Today's Market
by Dr Invest

Ho! Ho!, Just like a Yo Yo! Maybe Micheal Jackson knew something about the stock market too! I haven't blogged over the past week because there really hasn't been anything to report.

I want to get "Out of the Market", but have been waiting for the place to jump off. You will remember that in the first part of November, I purchase three stocks in hopes that the "Santa Rally" would soon be near; but upon the roof there rose such a clatter, I had to take a look at my DOW index to see what was the matter. (FDO, DLTR, CATM)

The market still seems obsessed with the EUROTRIBE and that is unlikely to go away. So stocks have fallen and rose again, and again, and again. I don't really see an end to this and it is indicative of a market getting ready to collapse. Traders are indecisive. They are just like me, desperately needing to get in, but really worried about getting out if there is a sudden long term downturn.

Well I did enter the market hoping for a 10% to 12% return. It is clear, that I will not hit that goal this year. So now, the goal is to get out before December the 24th. Next week, I will be looking for that special moment, hoping that CATM and DLTR will "YO YO" back up and I can capture a decent return for my efforts.

Return on CATM and DLTR as of today:

• CATM up 8.70%
• DLTR up 4.59%

I really have no reason to weep over these kind of returns, remember a year in a Certificate of Deposit might return 1.20%. Even a 4% return can beat some bonds over a year period. Though I really haven't watched these stocks very closely, I recognize the potential volatility of the market and I am ready to get out.

Let's look at the chart below and learn:

On this chart, look for two horizontal green lines, these represent a trading range. The top green line represents RESISTANCE because unless the market trend is strong, it is not likely to push above this top green line. The BOTTOM green line represents SUPPORT because unless the market trend is weak, it will likely not move below this line. In between these two lines is a TRADING RANGE. Given that there is no major good news or major bad news, the DOW is likely to remain within the TRADING RANGE. (Remember LIKELY, because nothing guarantees that the DOW, in this case, must stay within the TRADING RANGE.The political deadlock at the end of Friday moved the DOW into the red at the end of the day. In a last minute vote before Christmas, the politicians agreed to extend the payroll tax cuts.This should help the stock market rise on Monday.) The market is irrational and will act as it wants, but there is a strong likelihood that a tepid market, as we have, will continue in a sideways movement. NOW NOTICE the light greed diagonal lines. The light green diagonal line nearest the center right represents the last uptrend of the DOW. The light green diagonal line nearest the outside edge on the right, represents the present uptrend in the DOW. Good, I think you are begining to understand. Since Thursday, there has been an uptrend in the market. (represented by the black box moving upward) The EXPECTATION is that the UPTREND will continue until it meets RESISTANCE at the top green line.... somewhere around 12,300.

Another indicator of interest is the RSI indicator at the very TOP of this chart. This chart shows whether a stock is oversold or overbought. Note: when you see the stock price go down, people are selling to get out, so the RSI indicates an oversold; when there is a strong uptrend, too many people are buying stocks and the RSI will show an overbought. (see stockchart.com >chartschool) The point here is that the RSI indicator shows, that today, the DOW is a bit oversold. This makes me feel comfortable in waiting a bit longer. (Remember, there are no gurantees when using charts because you are seeing what already happened, so you can only draw approximations of where you think the market is going.)

There is another line worth mentioning and maybe even more important than the TRADING RANGE between the two green lines. It is the squiggly blue line between the two green  horizontal lines and is called the 50 DAY MOVING AVERAGE. So the 50 day moving average is critical and the DOW has to remain above the 50 day moving average.

In the DOW's present UPTREND, the top green horizontal line at 12,300 is the point at which the market could return to a downtrend.  Though the market is not moving STRONGLY UPWARD, I would expect the market to continue on an uptrend through Monday & Tuesday. I will see Monday and Tuesday as selling opportunities for DLTR and CATM.

Now all of this is rather FOOLISH TALK, because we don't know what the market will do. Israel might bomb IRAN, at which time the market is certain to NOSE DIVE. Europe might disband the EURO, and again the market would surely nose dive. This is simply part of TRADING STOCKS, live with it! Don't put all your (eggs) investments into one basket. Keep some in cash, some in real estate, some in gold, some in bonds. Most importantly, reduce your loss by using STOP-SELLS.

Knowing the importance of getting out of these two stocks next week and understanding that the market needs to remain in an UPTREND, I do look to a higher power than me for the benevolent blessings to come.

(Note: the above article is soley for entertainment purposes and not to be used as financial advice of any kind.)