Sunday, January 11, 2009

Dow Chart

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Last week (see my "S&P 500 Technical Analysis" post on January 4, 2009 ) I mentioned of a danger that could come from high volume expressed in high MVO in period from December 30, 2008 until January 2, 2009. At the same time I mentioned that I would expect to see a few flat session before the market may reverse. This exact scenario was played last week: Monday - Tuesday we saw almost flat market which pushed previously bullish technical indicators into bearish and neutral. If on Friday, January 2, 2009 my technical analysis was bullish, then by the end of the trading session on January 6, 2009 the same technical indicators on all three indexes I track (Nasdaq 100, DJI and S&P 500) were bearish (see chart below): SBV, MVO, Advance/Decline Oscillator and McClellan Oscillator - Bearish; MACD, Stochastics and RSI - from neutral to Bearish. As a result the rest of the week we had down market.

Now, at the end of the week my technical analysis still points me to the dominance of the bearish sentiment on the stock market: SBV is still moving down; Stochastics and RSI are still below 30 and 20 levels respectfully. Advance decline oscillator and McClellan oscillator are flat and may indicate the coming possibility of changes in the sentiment, yet, I would not bet on this until I see McClellan Oscillator crossing zero line and Advance/Decline Oscillator moving higher. It would be nice to see negative MVO (volume surge during the price decline) before reversal as well, yet, it's not necessary - we did not see red MVO before reversal on December 12, 2008 and December 29, 2008 and I may assume that we may see reversal without it again.

Dow Jones Industrial chart

So, what is going to be next week? - I do not know - I am not an investment advisor and I do not want to be the one. Several years ago I pass the test and did have a mutual funds investment license. At that time I could be considered as an investment advisor. Yet, I left that business after I discovered that majority of investment advisors know nothing about stock market and investments and their main job is not to help people with investments but sell products of the financial institutions. After, I was put in the "shame corner" by my boss for selling to one client what he needed instead of what would give bigger commissions I decided that it's not for me. Now, I can give you only one advice - do not trust anyone in investment business, not even me. If you want to invest you will invest your own money and you have to learn by yourself what is good and what is bad.

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