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Paul Mosgovoy
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Truth is timeless: “Markets never change” – Jesse Livermore, 1923 The early masters, Livermore, Wyckoff and Loeb isolated themselves from the crowd and crowd thinking. None of them ever graduated high-school and yet they each became legends in the market. Their techniques have been time-tested.... More
  • Major Reversal Possible For The Small Cap Sector 4 comments
    Jul 2, 2014 11:59 AM | about stocks: IWM

    Throughout the past few weeks the idea has been proposed that a rising interest rate environment and a declining stock market taking place at the same time is a real potential.

    If this scenario plays out to its fullest extent (a major reversal with interest rates rising), it will trap the largest number of 'investors' as they flee to the bond safe-haven only to see that too is in a decline.

    The iShares Russell 2000 ETF (NYSEARCA:IWM) looks as if it is pulling back from a failed breakout and is declining back into the wedge pattern.

    If price action continues its decline and penetrates the lower channel line, we will have confirmation of a potentially significant reversal.

    (click to enlarge)IWM Daily Chart

    Charts by TeleChart

    Meanwhile, back at the ranch, the bond reversal as seen by the iShares 20+ year Treasury ETF (NYSEARCA:TLT), is confirmed by a solid move back into its previous trading range.

    (click to enlarge)TLT Daily Chart

    Chart by TeleChart

    Paraphrasing Jesse Livermore: He said to get yourself positioned correctly and then stay put until conditions change.

    Therefore, we have positioned short the IWM via the Direxion Russell 2000 Bearish 3X ETF (NYSEARCA:TZA).

    Now we wait ("sit tight") for conditions to change.

    Disclosure: The author is long TZA.

    Stocks: IWM
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Comments (4)
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  • zaw77
    , contributor
    Comments (54) | Send Message
    Hi Paul, I am still with you in TZA, watching close what happen. Yes, it seems still not so bad re TZA. Regards, Chris.
    2 Jul 2014, 02:13 PM Reply Like
  • Paul Mosgovoy
    , contributor
    Comments (119) | Send Message
    Author’s reply » Nice to hear.


    My entries were not perfect. However, now that the big blow-off appears to be near an end, we can see more clearly.


    This may be the beginning of long-term move. After 5-years of bull market, we might be at a turning point.


    Of course, the market is the final judge if this is a reversal.


    With interest rates rising, I consider it very dangerous to be long on the market.


    Most everyone seems to be asleep and not paying attention.


    The news makes no mention (that I can tell) of the interest rate reversal.


    That is why it is important to think alone and stay apart from the crowd.


    The worst that can happen with TZA is that it begins another reversal.


    If that happens, it will probably be time to get out and watch from the sidelines.


    Thanks again for your note.


    2 Jul 2014, 02:53 PM Reply Like
  • zaw77
    , contributor
    Comments (54) | Send Message
    TWTR for example was strong last month, which was keeping moving higher some Russell 2000 stocks, tech sector seems still strong, which Impact R2k but I think we are overbought now.
    2 Jul 2014, 03:22 PM Reply Like
  • Paul Mosgovoy
    , contributor
    Comments (119) | Send Message
    Author’s reply » Most weeks that have a holiday in them are positive (rising).


    This week might be different.


    Let's see what happens tomorrow.


    2 Jul 2014, 03:31 PM Reply Like
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