Thursday, July 15, 2010

What The Market Did Today

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As usual, the first thing I do when I start my stock market investing routine is check what the market did today. I do this because I need to get a feel for what the overall market trend is. Why? Because you want to follow the trend of the market. Only invest in a market in an uptrend. It was a big day today for the market. Goldman Sachs was fined by the SEC (yet there stock price rose, go figure) and financial reform passed in Congress. These changes had an effect on the market but what do they really mean? For the most part, I don't really focus on the news of the day. While I read and listen to the opinions of the "so-called experts" in the media, their opinion really means nothing. The only opinion that matters is that of the market.

You can get the opinion of the market by looking at the major indexes price and volume action. Every day, these two pieces of information tell you what you need to know. Was the market up or down? Was it on higher or lower volume? Start looking at the charts on investor.com and make your own determination. Use the tools in the IBD to help you learn how to know what kind of market you are in at the moment and whether you should be buying individual stocks or selling them.

So, let's check out those indexes and see exactly for ourselves what the market action means for the trend. If you remember, the current outlook in the market pulse is "market in confirmed uptrend". This means that we are looking for signs that the uptrend might be under pressure. This happens when an index shows a distribution day. This is a day that an index closes lower on higher volume. Since the latest uptrend began, we've yet to see a one, which is a good sign. OK, now let's see exactly how did the stock market do today.

S&P 500 - Closed higher today on lower volume. The index is above it's 50 day moving average which is also good. Volume has been a lot less than average which seems like a weakness to me, but so far IBD hasn't been concerned with it. The closes have also been tightly in the same range for the last few days.

Dow Jones Industrial Average - Closed lower on lower volume. It's also above it's 50 day moving average line and has recently touched it's 200 day moving average. The price and volume action doesn't agree with what is on the front page and what is on the chart as far as volume goes. One says volume was higher and one says lower. I'll have to see what the Big Picture column says about that. For now, though, I don't see it as a distribution day.

New York Stock Exchange Composite - Closed higher on lower volume. Closes data has been tight in recent days and volume lighter than normal. Is there enough power in this rally, it remains to be seen but doesn't count as a distribution day. Above it's 50 day moving average but not in sight of it's 200 day moving average.

NASDAQ Composite - Closed lower on lower volume. It's over it's 50 day moving average and near it's 200 moving day average. I think a good sign here would be if the index broke it's 200 day average.

As you can tell, I've started to take note of the moving average lines as the IBD tends to focus on these. Before, I hadn't really paid much attention.

Still no distribution days so no pressure on the current stock market investing outlook. Be sure to watch IBD TV Market Wrap and read the Big Picture column.

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