Thursday, 21 February 2013

A triple digit fall in DOW is always something to ponder

Dear Friends,

U.S. stocks fell 108 points on Wednesday, retreating from multiyear highs, after minutes from the Federal Reserve’s last meeting illustrated differing views over continued stimulus.Some of Fed board probably think that the goverment stimulus should not continue amid the strong stock market.

This is the report by marketwatch.com to explain this:
http://www.marketwatch.com/story/us-stock-indexes-edge-lower-2013-02-20

Yesterday is the second triple digit loss in Feb and I am paying close attention to it. You can already sense a bit of tension in the market. This did not appear in January at all. As Dow approach 14198 historical high, tension is up a notch. A second indicator I would use to gauge the psychology of the market is a triple day fall. A triple day fall is a sign that market psychology has wavered. Just be careful a bit. Ever since the start of the year, there has not been a triple day drop yet in Dow, which signifies a great bullish run.

Do remember that understanding the market psychology is important in trading. Stock selection isn't the most important. Do take note that entering position now has to be a hit and run. Short term trading is preferred to long term. Money management should be tighter. Diversify some of your portfolio to defensive stocks may be a wise move.

Having said that , I do not think the market will tumble fast yet. It might remain sideways still for Feb. My concern is first week of March with the employment reports and manufacturing reports coming.

Rgds
Daniel
www.danielloh.com

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