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The Deeper Correction Has Arrived

My last post reminded our Shufflers that we had to look at the market with a bullish bias, but the age of the bull market was about to become a factor. Trends always have corrections as they progress. During the early life of the trend, many corrections are 2-4 days and relatively small, as traders and investors come into the market and buy small dips to keep the bull market alive. After 3 months of this type of buying, there is a time when a deeper correction occurs. Buyers simply step aside and are more cautious about their purchases. This occurred in July of this year.

We are now under the same market condition. The deeper correction that you are now seeing is “typical” for this stage of trend. A complex correction is the likely outcome over the next week or so. How deep will the correction be? This depends upon the news and financial outlook that develops over the next few weeks of course, but traders should expect many up and down days. The vertical rally is over for now.

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2009.10.05 / no responses / Category: TCC, The Stock Market
Bond Futures Suggest No Fear of Inflation

The 30 year bond futures set a new high for the past 4 months. This means rates are on the decline and this would not be the case, if there was a serious concern over inflation among the investment community. While there is certainly talk about the coming inflation due to the dumping of money into our economy, the bonds are not showing any signs that the inflation demon is on the horizon.

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2009.09.30 / no responses / Category: Mortgage Rates, TCC, The Stock Market
Like a Force of Gravity

The dominant trend of a market can take over prices like a hidden force of gravity. Yesterday I mentioned that the stock market was at an important juncture. The decline of last week was large enough to bring some potential that we were approaching a ledge in prices that could cause a larger correction in the bull market that we have enjoyed for the past several months. It was nearing the make or break time in the market.

It apparently was “make” time, as the bullish trend pulled prices higher in all the indexes. This was a perfect demonstration that the dominant trend in any market should always be respected. The “trend is your friend” is not just a tired old expression. It is backed by statistics when examining price behavior.

The only problem with the market is the age of the trend in daily prices. Prices normally begin to have deeper corrections after 3-3 1/2 months of consistent rallies. The decline in early July is an example. We are nearing a period in the cycle of prices where another larger correction against trend is increasing in likelyhood.

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2009.09.29 / no responses / Category: TCC, The Stock Market
Correction or Change in Trend?

The stock market is coming to a very important fork in the road. The Dow has fallen from its recent highs near 9,950 and has now fell back to near 9,600. Since the average daily range for the Dow is slightly over 100 points, this decline is not too severe as far as corrections go. The same can be said for the SP500 and the Nasdaq 100. What we have so far is a typical price correction in a bull market. We do not have enough evidence that the bull market has changed tends to a bearish trend.

That said this coming week may be an important week, as we continue to watch this price decline. If the Dow breaks below 9,500 this coming week, traders need to turn on their more sensitive radars and begin to watch prices more closely.

“Vertical” selling waves can sometimes be the start of a much larger correction or change in trend. So far the Dow has had down closes for three consecutive days. If this wave of selling continues, it may set up the first major reversal since the entire bull market began in March of this year. We will continue to watch the market in our daily blogs and let the Shufflers know, if they should begin to ring the register and bring in some profits from this recent bull market.

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2009.09.27 / no responses / Category: TCC, The Stock Market
Last Look McDonalds (MCD)

As investors build a portfolio, they must put their stock selections into a context of the stock’s individual trend as well as the stocks relative strength versus the SP500 or Nasdaq. You want to compare your stock in relation to the big engines. I have followed MCD now for several consecutive days to highlight the importance of this analysis.

I had mentioned that McDonalds MCD was not acting well as an individual stock when it was compared to the market as a whole. The stock indexes were rising, but McDonalds was hovering near its recent lows. I said in my blogs to watch the stock and see what happens if the entire market takes a breather and sets back a bit. The theory is that, if the stock cannot go up while the whole market is in a rally mode, what do you think the stock will do, if the whole market declines?

MCD set a new low on Friday and was down again today. Now we may see a small bounce over the next few days just to correct this recent decline, but the fall in the price of the stock is a clear picture of what can happen if you ignore individual stock relative strength when building a portfolio. I just thought you may have wanted to gain a little more incite into stock selection, as you learn how to take control of your own financial empire.

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2009.09.14 / no responses / Category: TCC, The Stock Market
Keep Watching McDonalds (MCD)

Yesterday I mentioned that McDonalds was demonstrating poor relative strength when this stock was compared to the SP500 “big engine” and that a decline in that stock was probable, in the event the entire stock market declined. The theory is that if a stock cannot rally when the entire stock market is advancing, what do you think the stock will do, if the entire stock market begins to fall?

The dow was down a bit today to stop the recent advance and McDonalds (MCD) set a new low for the past 3 months. Traders Country Club was created to educate new investors in how to trade the markets with a proper perspective and analysis. If the stock market corrects further next week, watch MCD. Learn how to avoid the “dogs of the dow”.

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2009.09.12 / no responses / Category: TCC, The Stock Market
The Golden Arches are not so Golden

Take a look at McDonalds (stock symbol MCD). While the Nasadaq and Dow and SP500 have enjoyed a nice rally the past few weeks, old Mac is struggling to hold the lows for the past 3 months. This is a sign of poor relative strength as compared to the “Big Engine” SP500.

Watch this stock over the next few days and weeks. If an individual stock cannot rally while the entire stock market is in a strong rally, what do you think the stock will do, if the whole market begins to fall? Watch MCD over the next few days and weeks. You will learn how to avoid the “dogs” and focus on stocks that show positive relative strength to the marketplace. Once you know how to compare your stock versus the market as a whole, you will find that you say the following much less often. “Why do the stocks I pick never seem to go up after I buy them”? Could it be you are not paying attention to individual stock relative strength?

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2009.09.10 / no responses / Category: The Stock Market
Listen Wednesday as we discuss the “0% Solution” and how this radical investment concept is gaining traction.

Also, plenty of new information about the completely unstable banking world and the huge mistakes investors are making right now in this major bear market rally.

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2009.08.28 / no responses / Category: Dan Cofall, The Stock Market