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Uncovered: Wild Stock Market Action And Profits

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October 04, 2011 – Comments (0) | RELATED TICKERS: SPY , UUP , JPM

The stock market continues to trade in a wild manner. A massive gap lower took the indexes to mega losses for the third consecutive day. The SPDR S&P 500 ETF (NYSE:SPY) hit an intra day low of $107.43. However, seasoned veteran traders understand a three bar surge to the downside on a gap down means a bounce. Anytime this happens, always look for a reversal. Sure enough, the SPY jumped higher and hit the flat line. Since that gap fill, the SPY has pulled back slightly with bullish consolidation into the lunch hour.

The reversal in the markets was not hard to see. Not only did a gap down occur on a three bar surge but the Dollar ran into major resistance. In last nights Technical Analysis Video, it was mentioned that the PowerShares DB US Dollar Index Bullish (NYSE:UUP)  had resistance at $22.62. This was the pivot high from February 2011. Just as the U.S. markets hit their lows, the Dollar ran into this level. Always remember, the markets move inverse to the U.S. Dollar. Therefore, using the powers of deductions, if the the Dollar is hitting resistance and will pull back, the markets should bounce.

Lastly, intelligent traders could have easily noted the strength in leading stocks like JPMorgan Chase & Co. (NYSE:JPM)  and Apple Inc. (NASDAQ:AAPL) . Even when the markets were down sharply, they held relatively well. Always watch the leading stocks for a hint as to the direction of the market.

Gareth Soloway
InTheMoneyStocks.com


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