Showing posts with label 401K. Show all posts
Showing posts with label 401K. Show all posts
February 28, 2015
February 19, 2015
FPHAX with 5.6% in 34 days
Nice trade that tracked pretty well to plan, with 5.6% profit in 34 trading days.
I was especially happy of how the trade conformed to my plan of buying at RSI 20 and selling at RSI 80. These upper and lower limits are indicated by the yellow lines on the RSI study.
According to Investopedia, Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.
Stocks are vibrational. The follow a general trend, and then vibrate above it and below it. If they go too high, they pull back. RSI measures the strength of the pull. It works a little like bollinger bands with less guesswork.
In my words, it tells you how strong the rubber band is pulled away from the longer term trend. If RSI is under 20, or over 80, a spring back is likely. If its over 90, sell for sure. Under 10, and it's a once in a year buying opportunity in mutual fund. Just be careful, RSI will still oscillate even when the trend is long term down.
I recently adjusted my RSI settings to be more conservative. They were previously a very aggressive 10 and 90, which means I was missing too many opportunities at the bottom end and waiting to long at the top end.
Note that I use an RSI interval of 5 days. I experimented with this interval to try and get maximum correlation with the price variation. I first added an RSI-7 study to my trading layout after attending a seminar at the Online Trading Academy. I prefer 5 as trends are more visible.
The blue dashed lines are my rough trend lines, the green dotted line the actual trade.
Annotating graphs is a way to clarify your thinking and the rules that you are trading by. It takes the emotions out and lets you treat fine tune your technical analysis approach.
You can see on the graph below, RSI is giving a much clearer signal than anything else about when to enter and exit the trade. If you had timed each oscillation strictly using the 20/80 rule, you would have made around $6 per share profit while the overall stock moved only about $2.50. Plus, your money would have only been invested about 60% of the duration of the 'buy and hope' investor.
I was especially happy of how the trade conformed to my plan of buying at RSI 20 and selling at RSI 80. These upper and lower limits are indicated by the yellow lines on the RSI study.
According to Investopedia, Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.
Stocks are vibrational. The follow a general trend, and then vibrate above it and below it. If they go too high, they pull back. RSI measures the strength of the pull. It works a little like bollinger bands with less guesswork.
In my words, it tells you how strong the rubber band is pulled away from the longer term trend. If RSI is under 20, or over 80, a spring back is likely. If its over 90, sell for sure. Under 10, and it's a once in a year buying opportunity in mutual fund. Just be careful, RSI will still oscillate even when the trend is long term down.
I recently adjusted my RSI settings to be more conservative. They were previously a very aggressive 10 and 90, which means I was missing too many opportunities at the bottom end and waiting to long at the top end.
Note that I use an RSI interval of 5 days. I experimented with this interval to try and get maximum correlation with the price variation. I first added an RSI-7 study to my trading layout after attending a seminar at the Online Trading Academy. I prefer 5 as trends are more visible.
The blue dashed lines are my rough trend lines, the green dotted line the actual trade.
Annotating graphs is a way to clarify your thinking and the rules that you are trading by. It takes the emotions out and lets you treat fine tune your technical analysis approach.
You can see on the graph below, RSI is giving a much clearer signal than anything else about when to enter and exit the trade. If you had timed each oscillation strictly using the 20/80 rule, you would have made around $6 per share profit while the overall stock moved only about $2.50. Plus, your money would have only been invested about 60% of the duration of the 'buy and hope' investor.
November 4, 2014
Closing FSCHX 6.0% in 30 days - retrospective
Hindsight shows how well timed this exit was.
A ton of exit signals on this one - confirmed in hindsight:
- Exceeded profit target (blue dotted line to $156)
- Upper bollinger band penetrated with a big runup to the bollinger band that week
- sequence of bars edging closer to the bollinger band
- RSI above 70
- EMA 5 above EMA 13
- MACD 5 (blue) above MACD 13 (yellow)
September 5, 2014
Closing HPQ 7.7% in 9 days
Profiting off earnings. 7.7% in 9 days is definitely a sell.
Sell signal RSI-90
Sell signal RSI-90
August 5, 2014
March 4, 2014
Closing FSDPX 8.1% in 24 trading days
This trade in Fidelity Select Materials (FSDPX) worked out perfectly - capturing 8.1% in just over a month.
Entry was classic entry on a pullback in a long term uptrend with regular cycles. You can see the overall uptrend as the blue dotted lines on the graph. This trade assumed the uptrend would continue to track within these channels.
