Friday, October 30, 2009

Time for defense

This is a chart of the offense/defense index I have used in Barron's Online several times over the years. Credit for Boris Simonder for creating the idea that I have copied using these ETFs.

Anyway, this week in Quick Takes Pro I suggested that the upside breakout might be a fake. Fortunately, my gut feeling turned out to be right. The chart suggests shifting to defensive strategies, especially selling rallies vs. buying dips.

1 comment:

patrick neid said...

For the overlay folks such as myself, 73-75 or the often talked about 1938-39, the pattern is basically over. Over in the sense that sell offs or extended consolidations should persist going forward.

The bulls are hoping for 1982 which puts us steadily higher until January. Others still think the Transports are foretelling a serious decline.

Either way, I would imagine, most overlay traders have taken the majority of their money off the table by now.