Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Bulls Hold The Line, For Now

Stock-Markets / US Stock Markets Jan 17, 2009 - 02:06 PM GMT

By: Kingsley_Anderson

Stock-Markets Best Financial Markets Analysis ArticleIt looks like the other shoe dropped this week. Just when everyone thought that we may have heard the last of the financial sector's woes, more bad news hit the wires. The question is how many more shoes are left?


For a time, the market shrugged off negative news. Starting last week though, the market was oversold and there was just too much negative news from the banks for it to ignore. For the time being, the bulls have held the line. Although there is still strong evidence to indicate a market bottom was established in November , that does not mean one should stay married to that opinion should conditions change.

The question that is constantly asked is “will there be a retest of the November lows?” The breaking of support this past week on all of the major indexes (8500 on the DJIA, 850 on the S&P 500, and 1500 on the NASDAQ) makes that more event more likely. However, all three also bounced back off support Thursday on noticeably higher volume- a slightly reassuring development

Past studies of bear markets tells us an actual touching or undercutting of the November lows is not absolutely necessary. Some have pointed out the possible formation of an inverted head and shoulders pattern developing on the S&P, Dow Jones, and the NASDAQ. While this may ultimately occur, at this point it is mere fanciful thinking. The pattern would not be complete until the neckline is breached (see the charts below). Until that occurs, anticipating the move is a pure gamble.

The price action on Friday was also questionable. The candles formed by the DJIA, S&P 500 and NASDAQ (I will not bore anyone with the names of the particular candlesticks) demonstrates that buyers' hearts are not into this recent reversal. Indecisiveness was further punctuated on the NASDAQ by the failure to pierce the 50 day moving average.

As can be imagined, there was a dramatic rise on the “Fear Index,” a.k.a. the VIX. It cut through resistance at 45 and has now backed off after running into resistance in the 55 area. If the indexes do recede below the November lows, investors should look to see if the VIX can make a higher high. If it fails to do so, a positive divergence will have occurred- a positive sign for the bulls. If a higher high is made on the VIX, things could get really ugly.

When analyzing the markets, do not get too wrapped up in the headlines. Remember, bull markets do not begin when the analysts raise their price targets higher and higher, and the newspapers trumpet the beginning of “a new age in prosperity.” By the time the economy is firing on all cylinders and everything is great, the market will be ready to top. This time, just like all the other times, the market will rise before the economy improves. Keep this in mind that when the market finally begins to move.

Hopefully, the market will sort itself within the next two weeks. Studies that indicate that “as January goes, so goes the rest of the year.” Last year was a prime example of a down January resulting in a bad year for the bulls. Once again, caution is advised.

By Kingsley Anderson

http://tradethebreakout.blogspot.com

Kingsley Anderson (pseudonym) is a long-time individual trader. When not analyzing stocks, he is an attorney at a large law firm. Prior to entering private practice, he served as a judge advocate in the U.S. Army for five years and continues to serve in the U.S. Army Reserves. Kingsley primarily relies on technical analysis to decipher the markets.
Kingsley's website is Trade The Breakout (http://tradethebreakout.blogspot.com)

© 2009 Copyright Kingsley Anderson - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Kingsley Anderson Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in