Tag Archives: Market trend

How to identify the trend in the market

Do you know where we are in the stock market right now? Is it cheap or is it expensive? We are near the all time high. What is the next? A stock market crash? A correction, or a consolidation? Where do we find answers to all those questions?

Indu

As an investor you need to read the map. You need to identify facts and not make any assumptions or any forecast. You can`t belive or “feel like” in the stock market. That`s why traders trade what they see, not what they think.

It is dangerous if investors and traders begin to assume. Predicting the market is a difficult, if not impossible, game. Reading the markets is an empirical science. Investors and traders with success in the markets requires serious study and analysis that is fraught with success and failures.

Failure is painful and should be looked upon as learning experiences. Technical analysis is an art form and the eye grows keener with practice. Success is the trading market is a great thing, but don`t get to smug about it. Study both successes and failures with an eye to the future.

It`s a great thing to identify the primary trend and then catch the big moves. Two thing drives the market: the fact and the psychology. The market tends to go much longer than expected (what we see right now) and much deeper as expected.

You have to understand that the markets are influenced by emotions and prone to over-react both up and down. Therefore; you have to concentrate on identification and following: identify the trend and then follow the trend and the trend is in place until proved otherwise.

This is when the trend will end, it is proved otherwise.

I will do it as easy as possible and show you a basic method of how you can identify the trend. This can be a good starting point for you to develop analysis guidelines that you are comfortable with and understand.

The first step to identify the primary trend is to identify the individual trend of the Dow Jones Industrial average (DJIA) and Dow Jones Transportation Average (DJTA), individually. Use peak and trough analysis in order to ascertain the identity of the trend.

An Uptrend is defined by prices that form a series of rising peaks and rising troughs. In the chart you will then see higher highs and higher lows.

A Downtrend is defined by prices that form a series of declining peaks and declining troughs. In the chart you will then see lower highs and lower lows.

Once the trend has been identified, it is assumed valid until proved otherwise. A downtrend is considered valid until a higher low forms, and the ensuing advance off of the higher low surpasses the previous reaction high.

Below is a chart of the Dow Jones Transportation Average. I printed out the chart yesterday june 26, 2014. As you can see, in 2012 there was a consolidation period, and in 2013, and so far in 2014, it is all in an uptrend, but where is the top? Where is the peak?

Tran

After a peak, a series of lower lows and lower highs will be formed to make a downtrend. In the downtrend we will then see a bounce back and have a secondary rally. After a downtrend, you have to look for high volume days, like high volume washout days. High volume days signal that a possible change is looming. Alone, a high volume washout day is not a buy signal, but rather an indication to monitor price action a little closer.

If you see a higher low later on, it is too early to call it a change in the trend. The change of a trend is not confirmed until the previous reaction high is surpassed. It need to cross the trend line to call it a change in the trend.
An uptrend is considered in place until a lower low forms and the ensuing decline exceeds the previous low. You can see the uptrend in the Dow Jones Industrial average chart below. You can see a series of higher highs, and higher lows.

Bears jumping in on the top can sit on top for a long time with more all-time-highs to come, but professional traders and fund managers do this to make an insurance for their portfolio, because it is impossible to predict a new change in the trend.

Indu

All you have to do is to catch the big moves. To do this, use weekly charts to establish reaction highs and lows. But weekly charts may not portray the details you need. One possible solution is to apply a short moving average to the price plot. A 5-day moving average could be applied to smooth the price series and still allow for the details.

What I am talking about is not a science. It is just ment to offer insights and guidelines from which to begin careful study of the market movements and price action. Look at the charts, read the map and catch the big moves.

Reports today:
09:55 a.m EST Revised UoM Consumer Sentiment
09:55 a.m EST Revised UoM Inflation Expectations

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Leave a comment

Filed under Stock market

Rally!

Yesterday, I was sitting in front of the TV…..eh…… in front of my computer, watching live streams with Chairman Ben Bernanke. He did not disappoint the markets. The DOW was up +1,84% and the S&P 500 was up +1,7%. What a rally!!!! Ho ho ho.

They are not going to taper now in December, but plan to start tapering in January next year. There was two good news yesterday: 1. The Fed will cut back it`s bond purchases by $10 billion, and 2. The interest rates could remain low even if unemployment drops below 6,5%. This is music in investors ears!

Gold went in the opposite direction and didn`t like the news from the Fed. Gold is now trading near the critical $1200 level. I have written about this critical level before, and this is the break even level for the mining companies.

The mining companies doesn`t earn money if the price goes below $1200. It will be very exiting to follow the gold price in the future. Watch out for this level and see if this level holds. The news yesterday was bearish for the gold, but bullish for the dollar.

