Ive just done an anylisis of various exchange and sector charts. These are long-term weekly charts for 900 weekly periods. Following is the breakdown of those charts. Of the 4 major exchange charts SPY(The S&P 500), DIA (Dow Jones Industrial Average) & QQQ (The Nasdaq) all have A chart rankings. Only IWM (The Russell 2000) has a weaker B ranking. Moving on to the Sector Charts XLY (Consumer Discretionary), XLK (Technology), XLI (Industrial), IYK (Consumer Goods), XLU (Utilities) & XLP (Consumer Staples) all have A rankings. The sector XLV (Healthcare) has a B ranking. The sectors XBI (Basic Materials), XLB (Minerals) & IYT (Transportation) has C rankings. Finally sector XLE (Energy) has an F ranking.
The reason it is important to know the rankings of all of this Index and sector information is to know where it is more helpful to go both long and short the market. For instance I have put in orders to take trades in my paper traking account to buy puts on both CIE & FCX. Both of these stock are in the Basic material sector tha has no more than a C ranking. A close look at the 900 period weekly chart for XLB also indicates a possible stallout for this sector which had been in an uptrend. This could easily indicate a reversal of trend and possible excellent profits for my 2 stock picks to short. The point is I should resist shorting stocks in Sectors showing a clear long-term uptrend such as A or B ranked sectors. I should also avoid going long in stock that are in downtrending sectors that have F or G rankings. I can make a rule in my trading plan that takes these things into account. How about making a rule against going long in a stock that is in a sector or index that is two or more letter grades below a long indication. Also never go short a stock that is in an index or sector that is two or more letter grades above a short indication.
Buy the way I successfully entered CIE at 50 cents per option with a total of nine options. I successfully entered my FCX position at $1 per option with a total of 9 options. In my next post I will discuss the stops that I need to set on these positions.