Tuesday, September 1, 2009

Stock Market Today

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OK. If you remember from my last post I talked at length about knowing the overall market's direction before you invest in any stock. The reason was because if the market direction is trending down, then your stock, no matter how good it might be has to fight the overall market trend to go up. That's a tall order. If you want to make money in the stock market investing today, first get a full handle on where the market is going. Each day, this is where the discussion is going to start. What did the market do today? What is the market? The stock market today news is where you should always start. But start where?

The overall market is actually a snapshot of three different indexes that we need to look at to ascertain whether it is going up or down. The first index we need to look at is the S&P 500, then the Dow Jones Industrial Average and finally the Nasdaq Composite Index. In addition, we need to compare the first two to the volume of the NYSE for the day. And while you can look at the stock market today on CNN, they will gloss over some of the most important information. Where you really need to look at is the home page of investors.com. All the data you need is to assess the market is free to you if you aren't a subscriber. Individual stock information is not. It's listed at the very top of the front page online each day.

The Standard and Poors 500 (S&P 500)


The S&P 500 closed today at 998.04 which was down -22.58 points or -2.21%. Right away we know our first important clue, that the index went down. That means it might be a potential distribution day depending on what the NYSE volume for the day was. If you saw today's data, you can kind of tell the NYSE volume was 1,631 (mil) up 259 points or 18.88 %. This gives us our second clue that volume was higher as the index fell lower which tells us that their were more stocks being sold than bought. O'Neil would refer to this as a distribution day and that this is an indication that the institutions are selling. When the market index closes higher on higher volume, this is called accumulation. Right now, we are only focused on what one day tells us. Today told us that the S&P 500 had a distribution day. A market on the uptrend can have a day of distribution and still rise higher. But once we see a day of distribution, it's a clue that we need to start watching for more distribution days. Let's move on to the next index.

Dow Jones Industrial Average


The next step is to look at the Dow Jones Industrial Average and see what happened and also compare it to the NYSE volume which we already know was higher than the day before and if you look at the chart at IBD for September 1, 2009, you'll also notice that it was above the daily moving average as well. The Dow closed today at 9,310.60, down -185.68 points or -1.96%. This puts the Dow today in perspective, that it was also a distribution day for this index. Let's take a look at the final index.

Nasdaq Composite Index


We will need to pieces of to complete our review of the stock markets today. The value and volume of the Nasdaq composite. This index was also down today -40.17 points to close at 1968.89 or a decline in value of an even -2.0%. The volume was 2,684 (mil) up 517 or 23.90% increase in volume. These two pieces of data tell us that the Nasdaq also had a distribution day.

So our stock market report today would indicate that the overall market was widespread distribution. Because volume was pretty high compared to the prior day and to the average daily volume, we can conclude that institutions today were probably selling off today.

As far as review then, when the market closes lower on higher volume, it's a distribution day and when it closes higher on higher volume, it's an accumulation day. This is how you analyze the stock market prices today and the volume information of the three major indexes. Each day, get in the habit of determining what kind of day the market it was. Were their more stocks bought or more sold. Once we have an eye for how the market performs on once specific day, then we can start to look at the overall trend. The stock market for today doesn't give us the overall trend. We need to look at a period of days to determine what direction we are headed. However if today was all of the information we had, we would know it's not the day to get started.

Another great resource is IBDtv's market wrap which goes over the these same numbers in a video presentation. As a subscriber of the paper, you'll also have access to the column, the Big Picture which keeps track of the overall trend. Our overall goal is to make money in the stock market, and this is the foundation. Master it before you move on to the next lesson on Stock Market Investing Today.

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