US - Market Direction 01 (May 08 - Jul 08)

US - Market Direction 01 (May 08 - Jul 08)

Postby millionairemind » Wed May 07, 2008 9:41 pm

I tot I start off a thread on market direction. In my small little world, finding the best stock that you can buy matters very little if the market is in a correction, cos most growth stocks are being pulled by the direction of the market.

The current mkt is in an uptrend, with the follow thro' day on March 20. To game the Asian market, all one needs is to follow the US market. When it goes into a correction, most Asian markets will follow suit.. in a matter of days.

The recent last 3 corrections started on Jan 7 2008, Nov 9 2007 and Jul 26 2007. If one goes back and check the charts, one will see that all our Asian indices and stocks tanked BIG time soon after that.

I will continue to provide updates of follow thro' days (uptrends) and correction (downtrends).

To go into full cash or not depends on one's investment style. I always close out all my long positions just before or on the first day of correction.

I will continue to pen my tots on how to spot corrections coming or an uptrend as time goes by, or you can just pick up the book How to make Money in stocks by Bill O'Neil if you would like to know earlier. :)

Cheers,
MM :D
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End- of-Day US Market Summary

Postby kennynah » Thu May 08, 2008 4:14 am

DOW = -ve 207 pts ...12,814
SP500 = -ve 25 .... 1,392
Naz = -ve 45 .... 2,438


The excuse, all time high Light Sweet Crude, which ended the trading at NYMEX at ~123.56

For most parts of the day, all indexes were trading in the +ve.... and all eyes on the SP500 support at 1400...and when that was broken, so did hell's gate. Following the breach, all indexes followed very aggressively downwards...

It was not a good night for equities...:(


i sure hope we wont see much further tanking like tonight...but if it should drop further...we could see support for DOW at ~12,550 - 12,610

SP500 needs to be stay above 1380 for this rally to have any strength further...and we are only 12 pts away
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US Market Technical Analysis - Ongoing

Postby kennynah » Thu May 08, 2008 8:20 pm

First, I hope to receive your review and also your inputs on any other TAs that either compliment or oppose my opinion in this on-going thread on TA on SP500... (please note, to restrict your comments on TA purely).. thanks in advance

folks, it is not with pleasure to highlight that we may have hit a resistance for SP500 at 1418....

this is TA, based on Fibo 50% retracement and you will see it clearly from this multi year chart....

my intention is therefore, in the very short term (like in the next few days), to sell into any rally...and then consider Shorts or Puts on major indexes...

Vaya Con Dios and prosper, my friends

2008-05-08-spx.png
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End 8May08 US Mkt Summary

Postby kennynah » Fri May 09, 2008 4:11 am

DOW = +ve 53...12,867
SP500 = +ve 5...1,397
Nazdaq = +ve 13...2,451



There's only one main headline....Crude Oil....All time HIGH at 124.61 pbl...

Other movers and shakers...

ECB held rate at 4%
BoE held rate at 5%
US Jobless Claims DROP to 365K vs previous 383K
Wholesale Inventories -ve 0.1% vs previous 0.9%

ex-Fed Chairman, Greenspan, said "subprime" problem is OVER...but housing problems remains and shd stabilize by end 2008



Odd, isnt it, that the indexes stayed afloat ?? bu who cares...as long as it didnt tank....with such ridiculous Oil price
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Re: Market Direction

Postby millionairemind » Fri May 09, 2008 8:59 am

Hi W,

Up trend still in tact though distribution days are increasing..

Current count - 4 for S&P, 3 for DOW and 2 for Nasdaq.

Nasdaq has been leading the indices for the past few rallies... will not be surprised if it continues to do so.

Paiseh :oops: ... as a trend follower... I can only follow the trend when it develops... cannot predict nor pre-empt.

Cheers,
MM
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Re: SP500 Resistance at 1418 - 8may08

Postby kennynah » Sat May 10, 2008 6:40 pm

Hello all again...

Now, let's see where the Support for SP500 is..

amazingly, 3 TA factors seem to point to ONE Support.... but like any sword, it can cut both ways...if this support is broken convincingly, then we may have to consider a more bearish view...

But otherwise, since Mar08, we have formed an upwards rally channel.... nothing goes up without correcting and this week, was probably one...

SP500 1380, looks like a good opportunity for entry...if u dare :) and we are a mere 8 points away....


2008-05-10-spx.png
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Re: Market Direction

Postby millionairemind » Sun May 11, 2008 12:46 pm

OK now for the part on when market goes into correction.

Just a couple of definitions..

Definition of Distribution Day - When index closes down more than 0.2% on increase volume than the previous day..

Y is tracking distribution day important?? Distribution days tells us what the mutual funds are doing on the charts.. if they are selling, we should be too cos' they control 75% of the trading in the US. They can sell for a variety of reasons.. which is only known a couple of months later. Any time within a short period of a couple of weeks that you get 3-5 distribution days in short succession with a BIG break out of the 50DMA, a correction has just set in.

