Time to Go

Dear Club Members:

Tonight, it is time to leave the C Fund. Barbara will be receiving her e-mail shortly.

We have had a good ride this week. We took advantage of the short up trend and oversold conditions. Kudos to Terry for moving into the C Fund on Friday. He was right on the mark. He has also taken plans to leave the C Fund which I applaud wholeheartedly.

Q: What are my reasons for leaving the C Fund?

I will list five reasons but I could list ten reasons just as easily:

1. The momentum is slowing down. Trader Mark Weinstein famously would look for a slow down in momentum and then go the other way. The strategy works because markets only go up on momentum. If you say good-bye to up momentum, then a stall is sure to follow. Then, its down you go.

2. The downward sloping 50-day moving average on a daily chart hangs over our heads at 1316. I know I sound like a stuck record but I remember the Flash Crash in 2010 and the Crash in 2008. Better safe than sorry. Both were heralded by resistance at the 50-day moving average. There are pros out there selling into this rally. They are banking on the 50-day moving average as a brick wall. I can feel it. So can Terry.

3. On a weekly chart, 1316 is resistance on the 13-day moving average. The market is not going higher than 1316, particularly since we are in a dominant downtrend. Yet, another reason to leave the C Fund.

4. I saw dangerous triple negative divergence between the MACD Histogram and the price action today. The market is rising on fumes. Triple negative divergences can lead to dramatic drops in price.

5. If you accept the Elliott Wave take on this market since May 1, 2011, then we are approaching the end of this Wave 4 (corrective wave c). What should follow is a Wave 5 down comparable to Wave 1 down (May 1 to May 23) and Wave 3 down (June 1 to June 16).

It is time to go.

Your resolute newsletter writer,

Wink

Inspirational Quote: "Only when nearly everything lines up right and he feels the timing is virtually perfect does he put on a trade. He passes up many trades that he believes have a high probability of working, but for which he lacks the same degree of near absolute confidence." Mark Weinstein in Market Wizards, page 337.

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