Continuation from yesterday…….What You Ought To Know About Shorting Nasdaq In March Of 2000
This simple strategy would have allowed investors to cover their short positions and go long shortly after the bottom was reached.
Trade #3: Cover your short position at 1,350 in October of 2002 and go long. Move realized gain 3,400. Net realized gain up to date 7,430 or 931%.
What followed was a 5 year bull market represented by an exact 5 year cycle. Lasting between October 10th, 2002 and October 11th, 2007. Once again, any analyst familiar with the work above would have known two things. First, once the five year cycle was over the market was likely to start its next bear leg down. Second, this bear leg would represent a “Mid-Cycle Panic” discussed earlier or the fastest moving decline of the entire 2000-2017 bear market.
In other words, such an analyst should have been looking for a market reversal as soon as October of 2007. Ready to liquidate his or her long position and to go short. Such a confirmation arrived in early January of 2008 when the Nasdaq broke below both its lower low and a rising trend line. Once the confirmation was received a long position should have been liquidated and a short position should have been established.
Trade #4: Exit your long position at 2,550 in January of 2008 and go short at the same time. Move realized gain 1,200. Net realized gain up to date 8,630 or 1,100%.
As expected, the market proceeded to collapse between October of 2007 and March of 2009. When the mid cycle panic ended most indices had lost in excess of 50%. The Nasdaq bottomed on March 9th at 1,265. An analyst familiar with the cyclical composition of the market would have known that “Mid-Cycle Panics” do not last longer than two years. In addition, given the extent of the decline on the Dow and due to a number of powerful cycles arriving in early March of 2009, it would have been a good guess that the market was about to bottom. As such, a bottom of some sort should have been anticipated in the first half of 2009.
The first signs of a reversal occurred in late March and early April of 2009 when the Nasdaq both broke above a down slopping trend line and set a higher high. Suggesting a trend reversal. A short position should have been covered at the time and a log position should have been established.
Trade #5: Cover your short position at 1,350 in April of 2009 and go long at the same time. Move realized gain 1,200. Net realized gain up to date 9,830 or 1,265%.
To Be Continued Tomorrow……
