May Lows Still Holding
After yesterday’s gap down opening the market basically ended where it opened. The indices tested last week’s lows and bounced back, making spinning tops in the process. (Note that I use SPY and DIA to do candlestick analysis on the S&P 500 and Dow respectively. That’s because of the way NYSE stocks open in the morning. Since the NYSE stocks don’t all open exactly at 9:30, but the indices do, the opening levels of those indices aren’t ‘real’ in my opinion. SPY and DIA give a more accurate view of the action at the open.) Check out how different yesterday’s candles look on the S&P 500, SPY, and NASDAQ (which opens all its stocks at 9:30):
That’s a huge difference for followers of candlesticks. The NASDAQ and SPY candles’ tiny real bodies show confusion and how much of a stalemate yesterday’s action was. The S&P 500 candle looks like the bears were fully in control all day yesterday. (The moral is that the NYSE sucks by not opening their stocks at 9:30 and don’t trust candlesticks of indices composed of NYSE stocks.) [/exit sandbox]
Anywho… The S&P 500 bounced off of its 200 day moving average for the second time in four days. That index is the only one of the major indices that’s been able to hold above that critical moving average. I still think we’re due for a bounce, but the more times we probe last week’s lows the more likely it will be that we smash through them.
This post has 2 comments
May 18th, 2004
So let’s presume that the market is going to continue testing lows and be choppy through the summer. Do you keep more money on the sidelines? Do you invest in stocks with strong dividends? Do you maintain your strategy?
May 18th, 2004
My strategy wouldn’t change very much since I’m a short term trader (looking for 3 to 5 day moves). I’d probably shorten my time frame a bit and I’d rely on oscillators (in my case stochastic) a LOT more. I’d be looking to sell/short overbought and buy/cover oversold based on my oscillator and of course candlesticks.
As for longer term folks, I’d hope they’d have the general market condition factored into their overall strategy. For my long-term account I’d be largely in cash until the uptrend resumed.