Don't worry Earlie, we are sending a man over to nail that chair down hard so it won't move...a seat belt will also be provided for more security...-g-
siliconinvestor.com
Better strap yourself in traders, the woeful siren call of a despondent stock market has gotten so loud lately that even a number of formerly outspoken bulls are now moaning in anguish! The latest sentiment readings from Investor's Intelligence reveal that recent market action has convinced more than a few newsletter writers to give up their bullish outlook. This week's figures show bullishness has dropped from the April 17 level of 54.8% all the way down to 40.8%. It took about 8- weeks, a 100-point S&P 500 drop, and a 300-point Nasdaq plunge to convince these former bull captains that their ship was indeed sinking.
So what do we make of it? History tells us that the number of bearish investment advisors usually has to outnumber the bullish before a bear market can turn around. For those who might ask why, it has to do with convincing enough investors to sell and get out of the market. Once the sellers are done and gone, the supply and demand equation shifts back toward a bullish balance, and the market treks higher. However, the latest numbers don't indicate that we're there yet. Typically, a reading in the high 20s or low 30s is considered adequate - if the number of bears is high enough. Currently the bear crowd is growing, but has yet to reach to "too many bears" level that generally accompanies a sustainable market turnaround. The good news for long- term investors? The numbers are now headed in the right direction.
Just as Odysseus in ancient Greek mythology bound himself to the ship's mast to prevent the wail of Sirens from luring the seafarer on to dangerous rocks, traders can find safety and prosperity by securing themselves with a few important standards.
1) Don't let the crowd determine your perspective. Although many investors now indulge in regular pity parties, successful traders don't have time to wallow in despair. Instead, focus on locating opportunity - there's plenty of it.
2) Avoid overtrading. There are two ways to over trade - trading too often, or taking on positions that are too large. To prevent the latter, always calculate the appropriate number of shares for your personal account size. And for the former, remember there's no reason to trade in a frenzy. Instead of grabbing every setup that comes along, concentrate on each trade you make. Thoughtfully pace yourself by taking on smaller trades to stay in tune, and then load up the wagons when the time is right.
3) Cut your losses and let your winners run. This means setting stops and executing them as planned. Don't dwell on the losers, just learn and go on. Manage your winners intelligently - give them enough room to grow, but don't neglect them and let profits disappear.
4) Even though trading is supposed to be serious business, the best traders know how to laugh - especially at themselves! Relax, and give yourself regular fun breaks to clear your head. You deserve it.
5) Thinking like a winner makes you a winner. The sum of our thoughts has an interesting way of showing up in our lives. Think of yourself as successful, and you will be a success!
Okay, that's it for now. Summer has just arrived, so let's enjoy it!
Thomas Sutton, Editor
******* MARKET NEWS & CONDITIONS *******
The Dow has lost 453 points during the last three sessions, while the tech-laden Nasdaq shed 102. The S&P 500 Index also gave up 48 points to close underneath 1,000 for the first time since September 21st. The Dow settled at 9253 on Friday, underneath the low posted on June 14th at 9260; however, the 8062 low posted on September 21st remains much lower. The Nasdaq, settling at 1440 and five points above its daily low, seems destined to test the 1387 level set during the infamous September 21st trading session.
Some of the questions that may enter traders' minds as the weekend commences: With the dollar incredibly weak, is the Dow more susceptible to selling pressure? Answer: Yes. Will other countries continue to sell short-term Treasury Bonds in order to escape a relatively weaker dollar? Answer: Most likely, which will continue to weaken companies such as CAT, GM, F, and DE that really depend on exporting goods. Will a weaker dollar possibly spur inflationary concerns? Answer: Yes. As a trader, does it make sense to really be aware of the dollar in order to gauge the equity markets? Answer: A resounding Yes.
Looking ahead, support in the Dow should be found near 9100 and then again near 8850. The 8850 level will likely prove extremely critical. Resistance above can be seen at 9380 and 9500. Turning to the Nasdaq, strong support is seen at 1387 and 1357, while resistance is near 1500 and above at the 22 DMA (currently at 1545). It's important to note that the Dow did eke out higher highs near the 9700 level before collapsing; therefore, sellers may want to test levels slightly lower before covering shorts and allowing buyers to regain control.
John Seckinger, Associate Analyst |