Entry signals were the candles penetrating the bollinger band under both the 5 and 13 week EMA lines (pink and green), after a huge reactionary selloff by the market as a whole in January. Call it the 2013 hangover selloff.
MAC-D showed negative, meaning the movement would soon to be to the upside.
RSI of 19 meaning the stock was oversold and had a high chance or returning to its overall trend from the last months.
There was risk that the selloff was the start of a boarder market selloff, but overall market conditions tended to indicate that the overall bull market was continuing.
Sell point was over target price at exactly 90 on the RSI graph, with two green candles penetrating the upper bollinger band, indicating a pull back is highly probable. Watch in the next days for the pullback back to about $85 where the green moving average is.
Effectiveness of this trade compared with long term term fund performance:
My trade
8.1% in 1 month
Overall fund performance
20.8 % over 1 yr
10.2 % over 2 yr
12.6% over 10 yrs
Entry was classic entry on a pullback in a long term uptrend with regular cycles. You can see the overall uptrend as the blue dotted lines on the graph. This trade assumed the uptrend would continue to track within these channels.
Entry signals were the candles penetrating the bollinger band under both the 5 and 13 week EMA lines (pink and green), after a huge reactionary selloff by the market as a whole in January. Call it the 2013 hangover selloff.
MAC-D showed negative, meaning the movement would soon to be to the upside.
RSI of 19 meaning the stock was oversold and had a high chance or returning to its overall trend from the last months.
There was risk that the selloff was the start of a boarder market selloff, but overall market conditions tended to indicate that the overall bull market was continuing.
Sell point was over target price at exactly 90 on the RSI graph, with two green candles penetrating the upper bollinger band, indicating a pull back is highly probable. Watch in the next days for the pullback back to about $85 where the green moving average is.
Effectiveness of this trade compared with long term term fund performance:
My trade
8.1% in 1 month
Overall fund performance
20.8 % over 1 yr
10.2 % over 2 yr
12.6% over 10 yrs
February 23, 2014
Closing FIUIX 4.7% profit in 39 days
This FIUIX trade was entered after the EMA- cross (pink crossing green) in an uptrend. MAC-D on the second graph lines were closing in on each other, indicating an uptrend was forming.
The MAC-D lines were about the baseline indicating continuation of the uptrend.
The trade hit my price target of $22.75 after 39 trading days. RSI wasn't indicating a definite sell as it was only at 82. RSI-5 at 90 is my 'Strong sell' level, although if an uptrend is strong you can let it run above 90.
This fund could still go higher, but I was happy to take 4.7% profit.
February 19, 2014
Closing FSHOX 6.1% profit in 39 trading days
Fidelity Select Construction and Housing (FSHOX) has been range bound for the last year, trading between $50 and $60.
Nice potential to time the cycles and take advantage of big short term movements in the fund price.
Entry was based on a huge selloff just before Christmas. The assumption was that this fund would return to similar levels as previously.
The risk was that the downturn was the beginning of a larger market selloff.
The first month was a little ragged as the price was jumping around with a false start, meaning this trade took a little while to develop.
Interestingly, the trade turned almost exactly the the lower dotted blue support line I drew on the graph. Then it rocketed upwards, and the final angle of the green line almost exactly matched the blue target dotted line.
Sell indicators were:
Nice potential to time the cycles and take advantage of big short term movements in the fund price.
Entry was based on a huge selloff just before Christmas. The assumption was that this fund would return to similar levels as previously.
The risk was that the downturn was the beginning of a larger market selloff.
The first month was a little ragged as the price was jumping around with a false start, meaning this trade took a little while to develop.
Interestingly, the trade turned almost exactly the the lower dotted blue support line I drew on the graph. Then it rocketed upwards, and the final angle of the green line almost exactly matched the blue target dotted line.
Sell indicators were:
- RSI over 90
- Upper bollinger band penetrated by green candle.
- Profit target reached
Comparison with overall fund performance:
My trade
6.1% in two months
Overall Fund Performance
1yr 19.84%
3 yrs 19.35%
10 years 9.51 %
Clearly, this fund doesn't provide much long term security!
February 11, 2014
Closing FRESX 5.95% profit in 34 days
This was a nicely timed 401K trade netting 5.95% while the overall market went up and down like a yoyo.
