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The Market Rebounds after Last Week’s Decline
By BigWave_Trader on January 25, 2010
Stocks relieve oversold conditions by ending the day higher on lower volume. Financials gave the S&P 500 a boost, but volume lagged. The lack of volume is something we’ve seen with this market after it has suffered bouts of intense selling. Like the S&P 500 the NASDAQ was higher with lower volume. On the NASDAQ breadth was decidedly negative and given the sell off at the close it does not inspire confidence this rebound has any legs. We’ll need to have the charts set up again to get the market over the selling.
It wasn’t a surprise to see the market rebound today after Friday’s sell off as the sell-off was dramatic. Markets do not move in straight lines, no matter how much you wish it would. President Obama did not have good luck winning the market over on Friday; we’ll see how he does after his State of the Union speech. Any rhetoric on new taxes for the Financials and even businesses will more than likely create selling pressure. It is important to be ready for anything and at the moment price action is dictating for us to be cautious.
All uptrends usually display a few pullbacks before making a final new high. Ideally, we’d see the market fall a bit further than 8% we’ve seen. Pullbacks are healthy for all bull markets as it helps the strongest stocks set bases. So far, we have yet to see the market pull back enough for bases to form. When we have proper bases it sets the tone for stocks to run more than 50% like we’ve seen here. These stocks who are true market leaders blast out of their bases 100, 300, or 500%. You must be patient and allow these stocks to setup rather than jumping the gun. In order to have the capital to take advantage of these stocks and if you jump the gun you risk losing your capital. Rule number one of speculation is do no harm therefore, stay patient.
No one knows the future, we can only use the past as a guide to put us in the best position to grab gains. The market knows no opinion and yours should be left at the door. Stay patient, cut your losses, and keep it simple.
Go get ‘em
Posted in Market Commentary