Categories
Search
 

Web

TigerShark
Popular Authors
  1. Dave Mecklenburg
  2. Momentum Trader
  3. Candlestick Trader
  4. Stock Scalper
  5. Pullback Trader
  6. Breakout Trader
  7. Reversal Trader
  8. Mean Reversion Trader
  9. Frugal Trader
  10. Swing Trader
  11. Canslim Investor
  12. Dog Investor
  13. Dave Landry
  14. Art Collins
  15. Lawrence G. McMillan
No popular authors found.
Website Info
 Free Festival of Traders Videos
Article Options
Popular Articles
  1. A 10-Day Trading System
  2. Use the Right Technical Tools When You Trade
  3. Which Stock Trading Theory Works?
  4. Conquer the Four Fears
  5. Advantages and Disadvantages of Different Trading Systems
No popular articles found.
Market Stumbles Yet Again
By Toni Hansen | Published  09/6/2007 | Futures , Stocks | Unrated
Market Stumbles Yet Again

The market was inundated by bad news on Wednesday and struggled to recover throughout the session. While the major indices didn't close at lows, they were unsuccessful in regaining any real footing intraday. The session began on a sour note with a strong downside gap which was the most pronounced in the Dow Jones Industrial Average ($DJI) and the S&P 500 ($SPX). The market had fallen throughout afterhours trading on Tuesday evening and into the early morning hours on Wednesday, and both the Dow and S&Ps opened at their 5-minute 200 simple moving average zones. In contrast, the Nasdaq gap was minor and nearly filled within the first 15-20 minutes of trading except that it first hit the 15-minute 20 sma overhead as resistance. After that, resistance hit soon after the open and all three indices gave way to further selling.



The sellers were given a boost by 10:00 ET economic data. At this time the National Association of Realtors reported a decline of 12.2% in July for contract signings on existing homes. This was the weakest performance since 2001. The market immediately responded with a rapid decline to new intraday lows. Support hit when the Dow came into its 15-minute 200 sma, but the market didn't go far from those 10:15 ET price levels. Instead they crept very slightly higher into the 5-minute 20 sma resistance before giving in to another wave of selling intraday which continued into about 11:45 ET.

The momentum began rather quickly on the second 5-minute decline ar 11:00 ET, but then it slowed significantly into 11:45 ET. The slower descent into the Nasdaq's 5-minute 200 sma was on lighter volume than the first move lower. This created favorable conditions for a mid-day correction off the lows. The Nasdaq, which had been holding up the best of the three indices, had a more difficult time finding room to move on the upside due to the 15-minute 20 sma overhead. The Dow and S&Ps on the other hand had a lot more room before their own 15-minute 20 period simple moving averages would hit in terms of price movement.



All three of the indices rose into their 15-minute 20 simple moving averages at about the same time as the 13:00 ET reversal period hit. The market dropped and then based along support into 14:00 ET. The sharper decline created a more bearish bias into the afternoon and when the Fed Beige Book came out at 14:00 ET the bears took over yet again. The Nasdaq fell strongly to lower low intraday and returned to Friday's closing level. The S&Ps and Dow were only able to make it back into their morning lows because they were already further extended on the downside to begin with. After hitting this support the market again turned over, pulling higher into the final hour of trading.



By the end of the session the Dow had fallen 143.39 points (-1.1%). The S&P 500 fell 17.13 points (-1.2%). The Nasdaq Composite lost the least in terms of percentage movement, falling 24.29 points (-0.9%). Most of the Nasdaq's losses were in the afternoon and were aided by news on Apple (AAPL) which announced substantial price reductions on their iPhones. Other top losers were TSN, FNSR, COST, and GES. APLX and KFT were a few of the bastions of strength While I'm still favoring a larger test of resistance from proven highs on the year, I'm taking positions in both directions.

Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.