Thursday, January 28, 2010

Will S&P Hold 1075?

Markets continue to drop instilling fear into all, but is this the end? Last week, I reported how the daily SP data has broken through the Parabolic Stop and Reverse (SAR) signal. It appears that today, SP weekly data is now breaking through the Parabolic SAR as well. When I view the SP data in my own market analysis system, I see indications of a continuation to the decline - accelerating momentum to the downside, increasing volatility, etc. But before I scream sell, I am going to look for some support at the 1075 level and a mild rebound to the 1110 level. At that point, should the market stall, I would guess that I will be pulling the plug and looking for additional downside opportunitites.

It's important to note that asset classes across the board are going down. There is little place to hide. If you want to have some safety, you need to understand the various risk management tools that are available. You must remember that in this liquidity driven rally, everything went up and money has been plentiful. When the fed pulls the plug and starts draining liquidity, probably every asset class is going to decline. This is no place for amateurs to be messing around. Those who dont utilize a competent money manager that has a command of all of the risk management tools available may find themselves again with huge losses. But for those who are paying attention, big gains are possible despite the market's direction.

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