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All Aboard!
Research for Online Investors
by John Dalt
5/27/10
I about spit out my coffee this
morning when I saw the overseas markets, and our futures market
numbers. This was not what I
expected. Well expect no more, reality
check. It took the Asian markets to tip their
hand. What
happened?
First we need to look back at the
U.S. market on Wednesday. The markets were up in the morning, but
faltered after the European markets
closed. Our markets
had just bounced off lows and a three day holiday weekend
is approaching. There
was a rumor that China was concerned about the euro valuation
and may withdraw from purchasing euro denominated
debt. The N. Koreans
rattled their sword concerning South Korea, and threatened to
halt travel between the North and
South.
This was a “three strikes and
you’re out” situation. When traders are uncertain of the future,
they become cautious. Cautious traders do not buy, they
sell.
While we in the U.S. were
sleeping, the Chinese affirmed their support for the
eurozone. Hillary Clinton offered to show China’s
leaders irrefutable evidence that N. Korea was guilty of firing
the torpedo and sinking South Korea’s warship in
March. China was reported to be “re-evaluating”
their support for N.
Korea.
This changed investors attitudes
and they went on a buying binge, starting in
Asia. Market
participants scooped up oversold stocks, by the time our market
opened this morning the locomotive had left the depot, it was
either get on or get out of the
way. We could
almost hear the conductor yelling “All
Aboard!”
Below is a Point and Finger chart
that should give us some indication of the market’s
direction. Point and Finger charts are useful to filter
out the daily noise of the market. The market has turned the bottom, and made a
move higher.
This chart shows the S&P 500
since October 2008, indicating we may see a run as high as1140
on the S&P before we hit significant
resistance.
This second chart covers the same
time frame for the S&P 500 with moving averages and MACD
displayed at the bottom.
The
200-day moving average (red line) is at 1104 and the 20-day
moving average (blue line) is at 1129 Looking
back for the past 18 months, you
can do well to buy when the index is below the 20-day moving,
and sell as you move above the 20-day moving
average. This was
during a nice bull run. Will it
continue? We
don’t know, but believe you should be a buyer now, and a
seller
later.
We
have three different levels of resistance to watch 1104, 1129,
and 1140 Watch how the market reacts as it reaches, and
either punches through or fails to penetrate these
levels. Watch the MACD (at bottom of chart), notice where
the black line is above the red line, leading it higher.
This occurred in March-April 2009, July 2009, and late Feb -
March 2010. If this repeats, get aboard the
train!
To the
Mailbag: Thanks, I
really do appreciate your responses. I feel I have
already gotten my money's worth in education
alone.---SwingTrader
subscriber R.G.
John’s
reply:
I appreciate your kind
words. We work hard with all of our premium
services to help our subscribers to not only make money
in the market, but also to learn more about markets and
investing.
The information presented in this
newsletter is based on generally available news releases,
corporate filings, current events, interviews and the editor’s
opinions.
It may contain errors and you
should not make investment decisions based solely on what you
believe you have read here. Do
your own research, it is your money. If
you lose it, it is your responsibility, not ours or your
grandmothers!
The editor may or may not have a
position in any securities discussed. The
editor may have held a position in a security earlier, or in
the future.
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