A lot of investors and money makers have lost a lot of money in their gold investments since 2011 and that is because they didn`t recognize and adapt to the changing trend. We are in the same situation right now, where a lot of people don`t really know what is to come in 2014. Will we see a rally in gold?

As you can see from the gold chart, we are at a stage one basing phase. 150 and 200 moving averages is slowing down and start to go sideways. This will go on for about 6-12 months. So, now you know when to expect the gold bull market start again.

In this one phase stage, a market goes both up and down and it looks like it goes nowhere. Many people are getting frustrated and start to give up and others that is not in the market stops paying attention to the market. After a bear market, a stage one basing phase will follow and make a new way for a real bull market.

We have seen many bubbles like the internet bubble, housing bubble and the market crash in 2008. Now, it seems like a new bubble is on the way. The Fed are on the way to build a dangerous federal government debt bubble.

It can be avoided by reducing the Congress spending deficit. But in the budget deal last week, they increased the government spending. All this money printing have been a disaster for the U.S.

In Mars next year, we have seen a bull market lasting for five years. What do you think will happen to QE if the economy slows again? Goldman Sachs predict the domestic GDP growth to hit 3% next year (1,7% in 2013). I hope he has right. I look forward to 2014.

News today: Unemployment Claims at 8:30am, Existing Home Sales & Philly Fed Manufacturing Index at 10:00am.

Markets up

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Leave a comment

Filed under Commodities, Stock market

To taper or not to taper

The FED`s FOMC minutes, said yesterday that they could see the Fed tapering its $85 billion-a-month bond-buying program at one of the next few meetings the coming months. In addition, the committee members also saw the U.S. economy growing at a moderate pace.

This is not something new to us. They have earlier said that they want to see the unemployment rate below 6,5% and a better growth with a stabile inflation before they start to taper. Therefore, the U.S employment report in early December will be on traders and investors watch list now.

Once they came out with the news yesterday, the dollar index shot to its daily high, which is a bearish signal for the precious metals traders. Gold and silver prices dropped sharply. Where are the gold headed now?

From 1976 into the peak in 1980, gold rallied from $101,50 to $873 an ounce. A big bullish trend for the gold that time. Fear and greed are reflecting this chart, while people trade on emotions.

The gold indes peaked out and the market backed off and settled into a sideway trend from about 1982 to 1996. Then it started a sideways trend from around $281 to $514. A loooooong sideways trend for a loooong periode of time.

It went sideways in the 90`s and people considered the market to be «dead». But then the market changed in 2001 – 2002. It started a new trend that peaked out in September 2011, trading at $1900.

The chart is now very similar to the chart back in the early 80`s. If this is the future for gold, we are likely to see a sideways trend now.

But many people expect a big drop now because the market seems to be overbought. If that happend, we will se a change for the gold price. Probably a big jump. News today: PPI & Unemployment Claims at 8:30am, Philly Fed Manufacturing Index at 10:00am.

shinybull_for_sitesite-7

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Leave a comment

Filed under Stock market, Stocks

Streaming is the future!

 

Internet changed the world, but we have only seen the beginning. You all know what happend to the print media. Internet relegated the print media to insignificance! Not only have the subscriptions gone, but the ad revenue has dropped dramatically too.

We are now seeing the same with the television. More than 5 million have already “cut the cord”. People ditched ordinary television in favor of online content from the likes of Hulu, Aereo, Netflix, YouTube, Amazon Prime, iTunes video and Goolgle Play. This trend will continue and is accelerating too.

Netflix is growing month after month and the ordinary cable TV subscriptions declines every day. A dramatic change. For every one American who ditched cable TV, we saw two signed up for Netflix. Now, you know what to buy and what to short?

Some investors are talking about a bubble in the technology industry. Is that right? Well, Nasdaq is nearing 4.000, and that is a level we have not seen since September 2000. Just months after the tech market collapsed. All this only a few months after the U.S Government shut down for 16 days early in October this year. This bull market is very odd!

Investors are bearish on gold and this precious metal is now trading at $1284,00. Once again below the support level at $1300. It is heading for the first annual loss since 2000. People do not belive in it anymore.

Gold slumped 23% this year and this is the biggest annual loss since 1981. Gold drops because the inflation everyone is waiting for fails to accelerate and the S&P 500 reaches all-time highs. I think people are bearish before Yellen`statement. She is ready to back stimulus until she sees a great growth in the economy.

News today: TIC Long-Term Purchases at 9:00am, NAHB Housing Market Index at 10:00am (all times: eastern time). Fed chairman Ben Bernanke will speak tomorrow!

Apple-TV-logo-on-iPad

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

Leave a comment

Filed under Commodities, Stock market, Uncategorized