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On a long
term basis:
1. The market is still
within the down trending channel that we have been talking about
2. All moving averages
are still pointing down.
3. Watch for failure of
the 1475 level as confirmation of the down trend continuing.
On a shorter
term basis:
1. The market is as
tight and choppy as we have seen it.
2. Every day, the market
gaps and then pulls back to the 1500 level
3. We may see a couple
more days of the same type of action until we break out
The market
has been consolidating for the last three weeks. This gap and fade, gap and
fade action is causing all moves to be throttled. The market just does not
support trends when it is consolidating.
Yes, we are
getting some nice moves, but they are very short lived. This market is
tougher than normal.
So is it
because of interest rates? No, news came out on Tuesday and the market did
not move.
Is it
because of the war on terrorism in the middle east? When did it end and when
did it start? What's new?
Is it new
terror threats? No, the market is aware that it is only a matter of time
before we get hit again. That fear is already built into the market.
Is it oil
prices? That's what they said when oil went above 40.
The truth of
the matter is that the market is just in a consolidation stage. We have been
in a strong down trend since May. We hit some support at 1519, which closed
the first wave, hit some support at 1450, which closed the second wave, and
we are now getting ready for the next stage in this trend. If this down trend
continues, the next wave, the third wave, may take us down to 1330. The last
time we had such a correction was in 2002.
The market
trades forward, never back. It trades based on what it thinks will happen in
the investment horizon, as in 6-9 months down the road, not based on what
happens now. In other words, ignore the news in your trading, all news is old
news.
Hope this helps,
Shay Horowitz - ShogunTrading
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