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HomeDJIA Chart: Classic ‘Head and Shoulders’
Posted by Larry Doyle on August 11th, 2011 9:01 AM |
Recent market volatility is clearly unnerving.
I believe the volatility is exacerbated by the general decline in broad based participation in the markets over the last few years. Additionally, the growth in derivatives, both within the equity and fixed income markets, has served to accentuate the swings.
I described these swings and the accompanying spike in volatility as the equivalent of an Adult Swim Only a few days ago when I wrote, What Caused the Market Meltdown?.
What are the implications for a market in which there is a lack of broad based participation?
To an ever increasing extent, professional traders study the charts and perform technical analysis to determine likely levels of support and resistance.
On that note, let’s navigate and review a chart of the Dow Jones Industrial Average which takes us back 5 years and provides a fabulous view of the recent cliff dive along our market landscape. (more…)
Reason to Be Concerned About the Market
Posted by Larry Doyle on July 6th, 2011 8:12 AM |
It is a well known fact that an increasing percentage of daily trading volume in the equity markets is driven by high frequency traders. Whether you think that is a good or bad development is currently irrelevant. It is a reality.
That reality has clearly changed the nature of investing and assessing the markets.
How does one invest with a long term horizon when so much of the market is driven by short term traders? Very carefully.
Long term investing requires a solid understanding of fundamental analysis. In the midst of that endeavor, though, investors might want to have an appreciation for technical analysis, which can be utilized across an array of time segments but is very often applied for shorter time periods. (more…)
“You’re Playing with Sharks”
Posted by Larry Doyle on July 22nd, 2010 6:20 AM |
Is it safe to go in the water? In other words, is it safe to play in the markets under the current construct? Do small retail investors truly stand a chance against the ‘big boys’ on Wall Street running high powered algorithmic trading programs and assorted other high frequency trading mechanisms? Are fundamental traders being thrown around amidst the ‘high waves’ and ‘strong surf’ pounding the shore?
No doubt, the scene on Wall Street has changed dramatically over the years. The onslaught of high frequency trading complete with a wide array of ‘bait and tackle’ such as flash orders, dark pools, naked access, co-location, and much more make it extremely challenging — if not downright daunting — for those who believe they can navigate these waters with simple ‘rod and reel.’ (more…)
Is The Market Overbought?
Posted by Larry Doyle on April 1st, 2009 9:55 PM |
A few weeks ago, I wrote a piece on whether the market was oversold. Allow me to re-introduce a few topics . . .
The market valuation of any asset is determined by three factors:
1. Fundamentals: measures items such as cash flow analysis, cost-benefit analysis, earnings before interest, taxes and depreciation (EBITDA)
2. Technicals: measured by regression of price movements to determine overbought and oversold conditions
3. Psychology: measured by unscientific surveys of market participants
And now the update:
1st quarter earnings are due out over the next few weeks. Most analysts and managers I follow believe these earnings will be lower than expectations and that 4th quarter 2008 earnings will be revised lower. Will companies provide guidance going forward? Many companies have refrained given the economic uncertainty. (more…)
Fibonacci Retracements
Posted by Larry Doyle on March 6th, 2009 12:40 PM |
I am going to assume that for the general public, the term Fibonacci Retracements is not part of the normal vocabulary. In helping people navigate the economic landscape, allow me to introduce you to a basic Wall Street practice utilized by many traders. Every investor can benefit from a basic understanding of this concept.
Major market indices trade based on fundamental analysis (cash flow, asset/liability, earnings ), technical analysis (price regressions), and psychology (measure of bullishness vs bearishness). Our friend Fibonacci falls into the technical analysis camp. I do not want to get overly involved in the arcane aspects of this concept, but it can be very useful in assessing market levels and market directions. (more…)
Is The Market Oversold?
Posted by Larry Doyle on February 25th, 2009 2:40 PM |
The valuation of any asset is determined by three factors:
1. Fundamentals: measures items such as cash flow analysis, cost-benefit analysis, earnings before interest, taxes and depreciation (EBITDA)
2. Technicals: measured by regression of price movements to determine overbought and oversold conditions
3. Psychology: measured by unscientific surveys of market participants
I have never seen such divergent views on expected future earnings which directly impacts any reasonable fundamental analysis. (more…)
