SSO Trade Update

With Tuesday's big market advance the SSO trade is now in a profitable position. Most overseas markets are continuing the advance Wednesday.

Despite the monster day yesterday, the short term model is not overbought yet, so if the market continues higher for the next day or so and gets overbought, the SSO trade should be another big gainer.

A wild card today will be the Fed meeting which will determine interest rate changes. While I don't know what they will decide or how the market will respond, realize that the reaction to these types of changes can be violent. In this case, there is the chance that the violent reaction will be to the upside as there is lots of negativity that could potentially be "reversed" off a news item like a favorable rate change. Looking at historical declines and advances in bear markets, the expectation would be a 30-40% advance from the low point of this decline. The time frame would typically be 4 months or less, and I think that in this case it is likely to be less if we do get a bear market rally on par with historical rallies.

Based off of chart analysis I view the 1100 area in the S&P 500 as either a topping area for a bear market rally, or at least a ceiling on any intial thurst upwards above this month's highs around 1050.

For trade management purposes in the past I have said that my bottom line using the short-term model has been much better with out using a stop loss to get suckered out in this volatile market. But for money management purposes I would suggest quickly moving a stop loss to a breakeven position on any further market strength, especially if the market gaps up Wednesday morning. Certainly a stop loss could be in place around 26.00 on SSO now with little risk of getting stopped out of a (should be) successful trade.

I will post the exit when the time comes.