"The Market Toolbox" October 8, 2005
Published: Sat, 10/08/05
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The Market Toolbox : You are receiving this e-mail as a part of your free subscription. If you would like to change your e-mail settings please follow the instructions at the bottom of this e-mail. Welcome To The Market Toolbox for October 8, 2005 A Free Newsletter Service from Investing Systems Inc. In this issue:
Featured Product... In volatile markets it really pays to understand technical analysis. The best, easiest and fastest way to come up to speed is the InTeLyZe interactive technical analysis education CD ROM. Check It Out.
Hello Everyone, This week we are looking at the market this week, and a look ahead at where we might be going from here. It seems the market was spooked by the idea that the fed is not done raising rates and that rates could go up a few more times until the policy becomes neutral. Oil prices hit hard in several industries and as we expected there is a flood of used SUV's on the market. Oil is off the highs and as refining capacity comes back online prices "at the pump" should drop a bit from here providing some relief to the over spent consumer. Oil stocks got whacked as profit taking seems to have affected the market leaders as the third quarter drew to a close. The jobs data showed that the underlying economy is a little stronger than expected (Pre Katrina) and the data has not yet taken "the aftermath" into consideration. I for one expect that the hurricanes will produce a net gain to jobs as it takes a lot more people to build a city than it does to run one. As our regular readers know we look at the Nasdaq Bullish percent Index for a peek into what we think the market will do. The chart below shows that the expected weakness delivered, and how, but we could be at a short-term bottom if the market does not blast through the apparent support levels.
After looking at this chart we think there is limited downside potential and the market should settle down soon. The chart below shows the range the DOW has been in all summer and note the 50 day crossing over the 200 day to the downside. Keep an eye on that as we seem to be at the lower end of the range we could get a bounce here, or hang around down here until we see some of the upcoming earnings data in about a week or so. We are also surprised that we have not seen more warnings coming into earnings season. That could be a good sign that the recent high oil prices have not had as much impact as expected.
As we look at the market momentum I wonder if now is the time to buy?
Many traders have been taught to buy strength and sell weakness. But the results shown by the research in How Markets Really Work prove that, over the past 15 years, you were better off doing the exact opposite...you should have been buying weakness and selling strength. Here is a chart that proves to you that (contrary to conventional wisdom) you were way better off buying into weakness after three consecutive down days than buying after a three-day rally.
Should you be buying when advancing issues outnumber declining issues by a substantial margin? Quite likely, if you heard the financial press announce that advancing stocks outnumbered declining stocks by large amount, they'd probably also describe the rally as being "healthy." But what do the statistics tell you? Let's say that the advancers outnumber declines by a margin of 3-to-1, you would have lost money over the next week by buying into that scenario!
It seems to be true today, yesterday the advances led decliners by a wide margin and today we saw a nice up day halting the recent free fall.
How has the market behaved on a short-term basis...
As you can see, some of the mostly widely held opinions among traders about these and other patterns are many times wrong. Do yourself a favor, know the facts. And Finally... "Best Of The Web" www.TigerSharkTrading.com You can improve your trading at TigerSharkTrading.com. Many of your fellow traders comment on the financial markets. This web site is built specifically for traders and here's what you'll find:
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The best, easiest and fastest way to come up to speed is the InTeLyZe interactive technical analysis education CD ROM. Check It Out.
Until Next Time... Best wishes and Good Investing, |
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