After the Crash: 13-Day Moving Average

I was traveling on the road all day. When I got to my hotel, I saw that the market had crashed. So, what do we do? Here is what we do:

The rule remains that we get out at the 13-day moving average. That is hard to do as you see the market continuing to drop. But the drop is setting up a rally. Prices will bounce and we will sell out on that bounce.

Q: Well, Wink, what's the timing for this bounce?

A: The market has more to fall. It just does due to the momentum of the down draft. However, the 2011 Stock Trader's Almanac offers hope.

* Based on a study of 21 years of market data, the probabilities favor a market low this Thursday, August 11, 2011. I would ignore the market news until this Thursday. You will just get caught up in the media frenzy. BUT you should pay attention to the market this Thursday, particularly the close. If the market rallies this Thursday and closes up, then so far so good.

* Probabilities favor a market rally on Friday, August 12. This rally should be a dickens of a rally and reward our patience.

*Probabilities favor a second dickens of a market rally on Tuesday, August 16. This is the rally that should take us up to the 13-day moving average or 1275.10 on a daily chart. If all goes according to plan, we get out on that rally. And it will feel very, very good to be out of this market! (Historically, mid-August is stronger than the beginning and end of August.)

*The Almanac has a striking chart on page 104. This chart shows that the Russell 2000 is likely to plunge EVEN MORE between September and November. We should be on the sidelines before that drop. I would not be surprised if the S&P 500 Index hit 970 before year's end. We are in a powerful Bear Market. Prices are trending down. Sooo, we wait patiently for the 13-day moving average to be hit and then we get out.

I apologize that other commitments have taken me away from close scrutiny of the markets. Sometimes, life intrudes.

Your humbled commentator,

Wink