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Mar 19, 2007 - Issue #050



Key Reversal Day!



Dow score card for the week ending 3/16/07.

DJ-30: 12110.41 -165.91 -1.35%. In the Real World: 50.39 -0.69 -1.35%.

UP: 8 (-14), Down: 22 (+14).

Trends (weekly): This is the subjective part.

Rising 5 (n/c):

AA, HON, KO, T, UTX.

Consolidating 17 (-2):

AIG, AXP, BA, CAT, DD, DIS, GM, HD, HPQ, IBM, JPM, MCD, MO, MRK, PFE, VZ, WMT.

Declining 8 (+2):

-*C, GE, INTC, JNJ, MMM, MSFT, -*PG, XON.

+/- denotes change of direction.

* denotes change of category.

Key Reversal Day!

Two more components joined the declining trend camp this week making it 8 to 5 declining over rising with the rest in the process of deciding what they want to be when they grow up.

Most intriguing is the action of Wednesday, 3/14. Following Tuesday's big drop with a further drop, taking out the 3/5 low in the process, then suddenly reversing, coming smartly off the bottom, and going out above Tuesday's close. Wham! Bam! Thank you, Ma'am! Traders know this as a "key reversal day".

Thursday's action was a slight follow through to the upside. Friday came the reaction and this too is intriguing.

This particular Friday, being the 3rd Friday of the month, was not only options expiration day for the month of March but also the quarter. In other words, Quadruple Witch!

As expected, trading volume was heavy with, not only the unwinding and rolling out of options and futures positions, but also the underlying stocks.

And, less we forget to mention, economic reports to deal with: Inflation, oil, interest rates, employment, sub-prime mortage foreclosures, credit tightening, etc, etc, etc! A busy day, indeed.

My point is, with all these problems to deal with, the volume was heavy enough to press down below the key reversal day low but it didn't. The trading range was narrow. Heavy volume but narrow range! That looks like a stand-off to me. As long as the market holds above the 3/14 low, the more it looks like the key reversal day low is an important pivot point. If the market takes out the 3/12 and 2/28 highs, the test should have been successful and the assult on the 2/20 high can begin.

On the other hand, if the 3/14 low is taken out, that could mean the downward swing is only half over.

One important thing: Guest commentators on CNBC's Kudlow & Company were asked where they would put money to "hide out" in this market. The market is no place to hide, Larry. If you ask me, there's only one place to be when you want to ride out a storm: Cash is King! You can always get back in later.







Comments? Ideas? Feedback? Let me have it, right between the eyes! I'd love to hear from you. Just reply to this zine and tell me what you think!

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