July - did not disappoint us
Will August be more of the same?

We finally got our normal July down turn in the market. The Dow 30 went from a July high of 14.021 on the 17th to a July 31st low of 13,199 and closing at 13,211. Thus taking out all the market has gained since May 1st.

The NASDAQ did not fare any better. Having reached a July 19 high of 2724 and closing on a July low of 2546. Again, taking out all of the gains since April 24th. 

Ditto on the SP-500.

 But we aren't done yet. I believe we will see all indices take out their February highs. The SP-500 did it on August 1st or at least tested the February high. The above comments were written on Aug 1^st.  While the SP500 close for the week wiped out even more gains. I started writing this in the middle of the week and decided to wait until the week-end to finish it. So you’ll see both set of comments.  

Why not play the Short side during these down months?
That where the QID comes in handy.

Playing the QID can be very rewarding. I enter a trade on July 24th at 42.28 and closed it out on August 1st at 46.08. Not bad for a 6 days trade.

What prompted me to buy
when everyone else is selling

For those that do not know, the QID is the Proshares Ultra short for the QQQQ ETF. That means you can actually short the Nasdaq by going long on the QID.

Several things prompted me to make the QID trade. First, was the Candlestick Morning Star pattern on 7/18 - 7/20. I did not jump right. Rather, I waited for a bullish sign which was the opening gap on 7/24. I, also, noticed the up volume was exceeding the down volume on the Morning Star. The Stochastic 12.3.3 had been in the oversold area for nearly the whole month of July. Plus, my AdvancedGet showed the QID had possibly reached the Completion of the 5 wave down pattern and the QQQQ was testing the 6 year high from May 2001. 

So what next? 
If we believe the Nasdaq February high will be taken out 

 It looks to me like all 3 indices are currently testing old support/resistance areas. So we should see some amount of rally over the next few days. Then the downtrend should continue. If you truly believe, as I do, that we will take out those February 2007 high on the down move then doesn't it make sense that the QID should take out the February lows and possibly the March highs. So I am looking for a re-enter point into the QID early this next week.

As you might guess I am writing this report a little each day. I am trying to stay one day ahead of the market. Wouldn’t that be nice if we could do that consistently. Today Aug 2, 2008 the market did as I expected above and the QID gave back more of the gains as all 3 indices were positive today. I’m looking for one more rally day (Friday). Although, the Dow 30 and the SP500 are both testing a previous trendline running from July 2006 to March 2007 for the SP500 and Oct 2005 to Feb 2006. These are old trendline that are still affecting price.

Today Aug 3^rd – I hate to admit the markets did not do as I expected. All 3 indices dropped with the Nasdaq dropping 64 points causing the QID to rally $1.94 to $46.55 back above my previous exit. As I stated above I expected one more rally day but that did not happen. Too bad the markets do not cooperate and do what we want them to do. Then we’d all be rich. So now I will watch Monday to determine a re-entry point as I expect the QID to test its 200 ma around the $50 mark.

You might be wondering why I did not jump back into QID on Friday when it was apparent the market were heading down. I was in an all day session viewing Worden Brothers new product “The Blocks Player” which I will be covering on www.tradingourway.com in the coming weeks. This product has tremendous potential for the serious trader.  

If the possibility of playing the short side of the market by going long on the Ultra-short ETF’s appeal to you then you might check out these: QID, DOG, DUG, SDS, TWM, SRS, MZZ, SKF, DXD, SH Unlike the QQQQ on the long side none of these are Optionable.

Next week’s report will be more in-depth on the QID trade including charts and detailed reason for makingthe trades.  

 Up-coming events:

At TradingOurWay, we are currently planning a Financial Seminar at Sea cruise departing out of FT. Lauderdale on April 12^th, 2008. It’s an 8 day cruise to the Panama Canal with 4 sea days of classroom activities. We would love to have everyone join us! Complete details can be found on our website at www.tradingourway.com