Sipping on a Cup of Coffee Deciphering Whether or Not The Stock Market is About to Make a Leg Down
Source: http://www.market-speculator.com/2009/05/11/sipping-on-a-cup-of-coffee-deciphering-whether-or-not-the-stock-market-is-about-to-make-a-leg-down/Posted on Monday, May 11th, 2009 | In Market Commentary
It is almost 6:30am EST on Monday May 11th 2009. I am looking at decisively BLEAK future levels and big down days in China. Is this the turn?
Last week Tuesday’s and Wednesday’s action was bullish; finding support at the lows to finish near the highs of the day. However, was it simply an example of a tired market? Thursday’s trading session was the tell that this market has simply moved too much in so little time that a rest is needed. Friday confirmed Thursday’s action by not being able to retake the highs of Thursday on volume. It would have been a tremendous bullish signal if the market had erased Thursday’s losses and had done it on big volume. I think it is time to become defensive in posture and prepare for a possible pullback.
After a move like we’ve seen from stocks off the most recent lows is very brisk move higher. We’ve stayed overbought since the March follow-through day, quite a long time to stay overbought. It wouldn’t surprise me if stocks pull back 5-10% off the intraday highs set on Thursday. Today’s open will certainly have the index challenging its 20dma, but if we can rally off the open and finish higher on strong volume it would signal the market still has more room to the upside. Letting reality set in, I don’t believe this will be the case as we haven’t seen any of the IBD indexes lead this market while it has made its move higher. We’ll need to see how stocks act this coming week.
If I were looking to make a move I’d be looking to short some Big Cap Technology stocks: AAPL BIDU RIMM QCOM INTC. These laggards have been rallying on less than ideal volume. They are liquid enough to avoid being wiped clean on a strong move higher. Big Cap Technology is an ideal way to take advantage of a market turn.
Keep your eye on the ball and losses short!
Market Speculator
No Positions
Last 5 posts by Market Speculator
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 About Market Speculator (http://market-speculator.com)
Market Speculator began his market career shortly before 9/11/01. The methodology he uses comes from the greatest stock market traders of all time; Livermore, Darvas, O’Neil, Dryfus, etc. Decision making is based on price and volume while stock screening is done by growth in fundamentals. Much like William O’Neil’s CAN SLIM approach to investing Market Speculator focuses on a narrow amount of stocks and lives by cutting his losses early. |
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