This stock is clearly in a slow downtrend, with several 5 - 15% swings evident in the last eight months. Blue lines on the graph represent potential trend and cyclic structure of the swings. These could be because of dividend payments, I didn't take that into account - the analysis was purely technical. If I managed to get a dividend payment I'll chalk it up to dumb luck.
Buy signal was the bounce off my blue dashed lower trendline on the top graph. Purchase was right on the green 5-day EMA on the weekly chart. The daily chart for these funds has two much chatter going on, but the weekly chart clearly shows the cyclic trends. This fund charges a short term trading redemption fee if the duration is less that 90 days (i.e. 12 bars on the graph), so I had to pay 0.75% to exit where I did. This was worth it considering the cyclic nature of the chart.
The red bars did not penetrate the lower bollinger band, indicating the downtrend was not too dramatic and dangerous. Often the penetration of red candles in the lower bollinger band can signal and accelerating downtrend.
MAC-D was below the line, with a series of red bars diminishing in size, showing the downtrend and slowed and was reversing, and a classic technical trading pattern of the MAC-D cross about to occur. The blue and yellow averages form a closing triangle, signaling an optimum buy point prior to the MAC-D cross.
RSI for the buy point was a little late - already at 45. Optimum entry point when you are trading based on RSI would been down at 10, but this stock turned around before then. And RSI way down at ten could be in a severe downtrend, so caution is required using that indicator alone.
Exit was conservative at $0.35 short of my target exit price. I could have let it run a little further, but the RSI was already 90 on the bottom graph, signaling that the stock is close to a reversal.
Overall market conditions of bullish in a bear market meant that the conservative exit taking 5.95% profit in 34 days was quite good. A buy and hold investor buying this fund in June last year (assuming by luck they bought at the low) would have made the same return in 8 months as this technical trade did in 34 days. A periodic investor in a 401K investing monthly would have probably ended up with a small profit, as the buy points would have varied, with some profitable and others not.
This stock is clearly in a slow downtrend, with several 5 - 15% swings evident in the last eight months. Blue lines on the graph represent potential trend and cyclic structure of the swings. These could be because of dividend payments, I didn't take that into account - the analysis was purely technical. If I managed to get a dividend payment I'll chalk it up to dumb luck.
Buy signal was the bounce off my blue dashed lower trendline on the top graph. Purchase was right on the green 5-day EMA on the weekly chart. The daily chart for these funds has two much chatter going on, but the weekly chart clearly shows the cyclic trends. This fund charges a short term trading redemption fee if the duration is less that 90 days (i.e. 12 bars on the graph), so I had to pay 0.75% to exit where I did. This was worth it considering the cyclic nature of the chart.
The red bars did not penetrate the lower bollinger band, indicating the downtrend was not too dramatic and dangerous. Often the penetration of red candles in the lower bollinger band can signal and accelerating downtrend.
MAC-D was below the line, with a series of red bars diminishing in size, showing the downtrend and slowed and was reversing, and a classic technical trading pattern of the MAC-D cross about to occur. The blue and yellow averages form a closing triangle, signaling an optimum buy point prior to the MAC-D cross.
RSI for the buy point was a little late - already at 45. Optimum entry point when you are trading based on RSI would been down at 10, but this stock turned around before then. And RSI way down at ten could be in a severe downtrend, so caution is required using that indicator alone.
Exit was conservative at $0.35 short of my target exit price. I could have let it run a little further, but the RSI was already 90 on the bottom graph, signaling that the stock is close to a reversal.
Overall market conditions of bullish in a bear market meant that the conservative exit taking 5.95% profit in 34 days was quite good. A buy and hold investor buying this fund in June last year (assuming by luck they bought at the low) would have made the same return in 8 months as this technical trade did in 34 days. A periodic investor in a 401K investing monthly would have probably ended up with a small profit, as the buy points would have varied, with some profitable and others not.
February 26, 2013
FSCSX 11.2% in 51 days
Closed this a couple of weeks ago and haven't had time to catch up.
Market is overbought and the sequester coming up. Closed with 11.2% profit (including the dividend) in 51 trading days.
4 out of 4 profitable trades in FSCSX in 2012, total gain 23%. Not bad for short term gains that are not taxed as short term gains because they are in my 401K....
Market is overbought and the sequester coming up. Closed with 11.2% profit (including the dividend) in 51 trading days.
4 out of 4 profitable trades in FSCSX in 2012, total gain 23%. Not bad for short term gains that are not taxed as short term gains because they are in my 401K....
January 29, 2013
FRESX overbought - Closing Long Position
Closing FRESX long position for similar technical reasons as VGSIX.
