Daily Market Comments - October 2008
10/31 - Stock Market Comments
Happy Halloween. The month of October has been especially scary this year. The past three days of trading have modified the fear factor quite a bit. Thursday's positive close in the Dow moved it up out of the trend channel. The NASDAQ traded well above the T-line. Although the uptrend can be seen, keep in mind at the market conditions have demonstrated great moves up and down over the past month and a half. Be positioned to the long side but, until a steady trend can be identified, remain very nimble. There is still indecision in this market that needs to be nullified.
10/30 - Stock Market Comments
The Dow was holding up reasonably well going into the final 10 minutes of trading on Wednesday. Then it sold off approximately 300 points. The NASDAQ held up reasonably well, closing eight points positive. This morning's futures indicate the Dow recovering those 300 points plus a little more. The 900 point day of Tuesday, although not forming a true Bullish Engulfing signal, looks to be close enough to be considered a Bullish Engulfing signal. The important factor today is to see if the Dow could close above the upper end of the sideways trend channel that has been developing over the past 3 to 4 weeks. Strong charts can be bought. But until a definite trend can be identified and confirmed, keep your fingers close to the trigger. Be bullish but nimble.
10/29 - Stock Market Comments
Candlestick signals and patterns usually provide a reasonable expectation of what a price trend is going to do. However, Tuesday's 900 point move in the Dow was completely unexpected. It wasn't quite a Bullish Engulfing signal but the NASDAQ did form a bullish candle after a small Inverted Hammer signal. The NASDAQ closed above the 50 day moving average. This may not be the bottom but it should be an opportunity to make some profits on the long side. These are still market conditions to remain very nimble and not have the total portfolio funds exposed yet.
10/28 - Stock Market Comments
The pre-market futures are showing the Dow up over 300 points. That would normally be very significant. However, as we have seen lately in this market, the Dow can move hundreds of points in the matter of a few minutes. Today's open is not consistent with the previous investor sentiment. Be careful, don't jump into anything until the market creates some sort of analyzable trend. Obviously, the severe whipsaw actions of the market are still making this a very difficult market to trade. Continue to remain heavy in cash. Today's close will be indicative of what to do with any existing short fund positions.
10/27 - Stock Market Comments
The premarket futures are again negative. Remember, the longer a downtrend persists, the higher the probability of witnessing panic selling. The Dow closed about halfway down its trading range on Friday. There was a possibility of a Hammer signal forming late Friday but the sellers came in during the final 30 minutes. As of now, there is nothing to show any change in the bearish investor sentiment. Remain prepared for a capitulation day.
10/24 - Stock Market Comments
As discussed in last night's chat session, if/when the bearish J-Hook pattern started to show any confirmation, they were going to take it down to the next level very hard and very fast. Today may be a classic selling climax. The futures are already down to the limits on the indexes. This was the exact reason why having some of the short funds in the portfolio for downside protection has been recommended ever since the possibility of a bearish J-Hook pattern was identified. This is why we recommended keeping your powder dry. Look for bargains in the next day or so.
10/23 - Stock Market Comments
The Dow closed on a very important support line on Wednesday. It initially breached the Pennant formation earlier in the day. Wednesday's close occurred right on a lower trend line that could be drawn up through the recent lows. It appears as if the morning futures are indicating a slightly lower open. Another hard selling day today would indicate wave three starting, possibly taking the Dow down to the 7000 area. The Bulls need to see an indecisive day or a strong positive day from this level. Having short funds in the portfolio is prudent.
10/22 - Stock Market Comments
The weakness exhibited in the markets on Tuesday is seeing follow-through in the premarket futures this morning. This puts the markets at best in a sideways trading mode. However, severe selling from these levels would still create the possibility of wave three to the downside. If today's trading closes near the lower end of its trading range, putting some short funds back in the portfolio will be prudent until a definite signal reveals investor sentiment is moving positive again. Unfortunately, this makes the trend analysis very nebulous.
10/21 - Stock Market Comments
The markets experienced some excessive buying going into the close on Monday. Both indexes closed above the T-line. This gave some prospect of the Bulls starting to take control. This morning's weakness in the futures appeared to be giving back the bullish move of the final 30 minutes of Monday. If the market shows excessive weakness today, down more than a couple of hundred points in the Dow, it would bring the markets back below the T-line and continue the waffling of this market. Confirmation of a bullish trend will require a close near the higher end of the trading range today.
10/20 - Stock Market Comments
The late day selling on Friday formed a Doji in the Dow, but the NASDAQ maintained its strength after it opened on Friday. The Dow has formed a Pennant pattern over the past 6 days of trading. This morning's positive futures provide another possibility for breaking up through the T-line. This would be a significant bullish factor. Be prepared to buy but also be prepared to close out positions quickly if the market comes back down through Friday's close. This market still has not yet shown decisiveness.
10/17 - Stock Market Comments
The markets came back nicely on Thursday, greatly relieving the possibility of a J-Hook pattern to the downside. The Dow and the NASDAQ showed more resilience than expected. However, this morning's futures indicate that most of Thursday's gains will be given back on the open. We needed to see a move up through the T-line to confirm the bullish control. The lower close today would put us back into an indecisive market condition, a choppy action essentially not showing any current trend, that would require a break to the upside or downside. Today's lower futures simply reveal that investment sentiment does not have a verifiable direction yet. Stay heavy in cash. Any trade executions need to be done with nimbleness.
