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By Mike Paulenoff, MPTrader.com
For three months I have held a spread position long the DIA (Blue Chips) versus short the IWM (Small Caps). My fundamental justification for holding this spread back in September was that the U.S. economy was slipping into a slowdown, or worse, which will support holding the big caps, while watching the smaller, undercapitalized companies' balance sheets deteriorate. With the exception of a few flurries on the upside, however, the DIA/IWM spread has stair-stepped lower from 1.60 to a recent low of 1.56 precisely because the U.S. remains relatively vibrant rather than sluggish.
Apart from my faulty fundamental outlook, my technical work all along has warned me that the 3+ year slide in the value of the DIA vis-
Mike Paulenoff is author of www.MPTrader.com, a real-time diary of his technical analysis & trade alerts on ETFs for precious metals, energy, currencies, and an array of equity indices and sectors, including international markets, plus key ETF component stocks in sectors like technology, mining, and banking. Sign up for a Free 15-day Trial!
