www.hedgefundlive.com — This past week was very volatile and I believe left a lot of people unsure as to the next major direction this market will trade. This blog will tell you exactly what to look for so you can make the right decisions and profit from whichever direction the market heads.
1) Perhaps the most important clue and right now the one leaving me more guessing than knowing is the 50 day simple moving average on the daily chart of the S&P emini March contract. The level is at 1287.50 and we got to a low of 1291.50 on Thursday, the market should have tested this level being so close and the fact that we did not means that at some point we will test it. With Thursdays snap back rally and Fridays strong market we are over 35 handles away from this ultra important level, essentially stuck in the middle of a range, a dangerous place to be.
2) The next great clue is to look at the stocks you normally traffic in and watch to see if their lows of this past week remain intact. If they do then most likely the market tested a lower move and is ready to move back up again. Subsequently if your stocks make higher highs this week look for the rally to pick up speed again.
3) Daily range on the S&P is a great predictor of future movement. Wide daily ranges like we saw this past week signal lower stock prices while a narrowing of the daily high to low ranges speak to higher prices.
4) The 20 day moving average stays above the 50 day moving average on the daily charts of your individual stocks. In our 115 names we follow nearly 70% are bullish using the metric of the 20 day SMA being above the 50 day SMA. If we see the percentage of stocks holding this pattern shrink watch out below as that signals a weakening of these names.
5) The last clue and the clue is the stock Apple Incorporated, symbol AAPL. This stock has been a great market leader over the past year. Last week tested the 50 day moving average three times and held each time. The lines of demarcation on AAPL are a higher high above $365 a share is bullish for stocks or a break below the 50 day SMA and holds under $336 a share would be bearish. AAPL makes up 20% of the Nasdaq therefore adding more significance to that index.
For those of you that tune into the Day Trade Well channel on www.hedgefundlive.com you know that I don’t like to use only one signal for my trading and that holds true in this case. Watch for more than just one of these clues to help decide the next direction and you will be able to get ahead of the market and profit regardless of the direction.