Stock Market Reversal? Asks Market Timer Frank Kollar
October 12, 2007 (FinancialWire) (By Frank Kollar)
On Thursday, the stock market reversed from new all-time highs in the S&P 500 Index (SPX) and rally highs in the Nasdaq Composite Index (COMPQ) and Nasdaq 100 Index (NDX).
Such reversals, that typically occur at rally highs, and then close below the lows of the previous day’s trading (for the Nasdaq below the lows of the entire week’s trading), are called “bearish outside reversal days.” Continued selling almost always follows them as the market has reached highs that just could not be sustained, sparking market-wide selling.
Note that this does not mean the current powerful stock market advance has ended. What it means is the advance has reached unsustainable levels. It was overbought and is now correcting as traders lock in profits. Once levels are reached where traders begin to see bargains, the advance will likely restart. How far down prices go has much to do with the market’s perceptions of the economy. If traders see strength, the selling may not go far at all.
Kollar’s research has shown that the financial markets are in tradable trends approximately 80 percent of the time. FibTimer strategies define trends and trade them in both advancing and declining markets. Caring nothing about what newscasters say or what the latest economic indicator predicts, trends are where the profits are, and that is where FibTimer is.
Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.
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