Facing into February, our main concern is how to prepare ourselves for the anticipated February Dip. We present 2-year charts of various securities, so that we can remind ourselves of what happened in February 2011. Of course, while patterns repeat, they seldom duplicate the previous year’s experience.
The Dow
Firstly, we have a look at the Dow Jones Industrial Average.
We insert a vertical line marking the postion of the 17th February 2011, the point at which the dip began. The dip was quite severe and lasted until the middle of March, when the market picked up and didn’t look back until the end of April.
In other years, the dip began much earlier, often as early as the middle of January.
This year we have had a good, if erratic, run since October, and seem nicely poised now for a dip.
Apple
At 15 February 2011, Apple shares had reached a crest, and began a slow, long-drawn out down-swing that lasted until the end of June. Similarly poised for a down-swing at present, the decline is unlikely to be as long-drawn as last year, which incorporated the Japanese tsunami.
Baidu
Baidu tells a completely different story. Mid January saw it recovering from a down-swing, and February saw it reaching for new heights. By the end of April, the market considered that it had gone too far (and world economic outlook was questioned), and it began a very erratic period lasting up to the present. We see it as trapped between Resistance Line B and Support Line C. It must break through one of these, and has tentatively broken through the Resistance Line, following upswing line D. We don’t know if Line D will emerge as the Support Line of the renewed up-trend; but think it likely that it will be more conservatively sloped – somewhere between the slope of Support Line C and the original Support Line A.
Ford
This time last year, Ford not only took a dip, but reversed from a strong up-trend to a strong down-trend. The vertical line at 26 Jan 2011 marks the beginning of this reversal. The down-trend continued until October, when an up-trend commenced. We had hardly written our post of last Thursday, warning of the February Dip, when Ford took a severe down-swing. How far it will dip is uncertain, as is the slope of its up-trend.
Nu Skin
The dip that NUS took at the end of February, 2011, was only a downswing, and marked the beginning of an accellerated up-trend, which continues to the present. Coming out a recent down-swing, the chart, on its own, indicates that NUS will continue rising strongly, and we are happy to bet on that.
Russian Market Vectors ETF (RSX)
Yes, RSX had a bit of a pause in its strong advance, in Jan/ Feb 2011. The main factor emerging from the chart, however, is its severe down-trend from April until October. We expect that it has suffered more down-side than is warranted and that it will trend upwards for the next few months at least. Perhaps there will be a down-swing in the coming weeks, after its strong advance in the past month.
Wynn
The February dip for Wynn, in 2011, was nothing more than a down-swing in its strong up-trend, which continued until July. We see that it broke out of its down-trend in December, but the slope of its up-trend is not yet established. We expect a down-swing, which may have now commenced, and, when it comes out of that down-swing, the bottom line of its up-trend will be better defined. We are watching for it to dip, and intend to invest when the down-swing turns up again.
XOP (S&P Oil & Gas Exploration Spider ETF)
Having been climbing very strongly during the optimistic start of 2011, XOP trended downwards, but erratically, until the end of October. If the world economy grows, Line C could emerge as the Support Line of a new up-trend to match slope A of the first half of 2011. Alternatively, the graph may continue to zig zag erratically between Support Line D and Resistance Line E. If the latter, we are poised for a severe down-swing at present. But we, frankly, don’t know which way it will go.