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Right now, my largest position is Cash with a little bit left in Gold. Since my last post, energy has been the big winner with the US markets still desperately searching for some momentum in either direction.

I missed the boat on the recent energy rally, but that and the US Dollar have really been the only markets with much volatility recently. One international ETF I will be keeping my eye on over the next week or so is the Taiwan ETF : EWT

Aside from some nice looking volume, it has finally broken out of its 4-month RSI range and I might be willing to take my chances on the next pullback depending on what the markets are looking like overall. It is really the only international market that has shown a preference one way or another recently.

Hopefully things will get interesting here soon, as its been a rather choppy three weeks.

At this point, I am still holding onto a lot of cash and waiting for the right opportunity to put it to work. This week has been great so far but one thing has been conpicuously missing during the rally; Volume. The lack of volume on this week’s bounce tells us that the big players have yet to be convinced that we have seen a bottom.

Yesterday’s retail sales numbers were a pleasant, non-completely gloomy, surprise but they weren’t exactly rosy. The bounce that is occuring is setting up for a beautiful short opportunity should the DJIA actually make it to the FFF Short Zone of 13,200 - 13,400. That’s where I see the next play setting up in the short-term but again, I’m not looking for any huge plays at the moment, just shorter-term swing plays. Medium-Longer term, I’m actually looking for some long positions to add to my retirment account, but I am trying to scale (aka: average down) into those as the market continues to drop.

On the Forex side, the Yen has really been taking a beating accross the board this week. I just entered a Long position today on the USD/JPY as it is finally breaking out of a multi-week rectangle which should be good for at least a couple hundred pips. I’m using a relatively close stop under yesterday’s low for the moment for if this does go, I expect it to do so within the next couple days whereas if I am wrong, it will likely just drop right back down into its prior trading range and there is no need for me to take any larger of a loss than necessary.

Can you imagine what would have happened if the fed had only cut the rate by 25 basis points or, heaven forbid, not at all?!?! Yesterday after the announcement, the markets rallied giving me the perfect opportunity to close out my long IYR & EWW positions. Looks like I wasn’t alone in my thinking. For even after the 2nd large rate cut in a week, the markets closed lower.

There were just too many variables conspiring against a continuation of the rally, at least short-term. While the markets showed a very nice volume spike 2 weeks ago, putting in a temporary bottom, the up-volume after that has been less and less each day. This means that lots of people aren’t buying it and that a re-test of the low is coming.

Here is where I’m in a bit of a quandary. While I think that today is going to be at least -150 at one point, I’m not ready to write off that volume spike from a couple weeks ago just yet. With all of the fear & negativity pervading the marketplace right now, I’m a bit of a contrarian at this point, at least in some markets.

So while I do think that the DJIA will test at least 11,850, I’m not sure where it goes from there. And so I have half the mind to hold onto my ammunition and wait for the clarity that will arise in the upcoming day’s trading. Will price merely test the lows & stall/bounce, or will it blow through them on exploding volume indicating the next leg of the bear market?

Had I not been long, I probably would have taken yesterday as an opportunity to get short. In hindsight, I probably still should have gone for a ST swing short play, but I was preoccupied and missed it. But with the drying up volume combined with price & moving average resistance, it’s much more likely that we’ll be seeing 11,000 vs. 13,000 this week.

I’ve closed out half of all my Short-term counter-trend trades a profit and am trailing the stop on the rest to see if there is enough energy left in them to make it to T2. If the European markets are any indicator, then it’s not looking like they’re going to make it, but it was worth a shot. EUR/GBP is sitting pips away from its target but other than that, I’m not really seeing too much out there that has me jumping from a sector/international/or market perspective.

All of the international indices are pretty much tracking in a similar fashion, with their direction likely to continue to go down, but with no clear entry or exit points defined yet. The one market I am keeping a very close eye on is the US Dollar. With the fed likely to continue to slash interest rates, the dollar will have to fall. The two most promising candidates that I’m watching are USD/CAD & GBP/USD. I’ll be looking for an opportunity to short the first and go long the second, whichever looks to have more potential. Right now I’m just going to continue to watch carefully and not push anything that I don’t feel comfortable with.

Only my USD position was stopped out yesterday, with a close call on EWW & IYR. Before the rate cut announcement came, the DJIA was down 600 points in Pre-market trading and I was pretty much sure that I was going to get stopped out on a gap down below my stops, but even on the USD stop, I got a very good fill on my stop, minimizing the loss somewhat.

And how about that IYR call. For those of you who may be unaware, IYR is the Real Estate tracking ETF. While all the other industries were clamoring to figure out whether or not the cut would be enough, the real estate industry knew that it could only help them (IYR’s up over 10% in since the announcement). I’ve closed out half of my position, adjusted my stop on the other half, and have a target of 67.50 on the second half.

As for EWW, I am much less sure of this trade after the events in the past couple of days. I will be trailing my stop via each day’s close and lowering my target to the gap around $54. It’s currently in the black but is my most vulnerable trade. The second half of my EUR/GBP trade is consolidating after moving favorably in my direciton 150 pips. I have a very close stop on this and will likely close it out in the next couple days if it does not hit my stop or target.

That’s it for right now as I have to run.