The market tried to have an up day and I guess in the NASDAQ we did see a bit of a rally. We should expect some up days just to keep some of the bears, like us, guessing. The stock market, as I measure the Dow Industrials, is now in an oversold position. The past few days have served to push the indicators down but have pretty much left the prices in the Dow intact. This kind of thing will happen on a short term basis, but long term the market is destined to drop.
We are going to keep the post “short” this evening. We will be watching for a rally to sell into as this market keeps everybody guessing. We don’t expect anything like a move back to 10,500, but we do expect a modest rally that could occur at any time. Today’s mini-rally was fairly sharp and qualifies as an opportunity to sell with the Dow up about 80 points in an hour after lunch. In spite of the big rally in the Dow, the breadth (gainers and losers as well as upside and downside volume) was negative today as the broad market struggled to get positive. Sometimes this happens on the second day, as in tomorrow but we think the market is decidedly weak and rallies will be sold.
Still, the message of the market is clear, down ahead. Keep this direction in mind as we head into the weekend and early next week. Mostly, rallies will get sold and the market will continue to buckle under the downside pressure.
We repeat, we do not find any major sectors of the market worth being long. The opportunities are on the short side. If you can’t “bear” going into a short fund, then head into cash for some protection. Those of you who want to hedge your long positions should do so with a protective put strategy. This is not the time to be long but if you must be, buy some protection by purchasing some of the inverse funds we have mentioned or buying puts on the securities you own. ASK questions in the comment section. We will answer them as soon as possible, normally within a day unless we’re in California or something like that.
Speaking of that, no there is no significance to an inside up day. It could lead to an outside down day and that is a different story, a bearish one.
Dow Industrials: 10,216.59 -0.32 (big move)
RYVNX: 22.55 (modest loss today)
Subscribe to:
Post Comments (Atom)
2 comments:
Please explain for a newbie what you mean by inside up day and outside down day. Thanks
Yes, sometimes we need to explain the terms we use. Thanks for the question.
The outside day, whether up or down, is the one that can have some significance to technicians. An outside day means that today's high was higher than yesterday's high and today's low was lower than yesterday's low, meaning yesterday's prices were contained in today's prices.
In order to be an outside down day, the ending price today must close below yesterday's low price. For an outside up day, the closing price must be higher than yesterday's high. This would be most significant at the end of an up or down trend and would occur on heavier volume for good confirmation of a reversal in trend.
For example, look at a three month chart of the Nasdaq Composite(use bigcharts.com in the links and use the symbol COMP). On October 4th you will see an outside down day signalling a trend reversal from up to down. This day occurred after a nice move up from the September 22nd low. After the outside down "reversal" day, the next two days were strongly down. The volume was not particularly strong that day but it was higher than any day during the recent uptrend leading to that day.
These days have the feel of a trend reversal due to the way they trade. You don't have to be a technician to appreciate the strength of the move, you can usually feel it.
Post a Comment