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Volatilty is No Place For Inexperienced Traders: The week ahead - June 7-11 2010 Print E-mail
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Weekly Forecast
Sunday, 06 June 2010 08:00

market_downwardsThis past week the markets continued to move up and down with big swings in both directions. Volatility is the new name of the game and is no place for inexperienced traders. It is extremely important to have a plan in place as the market can move against you very quickly.

The move up on Wednesday was on very low volume and failed quickly on Thursday. The move down on Friday was on very strong volume, a whopping  45% higher on the DJ-30. We didn't hear any stories about some broker with fat fingers adding zeros to sell orders this time.

Friday's close was the lowest close since Feb. 8th on both the DJ-30 and SPX, the NASDAQ Composite had moved up the most so a new closing low has not been printed. However much of the gains are directly attributed to AAPL and it is now over bought and in danger of dropping hard. If AAPL closes below the 50 day sma currently at 250 it can easily drop down to 222 or even 200 and that will make the NASDAQ the leader on the way down.

This coming week we expect the market will continue lower, our open positions and the selections on our watch list are inverted ETF's. This move down is not perfect or easy to trade as a number of the indicators we use are showing a divergence with price, In other words they are pointing up when price is obviously pointing down, so caution is a must.

This week we changed the charts below and instead of the normal candle charts we posted line charts. The  pattern that has formed is much easier to see in the line charts. If you look at the SPX, DJ-30 and NASDAQ charts below you will see the M pattern that has been formed over the past two weeks. Most traders can identify the bullish W pattern, but it is not always as easy to see the bearish M pattern. Line charts only show closing prices so although patterns are easier to see they do not show the highs and lows of each trading day.

Gold has formed an ascending triangle, a break up should take it to new highs.

The U.S. Dollar has broken above the 87.45 resistance area and now has 91.60 in it's sight.

clickforcharts


 

The Nasdaq Composite Index

COMPQX6


Standard and Poors SP-500 index

SPX6

The Dow Jones Industrial Averages Index

DJ-306

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GOLD - via the GLD

GLD6

The US Dollar (Dollar Index )

DXYO6
 

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