US Stock Market - More Weakness Ahead

Dow, S&P500 and Nasdaq index broke below their uptrend line on Friday. Volume has been picking up and this suggests real selling and not just profit taking.

The recent weakness started off from China when news broke that banks have been told to suspend lending. Although the suspension was not system wide, the market reacted nevertheless with Shanghai index moving down more then 3% and Dow closed nearly 1.1% lower. Adding to the uncertainty was US President Barack Obama proposal to overhaul US banks in order to avoid future financial crisis.

Technical charts are looking weak with MACD below its signal line and –DI above the +DI together with an increasing ADX value.

The support level for Dow is near the 10,000 level which is where the Fibonacci retracement is located. Expect to have more weakness next week.

Forex Trends

Forex Trends

Trends formed in different markets. For example stock market, commodity market, forex market etc. Trading with the trend is a proven method to trade any market, but it is particularly effective in trading forex market. Why?

Consider stocks in equity market. If a company is doing badly and its stock is trending downwards, the company can take measures to improve the situation. For example, the company can be restructured, CEO can be replaced etc. This can cause a rapid change to the company’s fundamental outlook which will sooner or later be reflected in its stock price. This process can happen in a fairly short period of time.

When we trade forex market we are trading the economies of entire nation. When a country’s economy is strong or weak, it usually takes a longer time for economy to recover.

Hence, forex tends to stay in a trend longer than other markets.

What Do I Need To Know About Technical Analysis Of Equities?

What Do I Need To Know About Technical Analysis Of Equities?

By: Mike Singh

Predicting future moves in the stock market has become a science. This form of prediction has become known as technical analysis. Traders who take this approach to investing in the stock market usually hold stocks for a short time period and then sell their stocks once the predicted profit has been achieved.

The foundations to technical analysis can be found in the understanding that stock price movements are predictable. All the factors affecting the value of a stock are reflected in the stock market with the greatest efficiency that can be found in any type of market. Movements in the stock value follow predictable historical trends, coupled with the efficiency of the market make it possible to predict the direction the stock is going to go.

Technical analysis is a very short term method of investing because the potential long term growth of a company is not taken into account through this method. Trades are timed to exactly reflect the upward and downward trends in the market so nothing is left to chance. Because buying and selling go through at specific times, losses can be minimized if the market does not move in the predicted manner.

Many methods of predicting the movement of the market have been developed for use in technical analysis. These methods for the most part are based on the 'support' and 'resistance' concept. How this works is that, support is the level by which a downward price is predicted to increase by and resistance is the level by which an upward price is expected reach before coming down again. To put this in clearer terms prices tend to fluctuate between a support and resistance levels.

Market movements are predicted for a large part through the use of charts (mostly bar charts). The horizontal axis represent time be it a minute, hour, day or week, while the vertical axis represents the price of the stock. By looking at the chart a trend for the stock value can be traced.

A trained analyst studies the chart and can see certain patterns in the chart that they can then use to predict for future movements in the price of stocks. As is the case with most things there is no one single pattern that fits all. There are hundreds of different types of movements, indicators and patterns that can be used. By combining a number of different indicators technical analysis can make it possible for an investor to become very successful on the stock market.

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