Sunday, June 13, 2010

Know what to do when the market signals change..

Since the end of April the market has displayed signals that all is not well, and like a well played hand in poker the infamous Flash Crash was a way to confirm what hand the market was getting ready to deal. Let's take a closer look and see why if you were paying close attention that you were short before the Fat Finger ordeal. All there major indices displayed the same pattern in unison and when they all lined up the same way(in this case a Head and Shoulders Top), One knew to be on the short side before the big -1000 point down day, and with a huge drop like that one had to cover. The art of Technicals is that when the indexes came back to retest the Neckline of the head and shoulders but failed gave one the signal to re short the market for the second leg down. Now all the indexes need a bounce for nothing goes down in straight lines for any length of time, but if the indexes keep retesting the lows, a bread down will occur and lower prices will be the end result so for now caution is needed if you feel like testing the waters long, for when a stock or index changes direction like it did in May and so far in June, time will bee need to make sure that lower is not the direction of choice