April 28, 2008
A Game of Guess the Markets Future Direction
By admin
Submitted by My Ambitions as a Trader and Investor
This is exactly how I feel. I feel as if I’m always scratching my head trying to figure out if we’ll be heading up or down in the near term. At the moment, volatility is low and investors have calmed their nerves. And with the DJIA and the other indices reclaiming their 50 day MA’s, why should they? But still, there is plenty of resistance to go through. I’ve said it a few weeks ago: Even if we climb back above the 200 day MA, I do not believe that we will stay afloat long enough to build a base. This isn’t the first time this has happened. Feel free to check some historical chart action to see what I am talking about. Even in a downtrend, the indices cannot just go straight down. They trade sideways and even rally at times. But they always seem to hit an invisible barrier or resistance. If you look at the down trend of 2000-02, you will notice several instances where the indices climbed back above their 200 day MA, only to fall below that line several days/weeks later. This is all part of the markets movement. It is a good idea to study the past charts. Nothing really changes. The same raw human emotions that governed the market since its inception still control it to this day. Nothing changes except the players and the name of the stocks. Although I am mostly painting a pessimistic picture, one needs to look at the situation in the right context. Sure, it is a lot harder to make a decent return on the long side, but even in a down trend, when the market bounces, there are always a small handful of longs to take advanatage of. This is always true. Not all stocks go up or down in either market trend. In fact, it is probably easier to find good stocks to go long in down turns since they are easier to spot. These are just a few things to keep in mind while you navigate this market.
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