As you will see from the chart below, the Dow Jones shows major support from a long-term trendline going all the way back to the low of 1987 following the Stock Market Crash. THIS is why the stock markets have been rallying of late and for no other reason.
Dow Jones Stock Market Long-Term Trendline Support
A closer look at the recent price action shows a down-ward sloping channel in place. There was also major support derived from three coincident Gann levels derived as price projections from recent tops. These came into the region of 6468-6474. All of THIS put together is why I was able to go long the Dow Jones at 6474, just four points off the major bottom! (If you don't believe me, see my post on March 6th Twitter calling that bottom within just minutes after it had been made!)
Gann Support Levels Giving the 6470 Bottom On Dow Jones
However, the overall long-term picture is NOT bullish at all. We can expect to see these markets rally for maybe a couple of weeks at best, enter the usual sideways consolidation range and then resume the bear market in earnest to take out the bottoms and trade much lower still.
S&P Long-Term Bearish Double Top Chart Formation
On the S&P500, for example, we can see a Double Top in place and completed so enormous that that its price target would be negative prices, i.e. the price would have to go below zero to fulfill it! Be that as it may, the point being made is that the bear market is in place and set to continue for far longer. The rallies we see at present are bear market rallies. Enjoy them while they last, but be prepared to reverse to the downside once more. Obviously, from an investment standpoint, this is STILL not the time to be buying into the stock markets.
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Stock Market Trading
The good news for bulls is that Dow Jones Industrial Average (.DJIA) rallied 53.92 points, equivalent to 0.8% on Friday to close the week out at 7,223.98. After a pretty strong performance all week, that meant that the index was up 9%. Meanwhile, the Nasdaq Composite Index (.COMP) also added 5.4 points, i.e. 0.4% and closed the week at 1,431.50, which is a 10.6% gain for the week. The S&P 500 Index (.SPX) closed at 756.55 on Friday, giving it a gain for the week of 10.7%.
This is all very nice. Moreover, the rallies are set to continue to still higher levels over the coming week or two. However, bear in mind that these are BEAR MARKET RALLIES. Although they are strong, these stock index rallies do NOT indicate that the equity markets have bottomed. Not at all.
Instead, what is happening is that they are finding very long-term technical trendline support and are rebounding from them. Hence, traders can certainly trade the rallies with confidence over the next few weeks. However, do expect the whole picture to turn bearish again quite soon. As for investors, this is STILL not the time to be getting back into stock markets!
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Glencore Staff Agree to Defer Termination Payments (Update2) – Bloomberg
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IIT alumnus earns laurels for boosting India-Vietnam trade – Deccan Herald
Shantanu Srivastava, 52, who passed out of IIT-Kanpur as a mechanical engineer in 1977, was recently conferred the title of "Friendship Order of Vietnam". Indian Institute of Technology (IIT)-Kanpur is widely renowned as a centre for excellence. And
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Senior Technology Service Relationship Manager Banking – Silicon.com
Key skills: Relationship management with external stakeholders (at the highest level CIO / CTO / IT Director / Commercial Directors), intimate business knowledge and understanding of the financial clearing and settlements business together with in
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SPRINGDALE, Ark., March 9, 2009 (GLOBE NEWSWIRE) — Tyson Foods, Inc. (NYSE:TSN) today announced that it entered into a $1 billion senior secured credit facility with JPMorgan Chase Bank, N.A., as Administrative Agent. The new credit facility is
Glencore Staff Agree to Defer Termination Payments (Update2) – Bloomberg
March 11 (Bloomberg) — Glencore International AG, the biggest commodity-trading company, said senior staff agreed to measures that would delay future termination payments in an attempt to strengthen the company’s finances. Departing “key
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There is a law called Sod's Law which basically says that if
anything can go wrong, it usually will… and at the worst
possible moment conceivable; so much so that it will seem as
though the universe is conspiring to get you!
This is what happened to me today, but I am glad to report that
it nonetheless had a happy ending.
So, there I was having done a Dow Jones trade that I had every
reason to be proud of. I had bought the Dow Jones at 6474 last
Friday night, just 4 points off the low of 6470 prior to a major
rally. I had watched it retrace to the 76.4% Fibonacci
retracement level, while having added a slightly misguided
pyramid to the position at the 61.8% retracement.
Nevertheless, good fortune sometimes favors the bold and the
market roared, as had been expected when I put the trade on in
the first place. I was well in profit, and that pyramid was
helping very nicely. All good so far.
So, here I was booting up my computer about 35-40 minutes before
the market opens. My intention was to let it trade to the next
major high, and take profits on the whole position and then
reverse to a short position for the inevitable correction.
Well, you can imagine my horror when I found that my router was
not connecting to the Internet. Thinking it was a temporary
error, I rebooted the computer only to find the exact same
thing!. I tried again with the same result (and my computer takes
AGES to come back fully into operational use after a reboot).
So now what? I have a major position on, I need to take action
maybe immediately on market open, … and I can't see it!
Thoughts of having to physically telephone the broker to take the
trade off blind, without a live chart, came into my mind.
There were only twenty minutes before the market opened. A
desperate idea came to me. I went up into the attic to retrieve
the DSL modem to see if I could possibly install it in time. At
least I was keeping a cool head, but the clock was ticking me
down.
I fiddled around in the back of the computer and switched wires
from the router to the modem, and connected it up. Of course,
the damn thing would not install properly. I had to try several
times, hunting for the specific driver, and the specific way to
connect online.
Just a few minutes left before the market opened. I logged onto
the Internet, opened my trading software, and no sooner had it
opened than it gave the "Market Open" clang of the bell. I had
made it with literally not a second to spare!
So what is the morale of this story? Why am I telling you all
this?
Be prepared! The things that you think could not remotely happen,
the things that would have to defy the laws of probability to
happen, DO happen! Who could have guessed that at precisely the
moment when I needed to access the screens to take profits on one
of my best trades in recent times, this kind of conspiracy of
events would present themselves to thwart me and potentially
screw up the trade?
If you use a router, make sure you have a modem handy too and
ensure that the software is installed! Make sure that you have
the number of the broker handy and that you KNOW how to actually
call in an order manually (do you?).
Basically, think ahead and try to picture what might go wrong and
come up with a solution to it beforehand. Maybe you need a spare
computer too? What happens if there is a total power cut in your
area (it WILL happen one day, you know).
Above all, when the crisis strikes, keep calm and try to think
clearly. That is what I was doing although it was getting ever
harder as the minutes ticked by, I was fooling around with
unresponsive hardware and cables and did not think I would make
it. It never helps to panic though.
Overall, remember that an ounce of good preparation beats a ton
of remedial action after the event. Remember, these things affect
your trading. There is no point blaming the universe when they
happen, as they will eventually.
So, BE PREPARED! You have been warned!
Copyright 2009. Asoka Selvarajah. All Rights Reserved.
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