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Old 11-15-2016,
Augusttela Augusttela is offline
 
Join Date: Dec 2014
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Our next trade on the docket was opened two weeks later, on 25 March, in our letter entitled When the Leaders Start to Lag.

There we pointed to the wide disconnect in the relative performance of the Dow Jones Industrials and the DJ Transports over the last six months, but in particular since the mid-November bottom.

We wrote:
Where the Dow gained 7%, the transports were up by almost 25%. … [yet] with both RSI and MACD diverging lower against price and the recent 80+ overbought reading of late January, we believe IYT’s momentum is now breaking.


We put on a zero premium pairs trade pitting IYT against DIA, two ETFs that serve as proxies for the old Dow indexes. We bought and sold PUTS on the two for the same price, so we paid only the cost of commissions to initiate.
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