Posted: Jan 19, 08 3:40pm
Stock Market Weekly Wrap – 1/19/08
TradeWithPros
Wow, what a week. The indices continued the record downdraft. We are now on track for the worse January since 1904. The good news is, that off that terrible January 104 years ago was a double digit rally by year end. Of course, times are very different now than in 1904, so this is anybody’s guess. We had called the downtrend on our site since the middle of December. Stick with the trend until it changes.
The best risk strategy is to trade stocks with the market trend. If the market is in a downtrend, your trading portfolio should be more short than long. In an uptrend more long than short. If you stick with that profile for your portfolio, your risk is reduced. Market direction is key. 60 percent of a stock's movement is accounted for by market direction, 30 percent by the direction of the stock's industry and just 10 percent by the stock itself.
Bad news continues to pound the markets. Is there going to be a bounce? Nothing moves straight up or down, so anything is possible, but the trends in all time frames, all indices remain bearish. We have added addition support points and removed some resistance points, as the several indices moved outside are previous chart parameters. We will hopefully be prepared for that in the charts this week.
DOW 30
Short Term Bearish – 12/16/07
Long Term Bearish – 11/16/07
The wedge formation broke. The index crashed through 12, 350 and is sitting just above the 12,000-12,050 support line. This position is key on the DOW. It is now sitting right on top of the 2003 uptrend. A break here moves the market deep into 11, 650.
SPX – Standard and Poor’s 500
Short Term Bearish – 12/16/07
Long Term Bearish – 11/16/07
SPX smashed through 1400 and 1380, stopping on 1325. We stated a “A strong break of 1370-1380 support on the SPX and its run for the doors with no meaningful support until 1325.” That is exactly what happened. Next meaningful stop on a break here means 1290.
NASDAQ Composite (COMP)
Short Term Bearish – 12/16/07
Long Term Bearish – 1/06/08
The NASDAQ is now below its 2003 uptrend. This index still remains the strength of the four, although that is not saying much now. We stated “A break here and next support is in the area of 2370-2380 where we will see the long term uptrend of 2003 converge with price support. A break of that line and 2300- 2320 is the next stop.” Once again, that is exactly what happened. If the COMP does not find support here, next stop 2365.
Russell 2000 Small Cap
Short Term Bearish – Before this Blog Started, 7/26/07
Long Term Bearish – 11/15/07
The ugly stepchild has now moved to 2006 lows. We had a typo in last weeks Blog we would like to apologize for, stating the index had not broken “last” years lows, that should of read 2 year lows. This index crashed through all support, not stopping until it reached the 2006 lows. That is pretty damaging bearish evidence. Remember that small caps usually lead the markets up and lead the markets down.
TradeWithPros was a huge hit at the World Money Show in London. The next appearance will be the TradersExpo in New York, Feb.16-19. Please visit www.newyorktradersexpo.com/ for more information. We met many wonderful traders and investors from around the globe in London and it would be great to meet you in New York!
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