Archive for Market Analysis
SP-500 continues decline to 1045.50 but what next?
Posted by: | CommentsI wrote on the 21st January & 27th of January forecasting market decline in the short term outlining the following scenarios.
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We essentially have 5 scenarios
1. Today’s negative action halts today and builds a base at the intermediate support line
2. We experience further downside action to the medium term support line at 1072
3. We pullback to 38.2% of the July Trend (6 months)
4. Pull Back to Fibonacci 50, at 1015
5. Experience quite a serious correction releasing the tension of the March to date rally with a pull back to 980.
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Of those 5 scenarios I suggested 2, 3 and 4 were the most likely.
So what happened? Read More→
Market Breadth – The Advance Decline Line
Posted by: | CommentsMarket breadth is a way of measuring the moves of the stock market in general by comparing the number of stocks that rise compared to those that fall or comparing stocks making new highs to those making new lows.
The Advance Decline Line (AD Line) is a useful indicator that measures if the broader market is advancing or declining. This enables you to see not just if the Dow Jones Industrials components are moving up but if all the stocks in the NYSE are increasing. The reasoning behind this is that if all stocks are increasing in a synchronized manner with the bigger indexes all is well. If most stocks are beginning to move downward and the Dow Jones Industrials or the S&P500 are still increasing this could be a sign of a significant change in market direction. The Battlefield analogy often used is “Are the Troops (smaller capitalization stocks) following the generals (DJ-30 / SP-500).
This line is plotted by taking the difference between the number of stocks advancing and those declining. If more stocks increase in price on a given day than those that decrease in price then the result is positive. If more decrease on a given day than increase the number is negative. This is then plotted cumulatively on the AD line.
I find the AD Line is most useful at major market bottoms. Here we have a chart of the DJ-30 and the AD Line. It produces some very interesting results that are useful to you during times of market turbulence.
Freestockcharts.com chart courtesy of Worden Brothers, Inc.
Advance Decline Line versus DJ-30
Notes on the chart: Read More→
Obama’s Budget Seeks $1.9 Trillion Tax Rise
Posted by: | CommentsFresh from Bloomberg
” Feb. 2 (Bloomberg) — The Obama administration seeks a $970 billion tax increase over the next decade on Americans earning more than $200,000 and wants to take in an additional $400 billion from businesses even as it retools a proposed crackdown on international tax-avoidance techniques.
The administration budget released yesterday would reinstate 10-year-old income tax rates of 36 percent and 39.6 percent for single Americans earning more than $200,000 and joint filers making more than $250,000 as part of a broad $1.9 trillion tax increase proposal. It proposes to eliminate preferences for oil and gas companies, life-insurance products, executives of investment partnerships and U.S.-based companies that operate overseas. “
Liberated Stock Trader.
This news hot from Washington is important. The US has to refocus on reducing its deficit, Obama made this clear in his state of the Union speech. There are two ways to reduce the US Debt burden using Monetary and Fiscal policy. Monetary policy changes could be to increase interest rates, but this is not an option in today’s environment. Fiscal policy changes could be to reduce spending. Obamas hands are tied as he came to power promising more investment and reform specifically in health care, however the financing of huge investments in stimulus packages and job creation is taking its toll. Fiscally the US cannot withdraw the stimulus packages at this still critical point in the recovery. Monetarily I imagine that later this year or early 2011 interest rate will rise. Only a prime rate above 5-8% will have an extremely negative affect as we see from history.
Market Continuing Decline, potentially more to come!
Posted by: | CommentsWell we are seeing continued decline!
As I flagged in my previous post on the 21st January here
“We essentially have 5 scenarios
- Today’s negative action halts today and builds a base at the intermediate support line
- We experience further downside action to the medium term support line at 1072
- We pullback to 38.2% of the July Trend (6 months)
- Pull Back to Fibonacci 50, at 1015
- Experience quite a serious correction releasing the tension of the March to date rally with a pull back to 980.
It has been a great rally since March but something inside me has to begun to be extremely skeptical. Do not get caught the wrong side of a power sell off without a stop loss in place. Do not risk any more than 5 to 10% max on any one trade. Never make one trade worth your entire portfolio. I believe options 2 and 3 are the most likely to occur, but potentially 4 is a possibility.”
Well Scenario 2 seems to be the target for now, the S&P500 has plummeted through support at 1119 and will come close to my 2nd specified downside target of 1072 over today and tomorrow. The next stop after that could be 1045. The market is not reacting well to any good news and that is a signal in itself. Be careful with your money, do not get dragged down betting against the odds your stock will rise in a falling market.
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US Markets Capitulate – Potential Change of Character
Posted by: | CommentsDespite a buoyant start to 2010, today we saw what could be termed a change of character in the US Markets. It is at times like these that no matter how good the stock you own is, your stock may get pulled down with the rest of them. So if we see a pull back, and it is not unreasonable to imagine we will get a pull back, we were due one in December but the Market (SP-500) kept creeping upwards and sideways, how much will it pull back?
Using simple Trend lines and Fibonacci Retracement we are able to build scenarios which allow us to make plans for the future.
Setting Potential Downside Targets
We essentially have 5 scenarios
- Today’s negative action halts today and builds a base at the intermediate support line
- We experience further downside action to the medium term support line at 1072
- We pullback to 38.2% of the July Trend 1045
- Pull Back to Fibonacci 50, at 1015
- Experience quite a serious correction releasing the tension of the March to date rally with a pull back to 980.
It has been a great rally since March, but something inside me has to begun to be extremely skeptical. Do not get caught the wrong side of a power sell off without and stop losses in place. Do not risk any more than 5 to 10% max on any one trade. Never make one trade worth your entire portfolio. I believe options 2 and 3 are the most likely to occur, but potentially 4 is a possibility.
Keep your friends close, your enemies closer and your stop losses the closest.
Learn Stock Market Trading and Investing with FREE Education and Training on Stock Screening, Stock Charts, Candlesticks, Technical Analysis & Fundamental Analysis and Stock Chart Indicators, Trading Academy Membership is free register here.
