Saturday, 23 January 2010

Market Pulse: Your source for stock, stock market, stock trades, and stocks info

Market Pulse: The last 3 days have been a phenomenal sell-off in which the S&P 500 has lost 5.1% from the intraday highs on Jan. 19. It took 3 days for the S&P 500 to lose 58+ points. After a relentless rise since the March lows, I would say that there may be a change in character taking place in the market. I have been saying since March that the bear market rally has been getting long in tooth and we were due for a reality check. Maybe this is it. I don’t know. I actually thought it was in late August, then I thought it was in late October, and then after the market rallied again. I didn’t know what to think, but I am not willing to pay high mark up prices for stocks in general. Now, we may be at the biggest juncture in the market since March 2009. Take a look at the chart of the S&P you will see two sets of dotted red lines. These lines signify the intraday high and low of the first 3 days of the month. This is a strategy I developed after reading the book, The Logical Trader, in which he talks about the first 20 minutes of the trading day being the high or low for the day about 17-23% of the time. So I thought why can’t this be applied to a month? I did a little research and found out that a lot of the time the first 3 days of a month can determine the high or low for the MONTH. So, to see which way an individual stock or index will move, just watch the first 3 days of the month and it may give you a GOOD idea. Try it out yourself. Look at the first 3 days of every month since the March lows and see if it marked the high or low for that month. The results might astonish you that it could be that simple. Now, back to the chart. You can see that the low for the month (Jan. 4) has been significantly breached. That is a potential warning sign for a change in trend because prior to the last 3 days the low for the month had been put and the market was moving up, albeit slowly. Now it’s plunged through on high volume, which indicates selling pressure. Market leaders like AAPL, GOOG, ASIA, JOYG have been getting bashed over the last several days. When the market leaders start to crack, it’s another clue that the trend may be changing. Another technical clue is the MACD has turned down, which is more confirmation of a change in momentum. The optimism just 3 days ago was above levels we saw in 2007. With this sharp break in the market, we shall see if it dents all the optimism about a recovery or this is start of the bear market I have been anticipating for the last 5 months.

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