The Next Two Days

We are approaching the turn of the month, the transition between February and March. This is an important and significant time. Consider these two observations:

1. The Three-Day Method suggests that market action is driven by powerful forces. Sometimes the market is driven down in order to create a buying opportunity. Sometimes the market is driven up in order to create a selling opportunity. The general idea is that there are roughly three types of days-- a Buy Day, a Sell Day, a Sell Short Day. A Buy Day is when the low of the day occurs early in the day. The market closes at its high. A Sell Day follows a Buy Day. The low of the day occurs early and the high of the day occurs late in the day. Powerful forces use this day to sell securities and contracts acquired the day before, i.e. the Buy Day. Finally, the Sell Short Day is the next day. The high of the day is made at the open or shortly after the open. The market then drops and closes at the low of the day.

If you accept this picture, then Thursday's low of 1294 on the Standard & Poor's 500 Index meant that Thursday was a Buy Day. This was a day to buy as a short-term trader. Friday was a Sell Day. Notice how the market opened at the low @ 1307 and continued up throughout the day until hitting a high of 1320 and closing @ 1319. Ideally, powerful forces that purchased S&P futures on Thursday were using Friday to sell into strength at higher prices.

So, Monday should be a Sell Short Day. This would be a selling opportunity where the market is driven up at the open and then sells off throughout the day. Look for an open around 1320, Friday's high, and then for the market to sell off throughout the day.

2. Tuesday, March 1, is the first day of the month. For the past few months, the first day of the month has been characterized by buying pressure. I would think that Monday should also be a Buy Day since it follows a Sell Short Day, Monday. If March 1 is an up day in the market, monitor the volume. If the volume is extremely low, then the rest of the week would be down.

Have a great day!

Wink

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