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Strategies & Market Trends : Continuing the IFMX discussion and more...
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To: Melissa McAuliffe who wrote (164)9/10/1997 10:14:00 PM
From: Robert Graham   of 206
 
The technicals of a stock are greatly influenced by the general market trend. For instance, if you anticipate a breakout and it actually occurs, if the market is in a downtrend, the breakout will not last nearly as long and it will dump much more quickly. Playing stocks when the market is in a downtrend is much more difficult to do. Also, perhaps some marginal breakouts will not occur at all. As a consequence, you do have to adapt how you use TA to the current market conditions. For instance, you will find a stock's RSI not peak as high as it normally would but it will drop to levels that are lower than normal before turning around. Also, it is important to know the strength of the stock's industry group in realtionship to the market.

Finally, no technicals will save you from a substantial drop in the stock market. For that matter, this condition that existed before the market drop was probably already in evidence on some of the key stocks that you would be following besides market indices giving indications leading the market correciton. The previous market correction started showing up in the price behavour of some of the stocks that I and others were following at the time, perhaps several weeks in advance of the actual drop. Also, the market appeared to be starting to respond to fundamental events in a markedly different and more pessamistic fashion.

Bob Graham
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