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Where I left things at on Feb.13, 2007 the S&P via SPY closed at 136.35. The estimation of a worst/best case scenario, I described the worst case scenario first in the previous part 3 and wrote that I would follow up with the best case scenario part 4 soon there after. It has been about 2 weeks since then and had planned on having this best case mapped out and posted before now but I have recently fallen behind due to family and professional schedule overload, so here goes.
The best case estimation is a range bound market that trades between the Feb. 1st highs of ~ 139.50 just below the Nov. 2007 lows of 140.50 to the low end of the first range at ~129.00 -128.50, at price level B1. Should the SPY stab the lows of Feb. 7th at 131.75 and trade as low as the 129.00-128.50 price level at B1 without a close any lower than the 128.50 price tag, would represents a possible long entry of as much as a 50% of account value, potential buy point setting up. Should this 129.00-128.50 price area get hit and then a daily bar were to close back above the 131.75 price of the Feb. 7th low by a minimum of 132.45, this would signal a confirmation long entry of as much as a 50%-75% of account value using our Rydex EOD system. This potential long entry would reverse our current Rydex EOD position of short 50% from Feb. 2nd. This is my less desirable entry location noted in the attached chart as green B1 for establishing a long position under my best case estimation scenario, and is subject to change or modification without notice due to the fact that I manage accounts in the Rydex EOD system based 80% upon a system/rule based approach, with a 20% element of discretion. That discretion can not be conveyed in text and is the evolution of over ten years of observation of price action, therefore this is not a recommendation to buy or sell or take any action whatsoever. The more desirable long entry location under my best case scenario comes in at green B2. A move below the Feb. 7th low of 131.75 that accelerates thru the 129-128.50 price level and washes out the Jan 22nd-23rd lows at ~ 126 to as deep as 124.50-123 price level at green B2, is the second range and much more desirable long entry location. Under ideal price action, (which will not be extrapolated herein, contact me directly for detailed criteria) this area represents a long entry of 100%-200% indices basket using our Rydex EOD model. At all times risk management is strictly followed inasmuch that anything can happen in these markets and estimations are exactly that, estimations! My own personal opinion is that we are in a long term deteriorating financial market that at best, temporarily trades in a wide descending channel range, while seemingly softly trending lower or a market that just grinds amazingly lower with violent counter trend spikes. Both have their dynamics and risks to any outright strategy of holding either a full long or short position in almost any exchange tradable asset. A buy and hold strategy or short and hold strategy for either can result in very messy performance at interim points within the cycle. My opinions are subject to pollution just like any one else’s, that is just one reason why I make near term estimations within a longer term context. (I do professional management of client accounts) Take whatever garnered from these pages just like you would from anything else in the financial media, with a big grain of salt, seasoned to personal preference.
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