The selling in January was harsh and fast. It was only in March that it was evident that mutual funds were raising cash to fund redemptions.

The January 08 redemption in US stock funds was 44.8B dollars, which was only matched in severity in July 2002, the last leg of the bear market when investors yanked $52.6B from the stock funds.

When they are selling, you can see it from the charts...

Image

Paiseh, not very good with graffiti on the chart :P

Right after Christmas 07, the market started coming under increased selling pressure.. cumulating in a big drop on 7th Jan when the Nasdaq broke down from its 50DMA. I closed out all my long positions on 3rd Jan when the increased selling pressure was evident.

The 50DMA always supports the Market indices.. When it breaks down on huge volume.. run for the hills.. :mrgreen:

I wrote up a piece on WS last time about the importance of tracking the hot money.. we can have the best stock analysis but if the BBs don't come in and buy.. the price does not go up and we will be stuck with "unloved inventory". If we buy an unloved value stock, it might be a long time b4 the big funds start noticing... and by the time, our money could be better used buying stocks with superior growth that blast right out of the gate.

http://www.wallstraits.com/community/vi ... 7#pid93903

I am not saying this is the best way to play the market, just another way to trade it. It has worked for me and I will continue to use it till it fails me one day.

I hope this helps. Cheers.
:D
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

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Re: SP500 Technical Analysis - Ongoing

Postby millionairemind » Sun May 11, 2008 3:18 pm

K,

Chart is swee swee... to add a couple more comments.

For the week - Nasdaq/NYSE lost 1.3%, DOW 2.4% and S&P 1.8%

Friday's drop was on low volume.. telling me index does not want to go down again.. waiting for another catalyst to move up.

Last week, there was a stealth rally among the leading stocks.. The Leading IBD 100 stocks rocket up 2.2%.. this is a very positive sign.. If leading stocks cannot outperform the index.. the uptrend will probably crash and burn soon. Stealth rallies or selloffs are difficult to catch but foretell the underlying trend in the market.

I will open a couple more trading long positions on Monday on my trading account after the initial sell offs in Singapore. Investment account still being held thro' this uptrend.

As usual, say is say, who am I to predict where market is going? if market tanks next week, just apply some CUT LOSS, Burnt Hand/Lose Money cream.. :P

Cheers,
MM :D
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

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Re: Market Direction

Postby helios » Sun May 11, 2008 6:05 pm

dear MM,

your chart + explanation r both v good and crystal-clear. (pls con't to share your experience).

i see a few critical candlesticks on e points u mentioned.

on uptrend reversal pattern,
1. hammer (tonkachi) @ 14april
2. harami-age @ 28mar

on downtrend continuation pattern,
3. gap (ku) @ 7jan was not closed w high vol
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Re: Market Direction

Postby millionairemind » Sun May 11, 2008 9:38 pm

Now for the last part of the instalment.. the follow thro' day.

A bit of definition - A follow-through is a gain of 1.7% or more by at least one of the major indexes on higher volume than the previous day, occurring on Day 4 onwards of the rally attempt.

The last follow thro' day was on March 20 by the DOW. One needs to track NYSE, DOW, S&P and the Nasdaq for signs of follow thro' after the index stops falling and attempts to rally. A close higher than the previous day counts as Day 1 of attempt rally.

Anytime during the rally attempt, if it undercuts the recent low, the rally count resets back to zero again.

Prospective rally is intact as long as DAY 2/3 DOES not undercut Day 1's low. The most explosive rally occurs when the follow thro' day occurs in Day 4-10... why??? Even if Day 1/2/3 has positive gains, it could easily be short covering... It takes ALOT of money to move the index by a large amount beyond Day 4.

Here is the chart for the DOW. As you can see, the DOW followed thro' on Day 8 of attempt rally. The strongest rally I have seen all come from Day 4-10 of the rally attempt.

Image

This follow thro' day is tested over more than 100 years of historical data. Please bear in mind that NOT ALL FOLLOW THRO' DAY results in a major uptrend BUT NO RALLY IN HISTORY HAS EVER STARTED WITHOUT A POWERFUL FOLLOW THRO' DAY.

This is accurate about 70% of the time... For me.. it is much better than blindly trading. Having the indices on an uptrend is like tail wind for your stock performance cos' most growth stocks will follow the market higher.

Y didn't the Nasdaq lead the follow thro' this time.. The Nasdaq undercut its recent low during the attempt while the DOW did not. So the base count was reset to zero again for the Nasdaq. The Nasdaq flashed a follow thro' on April 1.. together with the S&P 500.

Image

After one of the index flashes a follow thro', you would also want the other market indices to flash their respective follow thro' day not too far away after the initial follow thro'. This signifies strength in the overall market and that the BIG funds are back in the market, busily buying up shares.

Right after follow thro' day, watch the market index for signs of weakness... namely major distribution day within 3 trading days thereafter... Historically, if that happens, this rally will be killed very very quickly.

I hope this helps.
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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