Stock Market Summary Thursday 25th October 2012

Posted by Stephen Sutherland on Thu, Oct 25, 2012 @ 10:49 AM
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Yesterday's market action was positive.

The Nasdaq Composite bearishly reversed, losing 0.29% in far above average trade (Point A). With the loss being small and volume being inflated, it tells me that the bulls and bears are fighting it out for control of market direction. When this happens at market tops, it's known as 'churning,' behavior that often spells that the market has topped. In this case, because it's happened during a downtrend rather than an uptrend, it could mean that the market has finally found a bottom.

Further clues that we may have found a bottom come from the S&P 600's behaviour. Notice that yesterdays fall was accompanied by very low volume (Point B) indicating a reluctance to sell from institutional investors.

Leading stocks action was positive. A higher number gained in above average volume compared to those that dropped in above average volume. When this happens on a market 'down' day, it's known as a bullish divergence.

My opinion remains the same - the recent 5 week correction (Point C) will turn out to be a temporary dip. The market is displaying 'bottoming' behaviour, however if the market was to fall further, it's reassuring to know that the Nasdaq has solid support between its 200 day moving average and the 2942 (Point D).


Please note past performance should not be used as a guide to future performance, which is not guaranteed. Investing in Funds should be considered a long-term investment. The value of the investment can go down as well as up and there is no guarantee that you will get back the amount you originally invested.

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Topics: Stock Market Summary