It Is Not How They Open, It Is How They Close
Nearly every trading session after July 21, 2011 the major stock market indexes have sold off into the close. The major stock indexes have not had a two day winning streak since July 21, 2011 when the S&P 500 traded as high as 1345.00. There have been only two trading sessions since July 21, 2011 when that time that the markets have closed positive, however, there has been no follow through to the upside action on the next trading day. On August 3, 2011 the stock market rallied sharply into the close only to stage a sharp gap lower open the following day. The same type of pattern occurred on August 9, 2011 when the Dow Jones closed higher by more than 400.0 points on extremely heavy volume. Unfortunately, the very next trading session the markets failed to trade higher by opening sharply lower before the open and closing at the low of the session yesterday.
This morning, the major stock indexes are catching another bid higher to start the trading day. The SPDR Dow Jones Industrial Average(NYSE:DIA) is trading higher by $1.18 to $108.35 a share. These big early rallies in the market have been seen before, however, by the close of trading the early rallies seem to fail. There have only been two positive trading session in the past fifteen trading session. The markets are overdue for a bounce from this extremely oversold condition on the daily charts. This morning, many leading stocks are trading higher such as Apple Inc.(NASDAQ:AAPL), Netflix Inc.(NASDAQ:NFLX), and Exxon Mobil corp.(NYSE:XOM). The markets look to be off to a good start, however, in this volatile environment by the time this article is complete these markets could be down on the session.
Traders and investors must simply be prepared for the extreme volatility that is taking place at this time. The only positive signs for this stock market is that it is so oversold and extended to the downside. Unfortunately, the problems that caused these declines do not seem to be going away anytime soon. It is very important to remember the old market adage that states, it is not how they open, it only matters how they close.