It was a tough week in the market, as the Dow Jones closed down about 127 points (-1%), the S&P down about 7 points (-0.5%), with the Nasdaq gaining about 20 points (+0.7%); all-in-all, a pretty flat week, but still a good sign for stocks looking forward in my opinion. Investor’s & traders alike are taking profits, at any giving moment. Can you blame them? This is not the type of market where you let winning stock picks run. More so, stock market investor’s & traders are looking for reasons to get long the market, as opposed to selling everything, including the kitchen sink.
(On the chart below it says weekly meaning it's a 1 week 15 minute chart.)
On Tuesday, the market moved higher. The Dow gained about 79 points (+0.6%), as “upbeat housing results”, took investors by surprise. New housing permits applied for, climbed to 7.9%, a level not seen in nearly 4 years.
On Wednesday the market slipped but later recovered as all eyes moved to “Big ben” (Ben Bernanke); waiting in limbo to see what the Fed would do to “further stimulate” the U.S. economy. I was watching CNBC that day, and one of the guest speakers made a comment that, “the Feds still have ammunition at their disposal, however, that ammunition is not as powerful as before”. That’s the same, as saying that the Fed’s still have things that they can do, but it might not be as effective as the things they have done in the past to boost the economy. That guy was “cautiously pessimistic”, while trying to maintain optimism in my view. The Dow closed basically flat; off by only 3 points.
The Market mover came on Thursday, as U.S. stocks sold off heavily, sending the Dow down by as much as 261 points (-2%). A rise in “Initial Jobless Claims,” wasn’t digested by investors very well. Plus it didn’t help matters any, when rumors that Moody’s credit rating agency, was going to downgrade global banks (which turned out to be factual. They downgraded 15 banks). So what we saw was a classic, profit taking selloff, while some took short positions, in the market. Not a good day, by any means.
Then on Friday, the market snapped back (some buyers, some short covering), on news that the European Central bank (ECB) would “take further steps to ease loan collateral for banks”, (basically improve access to the banking sector by widening eligible collateral). The Dow rose about 67 points (+0.5%).
In light of all of this, it seems that the market is holding up well in the face of bad news. I would look to the charts to see when buying & selling opportunities present themselves. If we break key resistance points that’s an opportunity to take profits, cut losses, or take a short position. On the other hand, If the market rallies and we break past key resistance points, then that’s a chance to get long the market. Just my opinion!
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