Dude, where's the rally?

So, while 2007 started with a "Bang", it's ended on a whimper. The Dow ended the last day of trading down 101 points at 13,264. Considering the Volatility we got in 2007, this was a rather commendable performance. We look forward to 2008, hopeful but ever more cautious. Whatever lies in front of us, the Volatility is back. This means traders in the future have to be experts at hedging. Options, ProShares, or Portfolio strategies come to mind. Trading without protection is just not worth it! The Chart below shows the Weekly chart of the DIA:

There's obviously a Head-n-Shoulders pattern developing, and coupled with a bearish crossing of the 10 and 18 EMA could spell trouble. MACD looks to be looking lower, having been bullish this year (What do you think it would be like if we were bearish?). Money is still flowing into the markets, though, which is good. On another thought, the end of they year selling could possibly give rise to a January Effect, as duds were thrown out the window! (and in a volatile year, there were many of that, which makes sense for tax purposes. After Pakistan, who could blame them?). This could fuel January 2008, especially with expectations on earnings lower, after the rout in November. Wishful thinking or Psychology?

Do we chicken out? NO. It's hard to pick bottoms, and by the time the panic comes, we'll probably be too panicky ourselves to trade. Rather, it's better to have a hedging strategy. This is why I'll be in Singapore on January 12th, to attend a Seminar by John Summa. I've had invitations to go to Indonesia, but we'll see. There's too much work back home, with FXOptions course going into full gear soon.

Happy Trading for 2008!

Chief Shook