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Don't Be Surprised If . . . March 24, 2020

Posted by Tom in Thoughts.

March 20, 2020 – I don’t like predictions and much prefer looking at data, but . . . I just need to mention that don’t be surprised if we get a quick explosive rally in the stock market (based off of rosy news) and then an equally quick sell off back to the previous lows (or lower). It’s an age old game of trying to pick the bottom, sucking people in, then selling into a rally. How will be know? Likely by very high volume since there has to be a seller for every buyer, volume will go “off the charts” as folks scramble to get in . . but also to get out. It’s a swing door.

NASDAQ Composie Index

Right now I prefer to see a close above 7878 (green line), with support at around 6686 (red line). When either of these get taken out on a close, then (and only then) will it get my attention. Plus, let’s see if any rally has any “legs” or staying power. This action is easier to see on an intraday chart, say looking at 30 minute bars. Is a price move up being met with heavy volume and resistance as sellers come in to meet the buying demand?

This is not going to be easy, as nothing worthwhile is, but it’s important to be skeptical. There has been a lot of damage done and the outlook for the world economy is still unknown. There will be bad news, especially about corporate earnings. And we know that in the loooong run. It’s all about future earnings.

To illustrate how tough it is, I’m showing a pie chart of the percent of stocks in the S&P 1500 index that are in Accumulation (buying), Distribution (selling) and how strong their prices are.

Accumulation/Distribution –

% of Stock in S&P 1500

Price Strength –

The bottom line is to stay safe and look out for one another. Then be patient about this market. IF there is any logic . . it shouldn’t turn on a dime, but will take time to settle and build a base to effectively launch from.

Take Care and have a good week (or as best that you can). ….. Tom ….

Price chart by MetaStock; pie chart & table by http://www.HighGrowthStock.com. Used with permission.


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