Monday, 7 November 2011

How is November market?

Dear Friends,

It has been a great October. October climb is nothing less than spectacular. Dow Jones has climbed from 10400 points up to 12300 points, 2000 points in less than 1 month. I heard from CNBC that this has been one of the best 4 months, like in 26 years of Dow history. Wow! Applause!

I have stated that we must always pay attention to economical reports to know any market direction. In fact I emailed everybody during the first week of October to start accumulating position as I feel that market confidence is back. In mid of October, some traders think there might be a consolidation. On the last email on 19th October (see below), I still continued my stand to accumulate position!

So far so good! There have been some kind friends after my last email warning me that I might be wrong. I have also heard some trainers in Singapore continuously asking people to short index in mid October. Please don't do so now!! Market confidence is back. Be careful of shorting!

My views and stats for this month after the first week:

1)  ISM and Nonfarm payroll both did not beat expectation this month, resulting in down days on both days of results last week. As a trader, I normally have a habit. Today I am going to share with you something important and from my years trading in US market: As a trader, you need to pay special attention to how the market reacts to a bad report day to gauge the market confidence. Especially after a bad economical report day, to see whether it recovers.

In trading, the economical data is not important. It is how the market reacts to the data afterward that is important! If you notice, after a bad tuesday ISM last week, market recovers on Wednesday and Thursday.

On Friday, Dow Jones opened 160 points in the red after a bad nonfarm payroll, only to recover to negative 60 points at close of day. My view is that this shows some confidence in the market. The stock market is somewhat quite resilient.

2)  Like what Mr Hu Li Yang, index travels in boxes. See attachment. See how Dow breaks its box top at 11600. 3 days above, Mr Hu Li Yang says, the index will travel to another box. Based on this theory, the next target is 12700 points! Big resistance there, which is also near the 2 times selling pressure. For those that attend his class or my Stocks Course will know what I meant. It seems that 11600 is a strong support now after dropping to test this support once and rebounded up

3)  I believe Dow jones might continue its climb, but definitely at a slower pace than October as there will be some results not beating expectation this month

4)  I feel good about Europe now temporarily that the government is coming to a consensus to help Greece.

5)  Please do not short your stocks now unless there is a clear change in the direction. I don't see the market falling hard now. Would inform you if I feel a change.

6)  Pay attention to the first 3 trading days this week, as we shall see how market reacts after last Friday disappointing Non Farm payroll. This might determine the direction of this month.


Happy Trading!

Regards
Daniel

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