How To Capitalize on This Holiday Season
This post talks about how investors can capitalize on this holiday shopping season.
This post talks about how investors can capitalize on this holiday shopping season.
“Top Down Trading” (TDT) was Jesse Livermore’s unique trading system which outlines how one of the world’s most famous speculators read the tape. Livermore emphasized the importance of keeping things simple by remaining as objective and unbiased as possible.
The major averages confirmed a new rally attempt and ended higher for the week as investors digested the latest round of earnings and economic data. However, this was the second consecutive week that volume, a critical component of institutional demand, receded as the major averages advanced. Normally, one would like to see volume expand as the market rallies and contract when the market declines. In terms of new leadership, it was encouraging to see new 52-week highs outnumber new 52-week lows on the NYSE and Nasdaq exchange.
The major averages ended lower as the US dollar surged on Thursday. Volume, a critical component of institutional demand, was higher on both major exchanges which marked the latest distribution day for the popular indexes. Decliners trumped advancers by about a 4-to-1 ratio on the NYSE and by about a 3-to-1 ratio on the Nasdaq exchange. In terms of new leadership, it was encouraging to see new 52-week highs outnumber new 52-week lows on the NYSE and Nasdaq exchange but the number of actual leaders breaking out of sound bases remains very light.
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The major averages rallied on Wednesday, sending the benchmark S&P 500 Index to a fresh 2009 high on positive economic and political data. However, volume, a critical component of institutional demand, was reported lower on both major exchanges. That signaled that large institutions were not aggressively buying stocks.
Over the past decade, I have studied many of the legends of Wall Street and have noticed several overlapping similarities in their thinking. The following list outlines critical components that many of the best investors/traders share, regardless of their investment style or background
Make no mistake about it- this market is strong! Every pullback since the March lows has not exceeded -8% and the bulls have promptly showed up to quell the bearish pressure. The latest correction began on October 28, 2009 and ended today on November 9, 2009 when this rally-attempt was confirmed.
It is also important to note that several of the popular averages encountered resistance near their respective 50 DMA lines before turning lower today (SP500, NYSE, RUT, Nasdaq 100, Nasdaq Comp, & the mid cap S&P 400).
There is a major (flawed) assumption that is commonly used when people think about risk: that there is an equal relationship between risk and reward. However, in the real world, most so-called “risky” investments fail. Therefore, one would be wise to step back and take an objective look at the upside (i.e. potential return) before putting a single penny to work in any investment.