A Gray Line In The Sand
A much-overused expression among market analysts is
“line in the sand.”
Often, they’ll get baited into making definitive bullish or bearish comments
about individual stocks or the market as whole when they are interviewed by the
news media.
But traders know that one of the secrets of success
is to take one day at a time and not get emotionally tied to any
particular opinion about what the market will do next.
The whole technical mood of the market can swing from one extreme to another
very quickly. We’ve seen that in the past five days of market action. Monday’s
breakout from a 10-day trading range in the Nasdaq was greeted with with a
collective sigh. And they were singing “5000 here we come!”
Then Wednesday and Thursday happened and the music ended.
As Andy Grove said, “Only the paranoid survive.”
Today’s chart of the day of the NYSE Composite Index
(
NYA |
Quote |
Chart |
News |
PowerRating) shows a
trendline that some technicians might consider to be a “line in the
sand.” The trendline has been in place for 17 weeks and consistently
provided support during that time.
With the weakness we’re seeing on Friday’s session up to the time of this
writing, many traders are looking at the possibility of a breakdown below this
trendline. If that happens, does that mean that the hopes of a new bull market
are crushed?
Nothing is that black-and-white. In fact,
a consideration of a huge myriad of technical factors rarely gives even the most
successful traders in the world anything remotely resembling a definitive clue
about what the market will do next.
Moral of the story: Protective stops on every trade!
Have a great weekend,
Eddie