Sunday, July 18, 2010

Was Friday's slump start of a downtrend ?

S&P 500 went from 1010.91 to 1099.46 a jump of 88.55 points or +8.76% in a straight line...

We had an "uninterrupted uptrend for seven straight days" a rarity in trading.....so a pullback was inevitable..lousy consumer sentiment or not.....

SO..Friday was Option Expiry when MM are in total control.....then came bad consumer sentiment data....a stat which is highly questionable @ best...so down we went in a hurry to 1063.32...a pullback of 36.14 points or 3.29% from recent high......

SO..we have a retracement of 37.56% of recent gains......

This pullback is extremely healthy which will bring support to S&P 500 around 1060 area....

NO..nothing has changed in the economic picture...some data are backward looking.....

Too many traders are reacting to any negative data...instead of buying good stocks @ lower prices.....

There is a tendency to WAIT forever for LOWER prices...I do not know anyone who can time the market or stock prices......IF you have ever done it once...you were just lucky.....

Market will move higher because of better earning reports & just MAY get out of this trading range and form a new higher trading range....

IF ...you have strong diversified portfolio ..there is a very good chance that you will have profitable trades many times.....

YES...US markets will remain range bound...that is what is happening..once there is more economic clarity & growth ...then there MAY be a sustained uptrend....maybe in Q4....

Here is my $/Sector allocation as of Friday :

AAPL 36.60% Tech/Smartphone,Computer
EGO 27.38% Gold Mining
LVS 20.86% Casino Operator
CREE 15.16% Tech/LED

Being diversified always reduces risk.

Good luck in your OWN investing/trading style.

BLOG does NOT give buy or sell.

Saleem

2 comments:

charlie said...

does the light volume bother you? do you think with etf's playing such a big role that affects the volume? thanks for all your great input!!

Stocks100 said...

Hi Charlie,

Thanks for your feedback.

Volume can be impacted by many things like:

-Low participation by retail..
-IRA's being switched into safer money market funds.
-ETF has mushroomed which increases volatility as each basket contains hundreds of stock.
-Overall sentiment is poor towards equity.

I personally do not "overthink" volume aspect BUT concentrate on overall sentiment & technical indicators like RSI which i do understand.

Wall Street is a complex place & it is almost impossible to understand what is going on & why....

Saleem