Threading The 14000 Water Surface....
FUNDAMENTAL ANALYSIS
Stocks closed mixed today in an extremely turbulent session ending the Dow 85.84 points lower but the Nasdaq composite a marginal 7.7 points higher. Today, a broad based, low volume profit taking drove stocks to into the pit, back where it started yesterday but buying interest soon returned after midday, pushing the Nasdaq composite back up into positive territory. The Dow was making an attempt into positive territory too but time was up before it could do so. With the Dow making new highs recently, it is not unusual to see some profit taking, especially before the sensitive Jobless Claim report tomorrow (which is released every Thursday by the way). Jobless Claim report is an extremely important, forward looking economic indicator and formed part of the leading indicators index. Basically, if jobless claims show a rising and persistently high trend, it could be expected that consumer spending would drop and affect the rest of the economy in a domino like effect. That is why the stock market is sensitive to the jobless claim report. From investors' response to last Friday's employment report, I think investors would want to see some positive indication out of the jobless claim report instead of a gloomy one. Which also means that a positive report tomorrow may allow the market to get back up and probably to new highs. Let's watch and see...
TECHNICAL ANALYSIS
Praise be to the 14000 support level. The Dow rebounded off the 14000 support level once again in intraday trade today. This further reinforced the fact that the 14000 level has indeed become a strong short term support level. Short term momentum is now on the decline on our indicators and with the 14000 level this strong, I would see the Dow moving sideways along this line a little bit before making another upwards attempt. Overall outlook remains bullish as the Dow continues to trade atop a rising 30WMA and investors need to practise discretion when interpreting single day pullbacks like this one today.
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Labels: dow, fundamental analysis, nasdaq, technical analysis
posted by Jason Ng at 6:28 PM
4 Comments:
Hi Jason,
Thanks for your explanation on previous post :). In your opinion, would it be wise to add new positions now? If not, could you enlighten me on when would be a better time.
Thanks,
Rav
Rav,
Thanks for tuning in again. :)
Well, there is no way to answer your question in an intelligent way except by first knowing what your trading strategy, your trading horizon and your trading objective is in the first place.
For someone who is following a marked to market strategy for long term growth, then it doesn't quite matter to enter right now.
For someone who is following a market timing strategy, trying to generate alpha returns, then I would say that this might not be the best of times. In fact, the best of time was when the Dow displayed a definitely dragon tail formation reversal on 16 Aug, which I entered on the very next day.
Jason,
Thanks for speedy advice. When you said Alpha returns, do you mean swing trades? Do you recommend entering swing trades now (looks scary too me :))?
Rav
Alpha returns means return above market returns or excess returns. There are a lot of ways to generate alpha returns. In fact, the only reason why an investor would not follow a simple marked to market indexed strategy is that the investor desires to make above market returns and that is what we call alpha returns. So, no, alpha returns do not necessarily come from swing trading. There is even ways to generate alpha return out of buy and hold as long as the portfolio is properly diversified along the efficient frontier using CAPM.
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