“The most important rule of trading is to play good defense, not great offense. Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible draw down.”
– Paul Tudor Jones

As we move toward the last few trading days of the year the year, let’s look at how some key markets are trending as measured by the longer term 200-day moving average.

The S&P 500 index (SPY) is clearly in an uptrend and has been since late summer. It’s about 13% above its 200-day moving average (blue line), which is pointing higher. And even though it has done nothing but move sideways since early November, it’s also above its volatility stop (orange dots).

There will be much written about the prospects for the stock market going into 2o1o. It’s fun to talk about, but all of it is pure speculation. All we have and all we need is price. And right now the price says the trend is up.

Gold (GLD) is also in an uptrend with its 200-day moving average pointing higher. Like the S&P, the price is also about 13-14% above the average. As long as the trend is up I see no problem in owning gold.

It just so happens that right now gold  is below its volatility stop. So, although the Long Term Timing portfolio still owns GLD,  the ATR Trading portfolio has been out of it since December 7.  I won’t get interested in buying it in trading accounts until it closes above its volatility stop.

The U.S. dollar has been rallying through most of December. It’s above its volatility stop but below its downward pointing 200-day moving average. Therefore, all we can say about it at the moment is that it looks like a bear market rally.

I don’t know if it will or not, but the greenback could move all the way up to its 200 DMA (79.54 as of Friday’s close). If it does, it will probably run into a brick wall and turn back down. And, of course, the direction of the dollar is usually important for the direction of gold.

Crude oil reached a peak in October at over $80 a barrel. Since then it traded down to about $70 before bouncing this past week. However, the trend is up and until the market decides otherwise I’m expecting higher oil prices.

Agricultural commodities (DBA) have been moving sideways for a couple of months. But the price is above the the 200-day moving average and the average is beginning to point up. That tells me that the next significant move may be higher. With the exception of Jim Rogers not many people are talking about agriculture right now, but it may be forming a base for an upside breakout.

So I’ll be reading all the 2010 predictions along with everyone else. However, I’ll be reading them for entertainment value only. The only thing we know for sure is what is before our eyes. The stock market, gold, oil and agriculture are in longer term uptrends. The U.S. dollar is in a counter rally within longer term downtrend.

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