Fred Voetsch

Dow 6,000, Part II

On Jun 30 09:50 PM Fighting Yoda wrote:

> 1. The author says he is only a short term trader but his entire
> thesis is around long term drops.
>
> 2. Never buy these leveraged ETFs - they are meant as day trades
> only. Maybe it suits the author and the like but definitely not others.


The leveraged short ETF's should not be bought as investments but I have enough experience with several (SDS and SRS) to say that you can do very well with them over the course of weeks, as long as you understand them and how they move and deteriorate over time.

SDS is a very stable short, leveraged ETF. If you had bought it in late 2007, believing the market was heading downward, you would be even now, which is much better than if you had bought a long S&P 500 ETF.

The key is to buy into aging rallies and to sell into panics and to never over-extend yourself with these.

Dow 6,000, Part II

A very reasonable viewpoint.

When the primary trend of the market is down (some will disagree with this) and the secondary trend is up and has been up for 4 months it is a good time to take profits or even look at shorting the market.

Why? Because “the market will fluctuate.”

Why the Dow Is Headed to 6000

Actually, from a purely historical perpective it's possible to make the argument that the Dow will retrace all the way back to near 1,000.

It did so at the 100 level during the 30's and 40's after reaching that level decades earlier and then again at the 1,000 level in the 60's, 70's and early 80's.

In the seventies we didn't retrace beyond 500 but the market also had only risen by 2.6x over its 1929 bull market high while the gain this time was 14x the high in 1966. The bigger they are the harder they fall.

The trend average for the DJIA is, I believe, around 6,000, so having the the index fall back to 1,500 or so is not out of the range of possibilities. We certainly have all the pieces in place for this to happen.

I don't expect this to happen but I do believe it is possible and certainly it is not impossible given the tremendous leverage built into our economy.