6.4% profit over 73 trading days. Zero commission if you have an account with Fidelity
Technical Sell Signals were similar to VGSIX
Technical Sell Signals were similar to VGSIX
- Bollinger band - penetrated by green candles three times - sell signal
- MACD-5 line (blue) is way above the volume bars - sell signal
- RSI-5 above 90 - sell signal
RSI on the monthly chart is at 87, which indicates I could hang on longer to squeeze more out of this rally, but I'd rather take the profit. This trade is in my 401K account, where my emphasis on seeing the account balance go up every month and taking profits when they present themselves, rather than watching the balance go up and down with the market.
Of the last 18 trades in my 401K, 17 were profitable, so the strategy of taking profits seems to be working. Better than the usual 'buy and hope' investing that is encouraged in retirements accounts.
If a 'buy and hope' investor had bought FRESX in 2008, around 5 years ago, they would have made around 6.4% profit over 5 years. They would have seen their investment be at a loss for around 90% of that time. If they'd had the courage to hold to the market bottom in 2009, they would have seen their investment lose 70% of its value within the space of a year, before recovering over the course of the following 4 years.
Through use of technical analysis, this trade made 6.4% profit in under 3 months.
If a 'buy and hope' investor had bought FRESX in 2008, around 5 years ago, they would have made around 6.4% profit over 5 years. They would have seen their investment be at a loss for around 90% of that time. If they'd had the courage to hold to the market bottom in 2009, they would have seen their investment lose 70% of its value within the space of a year, before recovering over the course of the following 4 years.
Through use of technical analysis, this trade made 6.4% profit in under 3 months.
January 24, 2013
VGSIX Overbought - closing Long Position
VGSIX (like most of the market right now) looks oversold based on multiple technical indicators. Closing long position with 7.6% profit over 72 trading days.
Entry was a little early. Should have been a bit more patient.
Technical sell signals
Nice profit. Note to Vanguard. Won't be trading this fund again because it has a high commission - $75 both ways.
Entry was a little early. Should have been a bit more patient.
Technical sell signals
- Bollinger band - penetrated by green candles three times - sell signal
- MACD-5 line (blue) is above the volume bars - sell signal
- RSI-5 above 90 - sell signal
Nice profit. Note to Vanguard. Won't be trading this fund again because it has a high commission - $75 both ways.
December 27, 2012
Taking profits out of FSPTX before the Cliff
Taking profits out of this FSPTX 401K trade before the market goes over the cliff along with the reputation of the Republican party.
It was tracking up my blue dotted trendline nicely, but I've decided to minimize exposure right now.
It's quicker to buy back in if you are wrong, than wait for it to come back. It's also easier psychologically to deal with kicking yourself for being cautious, than kicking yourself for two months while the market recovers.
It was tracking up my blue dotted trendline nicely, but I've decided to minimize exposure right now.
It's quicker to buy back in if you are wrong, than wait for it to come back. It's also easier psychologically to deal with kicking yourself for being cautious, than kicking yourself for two months while the market recovers.
September 21, 2012
Sell FSCSX - 3rd profitable trade this year
Fidelity Investment's FSCSX Software and Computer fund has been my favorite fund of 2012.
Trade 1 back in January: 2.7% in 6 days (1% commission if less than 30 days, but 2.7% in a mutual fund in 6 days - lock in the profit!)
Trade 2 in February as the trend continued: 5.9%
Trade 3 in April to September, riding out the summer slump but still 4% profit.
13% total, and my money is looking for other opportunities with three months more in the year.
This fund is commission free if you keep it more than 30days, so makes an ideal fund for 401K trading. Why exit now? It's my 401K, so my goal is to see the balance go up ever month, not go up and down as the market wanders around in weak economy and a presidential election coming up.
Technicals show a pullback is in order. Candles are penetrating the upper bollinger band which indicates tension to the downside, and a likely snap back in price. Blue line on MACD is sailing above volume bars, meaning the trend is still up but has weakened. RSI went over 90, then dipped sharply back. The rally in January was different technically - the bars stayed within the bollinger band, and RSI climber over 90 and stayed there, meaning a much more stable rally. Check back in two weeks to see if my interpretation is correct.
Trade 1 back in January: 2.7% in 6 days (1% commission if less than 30 days, but 2.7% in a mutual fund in 6 days - lock in the profit!)
Trade 2 in February as the trend continued: 5.9%
Trade 3 in April to September, riding out the summer slump but still 4% profit.
