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Welcome to
"StockBreakthroughs Newsletter"
April 13, 2008.
Market Recap
It was once again the usual volotile and indecisive up and down action on Wall Street and other stock exchanges around the world this week.
On Wednesday, April9, crude oil rose $2.37, or 2.2%, to close at $110.87 on the New York Mercantile Exchange. Earlier it surged to a new intraday high of $112.21 a barrel.
On Friday stocks sank on industrial bellwether General Electric (GE) earnings miss,which cast a gloomy light on a slew of earnings reports next week. This was the first time in decades that GE missed market expectations. In all the years GE always met and, most times even exceeded expectations. And as GE shares lost 12.79% on Friday, one of the culprits was
as so often the credit cirsis again.
"Demand for our global Infrastructure business remained strong, but our financial services businesses were challenged by a slowing U.S. economy and difficult capital markets," GE Chairman and CEO Jeff Immelt said.
The Dow Jones fell 256.56 points, or 2%, to 12,325.42, with the blue chips hit with a weekly loss of 2.2%. The S&P 500 shed 27.72 points, or 2%, to 1,332.83, down 2.7% from last Friday. Hardest hit was the Nasdaq Composite, which dumped 61.46 points, or 2.6%, to 2,290.24, off 3.4% on the week.
And as most times the European markets followed with the German Dax losing 100.75 points, or 1,5%, and London's FTSE losing 69,60 points, or 1,17%.
The economic aftershock of GE's profit warning threatens recent optimism and pokes a hole in
recent sentiment that the credit crunch has passed. General Electric , whose activities reach a broad spectrum of business and consumer activity from TV shows and commercial loans to industrial turbines, said that profit fell 6%. It placed a big part of the blame on the near-collapse of investment bank Bear Stearns.
The profit disappointment came as a shock to many analysts and strategists who had been expecting that diversified, international companies as well as the broader U.S. economy were somewhat buffered from the big loan write-downs and trading losses that have rocked brokerages and banks this year. U.S. stock markets sold off sharply, cutting into gains made since mid-March.
The credit crunch once again has demonstrated with painful clarity that the financial sector has become dangerously over-leveraged, to a degree that almost nobody realized before – partly because the normal metrics to measure leverage are pretty useless. But to take a short cut you can read more on this on my blog that I've just started setting up on: http://stockbreakthroughs.com/blog/2008/04/12/an-economy-on-the-edge/.
There I posted an article called "An Economy On The Edge" that I've also posted on another blog and several article directories.
So what is the trading bias for the upcoming market sessions? In the long run I don't see any reasons to panic and getting rid of any long-term investments. On the contrary. I just bought into the Pioneer Investment Fund. But for day- and options trading the markets are definitely looking bearish at the moment.
The earnings season has just started. And this start was not nice! The Dow again dropped below it's psychological important mark of 12,500 points after having peaked up to 12,790.28
points already on April 2. The Nasdaq and S&P 500 don't look much better.
The 30-day moving averages of all of the big 3 indices are all flat to very slightly down. We do not have anything near a trend in the broad market so there is no backup in new trades from that standpoint
.
From a technical analysis point of view, this an excellent time to look for Pattern Alteration charts. These would include patterns such as Flags and Channel Breakouts.
In technical analysis, a Flag is a charting pattern that looks like a flag with a flagpole on either side. Flags result from price fluctuations within a narrow range and mark a consolidation before the previous move resumes.
Source: www.bigcharts.com
Flags and are among the most reliable of continuation patterns and only rarely produce a trend reversal.
In technical analysis, a Channel is a range between support and resistance levels that a stock price has traded in for a specific period of time.
Source: www.bigcharts.com
Once the price of a stock breaks out of the upper or lower part of a horizontal channel, a large price movement in the direction of the break usually follows. The longer a trade is in a channel, the more significant the channel break out is.
Once prices break through the upper area of resistance, this level will now become support. The same is true in the other direction. Once prices break through the lower area of support, this level now becomes resistance.
Yours in Successful Trading,
Ricky Schmidt
Information, charts or examples contained in this lesson are for illustrational and educational purposes only. They should not be considered as advice or a recommendation to buy or sell any security or financial instrument. We do not and cannot offer investment advice. For further information please read our disclaimer at: