Thursday, October 29, 2009
F.I.T. Stocks Market Update
TIME TO BE VERY CAUTIOUS! MARKET ON THE THRESHOLD OF A CORRECTION!
Yesterday, OCt. 28, 2009 all of the major indexes, with the exception of the DOW, crossed below the 50 day moving average line which for the past 8 months has been a support level for prices to bounce from. In addition, in the S&P and the NASDAQ a lower low in price was created and we broke through the lower level trend line that has held steady over the past 8 months. So now we have a breach of the 50 day moving average, a breach of the major support line of the upwards trending channel, prices have hit a lower low, and several days of distribution over the past two weeks have occurred in the stock market. These are all major signs of an unhealthy market and maybe an imminent correction.
When sell side volume builds and becomes the leader, the BEARS are beginning to win the battle. This is a very prudent time to follow your investment rules with no questions asked. Look to take PROFITS if you have them, CUT losses short in a weakening market and stick with your investment sell rules. The Stock Market is always right. If you have a sizable profit one can hold on a little bit longer, but if the market heads to a full correction it is best to capture your gains and wait for the market to turn around again.
The next couple of days will give the full answer on whether or not this sell off is for real. Last July the stock market through us a head fake, dipping below its support lines, and four or five days later jumping back into its upwards trending channel. Many times though, the stock market will break through its major support levels, head down in price for a couple of days, then buyers will step back in and drive prices right back up to the old support level, which now becomes resistance, and then gives the kiss of death by driving down even further catching many investors off guard. THIS IS A TIME TO BE VERY CAUTIOUS and FOLLOW YOUR INVESTMENT RULES WITH NO EMOTION.
NASDAQ 6 Month Chart:
THE S&P 6 MONTH CHART WITH 6 MONTH TIME FRAME
As you can see the S&P and the NASDAQ charts are exact replicas of each other. Both have just begun to breach the major support lines that had developed over their 8 month upwards trending channel. The Williams % R indicator has entered the -80 level indicating an oversold market. We will now need to watch carefully how aggressive buyers step back into the market or whether the BEARS will drag us down into a CORRECTION. My educated guess is that it is the BEARS time to win this battle.
Stick with your INVESTMENT RULES and FOLLOW THEM with NO QUESTIONS ASKED.
Happy and Healthy Investing,
Steve Martin
Founder
www.fitstocks.com
