Stock Market Analysis

Thursday, May 13, 2010

The Unwinding...

What a turbulent week it has been in the US market in what was traditionally a quieter week as the market attempts to unwind itself from all the mess created by last week's freak incident.

So far, its still not clear what caused last Thursday's drop neither it is that important anymore to know. As traders we focus on what we should do under such circumstances instead of wasting time digging for reasons. Let those who are supposed to do the digging do the digging while we wait for the "final verdict" and trade our way out of this or stay out altogether.

So far, the Dow have taken back most of the lost ground but seems to be having some difficulty at the daily 50MA area. Could those automatic system trading programs be interpreting this as the start of a bear trend and is now selling into the strength? Maybe. That is why I keep saying computers should not be totally autonomous in trading. If you won't give nukes to skynet, you shouldn't give money to computers without close human scrutiny either. So far, the market direction is extremely unclear and there is no strong indication if this is turning into an intermediate bear trend or is it rebounding from a short term pullback and heading higher. In accordance with the primary bull trend, the inclination seems to be pointing upwards but as trend followers, we prefer not to make guesses and wait for the market to make a decision so we can simply follow. Remember, the market is no place for soothsayers.

For now, the Dow turns a short term bear trend, intermediate bull trend and a primary bull trend.




Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

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