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Jul 23, 2007 - Issue #068

Looking for Support!

Dow score card for the week ending 7/20/07.

DJ-30: 13851.08 -56.17 -0.40%. In the Real World: 56.80 -0.23 -0.40%.

UP: 13, Down: 17.

Trends (weekly): This is the subjective part.

Rising 22 (+1) 73%:


Consolidating 6 (-1) 20%:

AIG, -*DD, JNJ, MRK, PFE, -*T.

Declining 2 (n/c) 7%:

C, PG.

+/- denotes change of direction.

* denotes change of category.

Looking for Support!

The market really gave the talking heads at CNBC and Larry Kudlow's guest panelists at Kudlow & Company something to talk about throughout the day, Friday, and after the close, didn't it?

Although Friday's selloff gave one that sickening sinking feeling, review of the weekly charts reveals the decline looks more like a correction within an ongoing rising market. Indeed, the rising trend category shows a one component increase. Admittedly, subjective it may be.

Note that components that were hit hard managed to hold above important recent lows. Note also that some components actually closed higher on the week.

Has this market found significant support? Undetermined. But isn't that why smart traders use sell stop orders to protect rising long positions from turning into losers? Never permit a profitable trade turn into a losing one.

Another good practice is to never lower the sell stop order, once it is placed. Weak traders tend to lower their "protective" sell stop orders as the market draws close, thereby defeating the purpose of the strategy.

This market is very difficult to read. If you're confused, you're not alone. Judicious placement of "stops" entered above and below significant pivot points is a time honored technique of a successful trading strategy. But you already know that, right?

Volatility is rising. Gold is rising. Oil is rising. Bonds are rising. This market is as nervous as a long tailed cat in a room full of rocking chairs! Pick your spots carefully.

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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