10/16 - Stock Market Comments
On Wednesday the Dow closed more than halfway down the big bullish candle of Monday. This illustrates that the Bears are still in control. The NASDAQ closed back down into the candle that created the change of investor sentiment last Friday. This puts the bullish trend in jeopardy. What would be required today is signs of indecisive trading or a Bullish Harami producing the potential for a double bottom. More weakness in these markets would confirm that the past few days were a bounce in a downtrend, with the formation of a bearish J-Hook pattern. Until a direction can be established, it is still advised to be sitting heavily in cash. Going long or short will become a function of what the markets tell us they are doing in the next few days. Continue to be patient. Don't commit funds if the evidence is not clear which way prices are moving.
10/15 - Stock Market Comments
Tuesday's trading created a Doji in the Dow. It formed right under the T-line. This made today's trading very easy. The bullish trend needed to see a positive open. However, the morning futures are down relatively strong. This should instigate some more profit-taking in the account, after some profit-taking on Tuesday. The Dow had a 600 point swing on Tuesday. It's obvious we are still in a very volatile market. This is still a time to be very nimble. Don't be afraid to take some profits on selected positions but be prepared to buy them right back when new strength is seen.
10/14 - Stock Market Comments
Monday's trading was definitely bullish confirmation. Now the question becomes whether this is a bounce in a downtrend or the beginning of a recovery. Anticipate some profit-taking along the way. Watch the candlestick signals. We will either have a pullback after the initial bounce, indicating a bearish J-Hook pattern, or an indecisive pullback would represent the possibility of a bullish J-Hook pattern from here. If you bought aggressively either Friday or early Monday, don't be afraid to stick some profits into the account. There will be more opportunities.
10/13 - Stock Market Comments
The Dow formed a Long-legged Doji on Friday. The NASDAQ formed a small Belt Hold signal. What was required today was confirmation. Obviously, the very strong bullish futures this morning should be confirmation. Today, long positions can be bought with the caveat that the markets should close near the high end of their trading ranges. Expect a few days of a bounce at least. The financial stocks showed excessive strength on Friday. This would be a good signal that confidence is coming back into the market.
10/10 - Stock Market Comments
Pre-market futures have all indications that this is going to be the panic selloff day. You can be pretty well assured that every margin account in the nation is probably having to do some liquidating. Have your cash ready for some heavy buying if this market sells off hard and fast in the first couple of hours. Today you will need to have your 1-minute and 5-minute charts ready to watch for bottom churning activity.
10/9 - Stock Market Comments
Although the markets closed down on Wednesday, they were showing signs that the Bulls were starting to step in earlier in the day. The NASDAQ formed an Inverted Hammer signal on Wednesday. Today's positive futures indicate the Bulls coming back into the market. The Dow futures appear to be opening at approximately the same level they opened on Wednesday. This creates the possibility of a Kicker signal today. If the Dow opens positive and starts moving positive, consider taking profits in some of the short fund positions. If we start seeing bullish trading from these levels, after the severe selloff, anticipate the possibility of a J-Hook pattern forming to the downside over the next few weeks.
10/8 - Stock Market Comments
Can you think of any reason to be buying in this market? Have you heard any commentary suggesting there are reasons to be buying this market? When there is absolutely no reasons being prescribed for buying stocks, that is the time to start watching for the capitulation day. If there is massive selling early in the day, that will be time to bring up your one minute charts, five minute charts, and 15 minute charts to start watching where the markets might start churning, indicating where the Bulls are finally stepping in and soaking up the selling. These are the type of days that can produce huge profit returns.
10/7 - Stock Market Comments
The NASDAQ formed a gap down Hammer signal on Monday. This provided more bottoming potential than the Dow finishing about halfway down in its trading range. Obviously the markets are in well oversold conditions but they are still in the effects of the Dumpling Top. Still consider the markets in a downtrend until a definite buy signal appears. Don't be too anxious to jump back into the market. Traders can buy on signs of strength. Just be prepared to take profits very quickly.
10/6 - Stock Market Comments
The late selling Friday revealed the lack of enthusiasm after the bailout bill was passed. This continued to make the Dumpling Top pattern in the Dow that much more compelling. Today's weakness in the premarket futures reveals the lack of any bullish sentiment. This is usually the result of a Dumpling Top. All long positions should have been closed by now and the short positions or buying short funds should be in place.
10/3 - Stock Market Comments
The NASDAQ closed at recent lows on Thursday, the Dow closed more than halfway down the big bullish candle of Tuesday. This indicated the T-line was still acting as resistance in this downward trend. The employment numbers were extremely bad this morning but it created a bullish move in the futures. The rationale being that the economy getting worse would put more pressure on Congress passing the bailout plan. The problem may be that once they pass the bailout plan, then what? The Dumpling Top is still the predominant pattern to be analyzed.
10/2 - Stock Market Comments
Wednesday's trading did not show anything decisive. The T line is still acting influentially on this market. The weakness in this morning's futures continues to reveal that no great bullish force has yet come into the markets. Obviously, commitments to the long side or the short side are not going to be done with any aggressiveness until the House of Representatives makes a decision. This puts us in the same scenario as the past few weeks/months. Do not commit any funds until the market indicates a direction.
10/1 - Stock Market Comments
The 500 point recovery in the Dow was very comforting but it did not breach the trajectory of the Dumpling Top. The Dow needs to close above the 11,200 area to negate the Dumpling Top effect. The weaker open today demonstrates the lack of follow-through for the bullish cause. Unless the markets can close positive today, the downward trajectory is still in progress.