Subj : Market Action To : All From : Paul Rogers Date : Thu May 19 2005 06:59 pm Content-type: text/plain The market oscillated back and forth 4 times across a horizontal trading range most of the day. The DJIA straddled the line, but the NASDAQ mirrored the moves above the line. Combining them with the S&P500 resulted in a chart that seemed to find find support and bounce off yesterday's close. In late afternoon it made some modest gains into the close. But volume was -13% below average, so it was a very "quiet" day. There are a few things I've learned from my daily analysis, that I hope you have or will see too. 1) As much as we might desire "signals" to tell us what to do, it's a forlorn desire. It doesn't matter how complicated we make them. What we're asking for is a crystal ball to predict the future. Ain't no such thing. We have to make a decision. It's our responsibility. We can't hand it off. Nevertheless, some formulas can provide a useful alert function. They can interpret PAST action in a helpful way. 2) Price action isn't enough information for making tactical decisions. We need to factor in volume, to tell us whether there is "enthusiasm" to the buying or selling. This applies to the overall market, but is equally applicable to our research and tactical decisions on individual stocks. 3) Even with volume included, we don't have enough information to judge whether the market is starting something meaningful, or it's just a "head-fake". "The Market" as measured by the DJIA30, NASDAQ100, even the S&P500, can't do it by itself. Without the support of the "broad market", for which we look to some variation of the "Advance-Decline Line", all we get is a rally, not a Bull Market. I think of a broadly based rally, in which the broad market participates, as a stable pyramid. But when only the few stock of the major indices participate, it an obelisk that can be tipped over and fall. 4) Prices of the market or any particular stock are composed of an intrinsic value which is in some way related to what we get from "fundamental analysis." But day to day in the market, a SIGNIFICANT part of the trading price is an "appreciation premium." It's how much more than the intrinsic value people are willing to pay on speculation. The evidence I've seen implies that's rather a lot! The problem is that this premium can evaporate just as quickly as it developed, because it is not based on an objective reality. For this reason, if we're active investors we must have effective and usable tactical rules for buying and selling stock, the right stocks, for the right price, at the right time. And I DO mean buying AND selling! Price Vola- Momen- Volume Oscil- Summ. Change tility tum lator Index -__+ -__+ -__+ -__+ -__+ -__+ _<__ _<__ _|__ __<_ _<__ __>_ 05/13 __|_ _<__ _|__ _<__ __<_ __>_ 05/16 __>_ _<__ __|_ _<__ __|_ __>_ 05/17 __>_ _<__ __|_ __|_ ___> __>_ 05/18 __>_ _|__ __|_ _|__ ___> __>_ 05/19 Timing Signals: I don't use or recommend timing signals, but they're fun to watch. If I did though, well, I might use something like this. (Be warned!! It tends to whipsaw around signal points!) Last Signal: BUY Date: 05/17/05 S&P: 1173 Winner or Loser: tbd By: tbd See my market tracking charts for '03-'04 and my investment strategy study at my website(s): http://www.xprt.net/~pgrogers/Pers.html http://www.geocities.com/paulgrogers/Pers.html Paul Rogers, paulgrogers@yahoo.com -o) http://www.angelfire.com/or/paulrogers /\\ Rogers' Second Law: Everything you do communicates. _\_V .... IT IS documented, look under "For Internal Use Only." ___ MultiMail/MS-DOS v0.35 --- * Origin: The Bare Bones BBS (1:105/360) .