O.k. people here is the first installment of how to handicap the stock market. As I'm writing this, the U.S. is currently bombing a bunch of brown people in Somalian territory so the market will probably react this morning.
This lesson is a starter course as will not be dealing with the day to day operation of the market, but will focus on what's going on long term. If you are thinking about starting a investment portfolio, you will soon have an excellent oppurtunity to get in, but for now stay on the sidelines and wait for a pull back.
Below is the Russell 2000 stock index, this is a cluster Fvck of all the small and midcap stocks. This is a leading indicator because when money comes into or out of the market, this is where it will show up with the most consistency.
First a little bit on how to set up the chart. This chart is a 3 month look at the IWM with daily openings and closings in a candle stick graph. the colored candle stick allows you to see the open and close price for the stock, and any gap openings that may have occured. I will go over gap opens at a later date. A graph of the 50 and 200 day moving averages are graph with the candle stick graph. The 50 day is in gold and the 200 is in blue. Below that is the volume for the stock for each day of trading, and below that is the Stochastics for the stock in question. Stochastics is just a fancy word for market sentiment, it is either over bought, oversold or somewhere in the middle. This is a typical chart style that I use for the overall look of a stock or index. I use an execution chart that will also come later.
As you look at the chart you can see that on Jan 21, the IWM bottomed and then started to move up toward the 50 day moving average. Each time the graph got close to the 50 day moving average, the index had a reversal and also the trading range has been tightening over the course of February. EVERY time the IWM gets near the 50 day movng average you can expect a volitale movement in the market either up or down. You can also tell that there is "support" just under the 700 level, which is where the index will start today's trading. This could be an interesting day. If it breaks support, we could see a double bottom at or below Jan 21 st levels. A look at the stochastics doesn't really help either way to tell which way the market is going to roll today.
When a stock or index "consolidates" like the IWM has been doing for the last month, you can expect a break out either up or down in volitile manner. By itself this chart is inconclusive and it is wise to check on other indicators which I will do in the next post.
This lesson is a starter course as will not be dealing with the day to day operation of the market, but will focus on what's going on long term. If you are thinking about starting a investment portfolio, you will soon have an excellent oppurtunity to get in, but for now stay on the sidelines and wait for a pull back.
Below is the Russell 2000 stock index, this is a cluster Fvck of all the small and midcap stocks. This is a leading indicator because when money comes into or out of the market, this is where it will show up with the most consistency.
First a little bit on how to set up the chart. This chart is a 3 month look at the IWM with daily openings and closings in a candle stick graph. the colored candle stick allows you to see the open and close price for the stock, and any gap openings that may have occured. I will go over gap opens at a later date. A graph of the 50 and 200 day moving averages are graph with the candle stick graph. The 50 day is in gold and the 200 is in blue. Below that is the volume for the stock for each day of trading, and below that is the Stochastics for the stock in question. Stochastics is just a fancy word for market sentiment, it is either over bought, oversold or somewhere in the middle. This is a typical chart style that I use for the overall look of a stock or index. I use an execution chart that will also come later.
As you look at the chart you can see that on Jan 21, the IWM bottomed and then started to move up toward the 50 day moving average. Each time the graph got close to the 50 day moving average, the index had a reversal and also the trading range has been tightening over the course of February. EVERY time the IWM gets near the 50 day movng average you can expect a volitale movement in the market either up or down. You can also tell that there is "support" just under the 700 level, which is where the index will start today's trading. This could be an interesting day. If it breaks support, we could see a double bottom at or below Jan 21 st levels. A look at the stochastics doesn't really help either way to tell which way the market is going to roll today.
When a stock or index "consolidates" like the IWM has been doing for the last month, you can expect a break out either up or down in volitile manner. By itself this chart is inconclusive and it is wise to check on other indicators which I will do in the next post.
