Time to take the cash and run!

I will come straight to the point this month, stockmarkets and by that I mean the Dow, S&P500 and the NASDAQ are screaming out a big sell to me. Readers of the column will know that I am not just a Bull or a long time Bear, I am happy to trade the markets both ways but right now I am with the bears.

Lets explain why I have turned a seller and have cashed in my long trades. We have had a good run of around 1,000 points on the Dow Jones from the 9,750 low in October 04 up to the recent of 10,850 at the end of 2004. Since then we pulled back which is expected after a big run. Markets sometimes have to go down before they can go higher. At my trading seminars I use the example of a catapult, you first pull back, create energy and go forward. But for the market to be healthy the second high should be higher than the first high, in the case of the Dow Jones, you can see from the chart we have failed and created a double top around the 10,800 level.

Spread Betting - Dow Jones Industrial Average

So where are we heading? Well my first target would be 10,400 and then 10,000, I don't see much lower than this for now. If you are interested in this idea you could back it by going short via a spread bet. I would have a stop at around 10,875. You could also look to do a fixed odds bet or you could look to buy put options.

Other factors that have made me bearish include the $VIX index. I have mentioned this index before. It's based on volatility of options prices. Recently the index as been at 10.5 to 11, this is a very low reading which shows calm and complacency. It has just started to move a little higher as I am finishing the column but it still gives me concern. Markets never crash when people expect them, they crash when everyone is complacent and they don't expect them.

The other factor that is weighing on markets is the price of Oil. If you recall after the Iraq war many market commentators said that Oil would be back at the $30 a barrel mark by the end of 2004. Well here we are in the first few months of 2005 and we are near $50. Higher oil prices are a big drag on financial markets. Many don't realise how much Oil prices effect everyday life and business. Lets say you order a book on the internet well that book still needs to be delivered to you in a van which uses petrol/Oil. Higher oil prices over time is bad for business and bad for major market indecies.

The US Dollar has had a bit of a bounce over the last few months, however the down trend is still in place and the currency could become a lot weaker again over the coming months. I see Sterling moving back up to the 1.95 plus market and I also see the $/Yen back down to 100. The weaker dollar should also push money back in to metals including Gold, Silver and Copper. I think Silver is looking very strong at the moment and this should out perform the others.

To summaries, its been a good move up for financial markets since the October lows but its now time to take the money and run and to look at going short.

Until next month wishing you lots of success with your trading.

Vince Stanzione is a major name in the UK spread betting industry, having generated a reputation for making millions of GBP pounds tax free with a simple style he now sells as both a mail order course and a 1 day seminar, usually thru his FinTrader.net operation.

Opinion seems to be divided on whether or not Vince's style is anything original - his mail order course (costing several hundred pounds GBP) seems to be nothing more than a ring-bound folder containing a basic 'beginner's guide to trading (explaining such concepts as 'moving averages', stop losses, how to open a spread betting account and so on). On the other hand, although the same information may be available in a few manuals from Amazon for 40 or 50 bucks, Mr Stanzione has assembled it into one easy course, which will probably save a beginner much time and effort at the start of their trading career. Stanzione's reputation in the various online trading forums is both attacked and defended with equal vigour.

YOU SHOULDN'T SPEND MORE THAN GBP500 TO ATTEND A WORKSHOP OR SEMINAR NOT EVEN IF THEY PROMISE YOU GOLD FOR ATTENDING

The "Ads by Google" are just ads and help support the free information aspect of this site. You'll have to do your own research to decide whether those companies are reliable or not.