Monday, October 10, 2005
Issue Contents:
| 09:50 | Market Direction Quick Take |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Even if a market is terribly weak, generally aftrer such a big move down, particularly when such a move retests an important prior low, we expect a bounce.
Typical targets following a big sell off are near the 20 and 50 period moving averages; but its also worth counting the number of bars price bounces. For the first 2 – 5 bars, the risk of sellers coming in and forcing price right back down is much higher.
The bounce may be only a single day to three or four days before attempting to continue down again; or, the other common scenario is that a process of consolidation will begin, resulting in a range developing near the recent lows. Such a process often takes 5 – 12 sessions before price resolves in whatever direction it intends to.
And if no bounce forms – price continues lower today? That my friends is a sign of an extremely weak and dangerous market. When price is unable to find support from buyers and blasts down following a single pause day, we have to assume that investors and traders are singlemindedly focussed on heading for the exit doors.
If so, the next major support level on the Dow 30 is near 10,000, the 2005 lows, and on the other major indexes we can expect at least a 50% retracement of the rally since the spring, if not a little more for good measure.
Today's transcript.
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