Monday, October 13, 2008

End of the Market Crash?

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Isn't it a good day? Read my Friday's (Stock Market Crash Analysis) post. Yes I expected strong run, but this rally up exceeded all my expectations - DJI run 11% up, S&P rally 11.5% up and the Nasdaq 100 has made 12,5% profit. S&P 500 and DJI have recovered from more than the half of the last week losses and the Nasdaq 100 index almost made to the October 3, 2008 close.

I had bullish feeling and I was reworded. Yet, let's not forget the lessons of the past by following the golden rules: protect the profit and cut losses. Even I'm still in Bullish mood and even all my technical indicators point to the continuation of the recovery, it is a good strategy to have trailing stop set.

I do not post any chart today, as I mentioned all my technical analysis is bullish at this moment and I see the odds are on the side of the further up-move. The fact that the market ignored huge volume and oversold levels in the middle of the September tells me that there is a possibility of the indexes running to this level. Yet, before that the indexes has to run over the September 29th, 2008 bounce level.

I believe the main questions many traders are asking now is "Is this the end of recession?" My answer is "I do not know...". Yes, it could. During the recent crash a huge amount of money left the market. Friday and today we saw that the investors started to buy by pushing the price up. I would say we will see how the recovery develops. In majority situation after the strong bounce we may see the attempt of the market to retest the support levels and today 11% run up is not a complete victory on the recession. I will say that the recession is broken only when I see after the first recovery run a down move and then reversal which would beat the first recovery run highs.

Again, as a mentioned in my previous post if you are long-term investor and for you it is not very important where the indexes are in a month if over the long period (several years) you are in profit then you use each drop to buy. Friday October 10 was a nice day to buy in long term (see my previous post). Even if the indexes drop lover in a month, then you will make just another injection into your 401k and IRA accounts. If you wait when the indexes are back to the July 2007 highs and then start to invest into your pension funds I may guarantee that over the long term your pension will be broken.