The improving trend in the jobs picture that is being established is positive on the short term and this sets up the market to continue to gradually move higher.
The Dow30 was up 150 points in the first hour and proceeded to sell off 200 points in an hour as the US Dollar moved up 1.7% Friday. The US Dollar has been on a downtrend since an important bottom in stocks was established on March 10th dropping from 89 to $74.50 (last week). Any substantial bounce upward in the dollar will have a direct effect and cause the stock market to drop.
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The stock market really caught fire today for no apparent reason except that TradeStocksAmerica said that the buy on the dippers should start buying again. Seriously though, some say the market is thinly traded with a bias toward the upside because of the Jewish holidays. A more likely explanation other than the two given above is that there is a lot of money on the sidelines wanting to get in the market after watching stocks move up 56% on the indices since March 10th (or 71% for the Nasdaq Composite).
A lot of people that were left behind want to start making money in stocks after seeing the market move up so much. And the people who have made some money want to start making more.
So eventually the largest part of the investor group piles in with their money at almost the worst time possible.
But this causes problems for most people. Since the less educated investor needs confirmation that the stock market is going up BEFORE they buy themselves and it is such a delayed amount of time before their emotions allow them to get fully invested, the market usually has made most of its move up.
And the same goes with being emotionally “locked up” when stocks are going down. People tend to wait too long until they “just can’t stand the falling prices anymore” and throw in the towel when stock prices are at their lowest. Be cautious because history has proven that most people, as a group, decide to buy toward the end of the bull run and sell when stocks are near their lowest. Learn the strategies in The Wizard Training Course and build the knowledge to invest or trade with the odds on our side, no matter what the herd is doing or how the market is acting.
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REPEAT from Friday’s (SEP-4-09) report: Most stocks are probably not going to rebound to higher highs and we are looking at a few stocks to move to new highs.
It is best to monitor the market closely with your long positions because one of these times, the buy on the dip pattern will stop working and that spike down we had 2 days ago (Tues, Sep 1st) could very well mean an intermediate top is in and a downtrend could be starting but it is a little premature to tell that but that is my hunch at the moment.
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It feels and looks like stocks are going to start riding a momentum wave although trading volume is probably going to be light as summer vacations are wrapping up in the next two weeks.
As mentioned on Thursday night’s report is that the market is ignoring bad news right now and this is something to monitor if and when investors are hyper-focused on good or bad economic news.
The comments in recent weeks of that describe the market looking for “green shoots” (referring to a new plant growing out of the ground) of potential signs of economic recovery has now matured past that point.
Investors seem to be convinced that the worst is behind us after so much brainwashing by government officials, politicians and some early forecasters trying to make a name for themselves by making a famous call.
The important thing to watch is if the market acts like it is believing those talking points and right now it does. Any selling that occurs in coming weeks will probably be the type of correction that investors will buy into and that will give us another excellent swing trade opportunity on the long side.
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The market is resilient and the buy on the dip mentality is still alive and well. The same pattern has continued for weeks of buying on dips as well as investors focusing on economic data that may give clues the economy is turning around.
We are starting to see headlines in business news stating that a certain economist stating the recession bottom may have passed. Along with the rosy picture the White house and other politicians are painting about the economy, the fact is the rebound from such problems as the USA (along with most countries) has had is likely to quite some time to return to a healthy state.
Is real estate going to be profitable soon– not likely. Can we make money in stocks? Very likely.
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