybe. 5,000? Doubtful. The market has priced in an economic armageddon. Things are bad, but the global economy is not coming to a hault. There are a lot of values to be had out there. Pick your spots. For example, every single time Mcdonald's (MCD) pulls back. I am nibbling. I sell calls to finance the purchase and hedge my risk and capital outlay, but MCD goes higher by the end of the year. That is a trend that is easy to spot.

As you continue to read, and as I continue to post, you will find that I do not complicate things with crazy scenarios for profits. I look for the easiest-to-predict, lowest risk trades available. Notice I said lowest risk. Not most profitable. I have found that the easiest way to make money in the market is not to lose money in the first place. The fastest way to walk from point A to point B is to never take steps backward. Big picture trends are very easy to spot if you just look for them. I will do some math next time to show you how. Until then, stay low risk