STOCKS END MOSTLY LOWER ON MIXED DATA ON HOUSING, CONSUMERS October 27, 2009
Posted by Marlowe Cassetti in DBE, DIG.trackback
Yes, the market had the blahs today however RSI made one pick today (see below). However I find it instructive that RSI’s recent picks tilt in the energy/commodities direction. These two sectors are influenced by a multitude of factors, but in general, a recovering economy sustains higher energy/commodity prices. So indirectly RSI is predicting a continuation of the economic upturn.
I have to do some explaining. In yesterday’s blog I mentioned I would pass on Ultra Oil & Gas ProShares (DIG), due to my current commodity exposure plus the fact that DIG is leveraged at 2X and hence has a high volatility. This morning I reviewed my analysis and thought otherwise. My decision was influenced by my investigation of previous back-testing history. RSI has a tendency of picking a bunch of funds, especially at important market junctures. But by the time I placed my order DIG had made a nice gain of about $1.00 off the opening price. So I ended up getting in a bit late and missed a bit of the move. Lesson learned? I hope. So there is a lot more to this game than having a mechanical trading system. One must be disciplined.
One of the problems bothering me is my attempt to diversify exposure. This was emphasized in the Turtle Trading Experiment as a risk mitigation technique. However if RSI wants to pile onto energy/commodity funds, should I stand in the way? My present stance is to accommodate, but only to a reasonable degree.
Today’s pick is:
- Buy 560 shares of DBE – PowerShares DB Multi-Sector Commodity Trust Energy Fund at tomorrow’s market opening. Place a stop loss order $1.79 below your entry price and a profit $2.68 above the entry price.
Okay, I’ve said enough about being tapped out on commodity funds, but give it a good look and please do your due diligence. Catch you tomorrow.
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