Hello Don and thread, I hope everyone has been well. It's been some time since my last post, however the current market condition is such that I thought I would add my own perspective to where I think we are currently. The unprecendented volatility of the past couple of weeks has left many confused and disoriented. How do you establish a firm footing when the market is down 700 pts one week only to see a 500 pt gain the next? Why the confusion? More importantly, WHO is benefiting from all this volatility? My own experience and warped believe system as to who really controls the action on Wall Street tells me that the smart money has done a masterful job at confusing the masses. Think about it, the action of the past couple of weeks has been an ideal environment to carry out the process of accumulation OR distribution of shares. Which leaves us with the obvious question as to which of the two is currently taking place. Oh yes, btw whether you call the smart money: market makers, specialists, insiders ,,,etc really doesn't matter, as long as we realize that any major move that occurs whether bullish or bearish almost always catches the majority of investors on the wrong side of the trade. Yet a select few will always benefit. Fortunately for us their motivation become much more apparent when simply following the price action on a simple bar chart. It is very difficult to hide a trend. It is also, however, very difficult to identify a reversal in trend, in its early onset. Plus the smart money also realizes that it has to perform at an even higher level today at accomplishing its inventory process since computers and the publics fascination with the markets puts them in a more competitive arena. The end result is increased volatility and a shortened time span for major price swings similar to the ones of the past couple of weeks.
In the past couple of days this thread has done a great job at covering both the bullish and bearish points of view. As I look out at the major avgs my own approach to the market has always been to not only look at the major indices such as the DOW or Trannies but even more importantly to look at the price action (chart) of the stocks that make up those major avgs. It only makes sense that the action of the generals will eventually spill over to the index as well. Here are a couple of observations that I noticed after looking at some of the stocks that I follow:
DOW - Closed very strong this week with a huge close on Friday. This index is currently running into a major wall of resistance. One that it has failed to break out of several time before. A quick look at a weekly bar chart will reveal the downtrend still intact. Last week's high was 10718 this weeks high is 10392.
Trannies - A glance at the chart in any time frame speaks a thousand words. Downtrend still intact.
Naz - Had a big day Friday. But yet one day's action cannot mask a more obvious breakdown on the chart.
The downside damage in some of the majors like IBM, LU, HWP and TXN has become even more apparent.
MSFT - Three lower highs three weeks in a row; CSCO whose late day trading and close has given us two lower highs as well as a complete reversal.
GE and MOT are both touch major upside resistance (years in the making). How are they going to handle this resistance?
YHOO and AMZN have smaller head and shoulder pattern developed within even larger H&S better viewed on a weekly bar chart.
My point in using these examples is that with the vast majority of stocks already experiencing their own bear market. The action of the generals is where we should look for an idea of future market direction. Many have already begun to break down. My own interpretation is that the action next week will offer us great insight, especially with monthly closing prices ending on Friday. We are at a critical area. It's up to the individual stocks and indices to respond.
Regards,
SO |
