What is Happening to the Dow?

I had the opportunity to meet with very interesting to investors lately. He works at a hedge fund run by putting more than $ 150 million. His focus. . . distressed debt. Sensing an opportunity, I began to ask him about his investments and that he was making money in this market. His answer was surprising.

"We have deployed capital in more than 18 months ."

What I asked him to repeat his answer;? I could not believe what I heard, "We have deployed capital in more than 18 months." Despite all the market. turmoil and the collapse of real estate and mortgage industry, he was sitting 100% in cash (and be paid well to do ).

His explanation is simple. "We expect another leg down in the market." I was floored this response. We dropped about 2,000 points on the Dow, almost 15%. And yet, he expects a further decline in the market he will not say much more, but a warning as it is very difficult to ignore

..

I hope that's wrong. But what if not?

As a result, I started looking more closely at my charts. From a technical analysis of one of the first indicators to find out more about the support and resistance. Support lines are points on a map where buying interest is sufficiently strong to overcome selling pressure. Dow is a clear line of support around 12,000 level.

22 January, Dow Jones Industrial Average closed at 11,971, below 12,000 for the first time since the third quarter of 2006. In March 2007, we were near the support line again, but never broke under him.

Well, obviously, 12,000 is a very important level. If you close below that level for more than two days in a row, I would say that we are headed even lower. This suggests a trend in a bear market with more sellers than buyers. In my opinion, a move below 12,000 confirms recession fears and suggests the market will fall further, possibly as low as 11 700 (the next point of support ).

I'm going to watch this level closely -. As you

If we break below that level, I would suggest moving part of your portfolio in a recession proof investment. The health industry is a good place to start. In the last recession, 2000 - 2002, Dow Jones U.S. Healthcare Index rallied more than 100 %.

Some health focused ETFs include iShares Dow Jones U.S. Healthcare (IYH), or iShares Dow Jones U.S. Health Service (IHF ). Both can provide good cover on the falling market