13% total, and my money is looking for other opportunities with three months more in the year.
This fund is commission free if you keep it more than 30days, so makes an ideal fund for 401K trading. Why exit now? It's my 401K, so my goal is to see the balance go up ever month, not go up and down as the market wanders around in weak economy and a presidential election coming up.
Technicals show a pullback is in order. Candles are penetrating the upper bollinger band which indicates tension to the downside, and a likely snap back in price. Blue line on MACD is sailing above volume bars, meaning the trend is still up but has weakened. RSI went over 90, then dipped sharply back. The rally in January was different technically - the bars stayed within the bollinger band, and RSI climber over 90 and stayed there, meaning a much more stable rally. Check back in two weeks to see if my interpretation is correct.
March 14, 2012
Get ready to sell everything not nailed down
Yesterday's monster jump in the Dow made a lot of investors happy, including me. My 401K made it's biggest ever single day dollar increase from investment returns yesterday.
But gains like this also make me nervous.
The DOW broke through 13,000 with a bang, but look at the weekly and monthly charts below. It's not a sell yet, but with the daily chart on the bollinger band, and RSI indicator over 80 on both the weekly and monthly charts, my assessment is that there is a high probability of another significant summer pullback within the next 3 months.
So, time to take profits and feel good about it, and perhaps consider reinvesting in dividend paying stocks and funds that are less impacted by market swings.
Monthly chart with RSI over 80.
Long term sell signals: Monthly chart within bollinger band, Green EMA 5 (150 day) down.
But gains like this also make me nervous.
The DOW broke through 13,000 with a bang, but look at the weekly and monthly charts below. It's not a sell yet, but with the daily chart on the bollinger band, and RSI indicator over 80 on both the weekly and monthly charts, my assessment is that there is a high probability of another significant summer pullback within the next 3 months.
So, time to take profits and feel good about it, and perhaps consider reinvesting in dividend paying stocks and funds that are less impacted by market swings.
Monthly chart with RSI over 80.
Long term sell signals: Monthly chart within bollinger band, Green EMA 5 (150 day) down.
August 8, 2011
I SPY carnage: Financial Crisis 2.0
Disclosure: Personally, I have over lost 20% of my portfolio in the last two months. Today I dumped everything that wasn't already past the point of no return (i.e. less than 15% loss, and paying less than 10% dividend at todays price). I'm keeping my dividend payers (AOD, AGD, CPLP) that are past the point of no return. The losses in these are now too great to think of these stocks as anything more than 5-10 year dividend reinvestment vehicles for my future. Lock em away and forget em.
On the bright side right now, dividends reinvested in AOD will be making 14.6%, dividends reinvested in AGD will be making 12.83%, and CPLP 19.02%. CPLP dividend is payable in few weeks, AOD and AGD pay monthly, so the dividends average out the losses as quickly as is possible in this situation.
The other reason I liquidated half my portfolio is that I need money to trade short in the bear market, or just have some cash sitting around to pick up the unbelievable bargains that are going to appearing in the next few months. The next few months will see some stocks so devastated by the lack of confidence that we are seeing in governments, business and our financial system, that 100%, 200% and more gains will be possible. But you'll need cash available to make those gains.
Here is why I think the bear market is just getting started. Have a look at the monthly chart for SPY (S&P ETF).
1. Bearish Engulfing Candle. This months candle is a monster bearish engulfing candle that exploded through the 17 month moving average (pink on the top graph) like is wasn't even there. See when that last happened? January 2008. It took 16 months for the market to recover when that last happened.
2. MACD is just crossing downwards on the monthly chart (blue crossing yellow). That means this downtrend is just picking up momentum. There is no good economic news out there. Europe is in disarray, the US public has utterly lost confidence in both the contribution of Wall Street to middle-class society, and Washington's ability to make any sort of coherent economic decision whatsoever. Corporations are sitting on piles of cash, but CEOs are paralyzed by fear of their boards, their big investors and of losing their inflated compensation packages.
3. Bollinger band Look at how far away this months candle is from the lower bollinger band. This months down trend has now built up so much momentum to the downside, that it continuing down to the lower bollinger band is a high possibility, taking the stock market right back to 2003 levels. Technically, if that does happen, it could even accelerate downwards, which is what happened in 2008
4. RSI is still at 15, meaning that a bounce is possible, but by no means certain, especially if small investors start to panic and yank their money out of the market to stem further losses. RSI is a great indicator that a bounce may be coming, but really only if it gets below 10. We are still some way off that, and RSI can stay low for some time.
5. Volume. Look at the volume in Jan 2008. It's about what we have seen so far this month. So, the panic is just setting in. Regular investors are only just starting to get how bad this is. If more investors panic, then volume could increase, adding fuel to the fire, and getting panic based selling up to similar levels that we saw in Financial Crisis 1.0.
In conclusion: We may see a huge bounce in the next month. Or the entire global market could crater from here on out for the rest of the year as people brace themselves for Financial Crisis 2.0. Either way, you want to half at least half you whole portfolio is cash right now and do nothing with it until things settle. If you haven't taken at least half your 401K out of ALL stock market funds by now, I recommend you consider that seriously. (Disclaimer: I am not a financial advisor, just a blogger).
Anything your broker or financial advisor says to you about global diversification right now should treated with contempt - the US debt downgrade is as global an issue as any we ever see in our lifetime. If you don't get out of funds and have a big chunk of your 401K in cash or bonds, long term stock market funds in your 401K funds will probably be well on track to being back to 2004-2005 levels, erasing the last five years of gains if there is not an immediate bounce. Sit on the cash, then watch for the recovery in about six months and seek to use your 401K as a trading account to be invested in only when the market is in clear uptrend.
On the bright side right now, dividends reinvested in AOD will be making 14.6%, dividends reinvested in AGD will be making 12.83%, and CPLP 19.02%. CPLP dividend is payable in few weeks, AOD and AGD pay monthly, so the dividends average out the losses as quickly as is possible in this situation.
The other reason I liquidated half my portfolio is that I need money to trade short in the bear market, or just have some cash sitting around to pick up the unbelievable bargains that are going to appearing in the next few months. The next few months will see some stocks so devastated by the lack of confidence that we are seeing in governments, business and our financial system, that 100%, 200% and more gains will be possible. But you'll need cash available to make those gains.
Here is why I think the bear market is just getting started. Have a look at the monthly chart for SPY (S&P ETF).
1. Bearish Engulfing Candle. This months candle is a monster bearish engulfing candle that exploded through the 17 month moving average (pink on the top graph) like is wasn't even there. See when that last happened? January 2008. It took 16 months for the market to recover when that last happened.
2. MACD is just crossing downwards on the monthly chart (blue crossing yellow). That means this downtrend is just picking up momentum. There is no good economic news out there. Europe is in disarray, the US public has utterly lost confidence in both the contribution of Wall Street to middle-class society, and Washington's ability to make any sort of coherent economic decision whatsoever. Corporations are sitting on piles of cash, but CEOs are paralyzed by fear of their boards, their big investors and of losing their inflated compensation packages.
3. Bollinger band Look at how far away this months candle is from the lower bollinger band. This months down trend has now built up so much momentum to the downside, that it continuing down to the lower bollinger band is a high possibility, taking the stock market right back to 2003 levels. Technically, if that does happen, it could even accelerate downwards, which is what happened in 2008
4. RSI is still at 15, meaning that a bounce is possible, but by no means certain, especially if small investors start to panic and yank their money out of the market to stem further losses. RSI is a great indicator that a bounce may be coming, but really only if it gets below 10. We are still some way off that, and RSI can stay low for some time.
5. Volume. Look at the volume in Jan 2008. It's about what we have seen so far this month. So, the panic is just setting in. Regular investors are only just starting to get how bad this is. If more investors panic, then volume could increase, adding fuel to the fire, and getting panic based selling up to similar levels that we saw in Financial Crisis 1.0.
In conclusion: We may see a huge bounce in the next month. Or the entire global market could crater from here on out for the rest of the year as people brace themselves for Financial Crisis 2.0. Either way, you want to half at least half you whole portfolio is cash right now and do nothing with it until things settle. If you haven't taken at least half your 401K out of ALL stock market funds by now, I recommend you consider that seriously. (Disclaimer: I am not a financial advisor, just a blogger).
Anything your broker or financial advisor says to you about global diversification right now should treated with contempt - the US debt downgrade is as global an issue as any we ever see in our lifetime. If you don't get out of funds and have a big chunk of your 401K in cash or bonds, long term stock market funds in your 401K funds will probably be well on track to being back to 2004-2005 levels, erasing the last five years of gains if there is not an immediate bounce. Sit on the cash, then watch for the recovery in about six months and seek to use your 401K as a trading account to be invested in only when the market is in clear uptrend.
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