Sunday, November 29, 2009

Nikkei vs Dow 2 year chart

As a follow up to yesterday's charts on the Nikkei and Dow I have another chart today showing both indexes plotted on the same 2 year chart. As you can see there has begun a divergence of the 2 Indexes. The Nikkei has been going steadily down of late as the Dow continues to rise. It is my strong belief that the Dow will turn down and join the Nikkei once again, as the 2 indexes do track each other very well. At this time their spread is greater than it has been over this 2 year period.

With the Dubai troubles over non payment of their loans, this could increase the magnitude of the reversal. It's a good time to be on the Short side of this market. The ETF, TZA, should increase, as should FAZ as both are Ultra Shorts. TZA is a Triple Short of the Russell Index and FAZ is an Ultra Short of Financials.

Note, the chart is on a Log scale.

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