The,Candlestick,Case,for,Perpe finance, share, loan The Candlestick Case for a Perpetual Short in the S&P 50


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How quickly time does fly.  It is almost a year since the stock market posted a significant long-term High.  It was marked by a bearish Candlestick pattern, and has been followed all the way down by a series of similar bearish formations.  The events attending the near-collapse of the entire financial system over the last few days, leading up to enactment of bailout legislation, drove many investors to a state of deep concern about the worth of their nest eggs. It is terribly unfortunate that so many people have worked so hard all their lives to set aside something for retirement, only to be faced with a serious decline in the market value of their stocks – and the prospect of much worse.  What is even more unfortunate is that they have no understanding of the defensive measures which they could have taken last October, and should be taking right now and into the future. There is no need to be a “deer in the headlights.”  The Candlestick formations over the past several days continue to indicate the seriousness and power of this bear market, and the need to compensate for it so as to defend the value of one’s portfolio. There is “insurance” to be had.  It lies in the form of Inverse Stock Index Funds and Inverse Stock Index Exchange-Traded Funds.  There are many of them available on the market, promoted by respected firms.  Their stated goal is to increase in value when the particular Index to which they are tied decreases in value.  Some of them work on a one-to-one basis – for example, a particular Exchange-Traded Fund might be structured to increase one dollar in value for every dollar by which the S&P 500 decreases in value.  Some of them are leveraged, say on a two-to-one basis. I believe that we are in a long-running bear market which is only now getting up to speed.  I favor the idea that every investor should create and maintain a “Perpetual Short” position, using either an Inverse Stock Mutual Fund or an Inverse Stock Exchange-Traded Fund as the vehicle; and that he or she should be depositing funds into that “insurance plan” consistently, on a regular basis.  It is possible, this way, to completely offset the possibility of loss in a portfolio which contains high-quality stocks.  On top of that, it is possible to make an absolute profit, as well. The stock market (and, therefore, each of the Indexes) moves in waves, which are clearly visible on charts.  While a “Perpetual Short” program can be extremely valuable in protecting the value of one’s portfolio, deft use of Candlestick analysis can also be very useful in identifying countertrends to be harvested for profit in upward corrections.  They are also a great help in identifying the likely end of a countertrend rally and a great opportunity to “pounce on the bounce” for added profit to the downside. William Kurtz      October 5, 2008       http://www.candlewave.com

The,Candlestick,Case,for,Perpe

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