Yesterday (11/13/08) was a significant day in the stock market for multiple reasons. First, the market successfully bounced off of support across all major indices. Second, the bounce came with significant volume far above the average, which usually equates to institutional buying. Institutional volume is important because it is the larger institution like the pension funds, mutual funds and hedge funds that drive the market. Third, the market at mid-day was down by around a 4% margin then in the afternoon it rallied and finished the day up approximately 7%. Technically this is a victory for the bulls as they were able to over come the early selling and push forward to end the day very strong. Finally, the market went up on a day where very weak economic news was released. Initial jobless claims were at 7 year highs. When the market goes up on bad news it is a psychological win as the market was able to look past bad news and buy into potential future prosperity. See chart below to better understand the technical picture. So, what does this all mean? I would say this is short-term victory for the market as it was able to hold support. This is the first step in building a base or foundation to work off of. It is difficult for the market or any structure to go significantly higher if there is no foundation or base to work off of. Yesterday was the beginning of a base building process. Going forward, if we are able to continue to hold the recent support levels that would be a positive for the market. On the other hand, if we fall below support the market will probably make another move downward.
For professional investment advice on this topic contact:
Allgen Financial Services, Inc.
888.6ALLGEN (888) 625-5436
advisors@allgenfinancial.com
www.allgenfinancial.com
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