The Trend is Your Friend

There is an old saying that the trend is your friend. Certainly, the trend has been down in the S&P 500 Index since November 5, 2010. We are now re-testing the lows of 1173 made last Tuesday, November 16. The news from Korea this morning rattled the markets. Notice that the market did not shrug off or ignore the bad news. It reacted severely to bad news by dropping to a low of 1176. The path of least resistance is now down in a down trend. So, the take away point this evening is that the market's reaction to bad news confirmed that the market is weak. We also had a market that closed down more than 1%. When a market closes down more than 1%, it is considered a true selling day. These days are generally bad times to hold stocks. There are always exceptions but the vast majority of stocks will follow the general trend of the market.

Should the market breach 1173, last Tuesday's low, we should see an acceleration in selling pressure.
Traditionally, investors and traders are conditioned to anticipate calm and peaceful trading days around Thanksgiving. The market's behavior today is another example of how contrary opinion can prove profitable.

Have a good evening!

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