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Sep 25, 2006 - Issue #025
Dow score card for the week ending 9/22/06.
DJ-30: 11508.10 -52.67 -0.46%.
UP: 14 (-10), Down: 5 (+11), NC 0 (-1).
Trends (weekly): This is the subjective part.
Rising 15 (-3):
AIG, DIS, HON, HPQ, IBM, INTC, JNJ, JPM, KO, MCD, MO, PFE, T, VZ, WMT.
Consolidating 12 (+3):
+*AXP, C, DD, GE, -*GM, -*HD, MMM, MRK, MSFT, PG, -*UTX, XOM.
Declining 3 (nc):
AA, BA, -*CAT.
* denotes change of category.
+/- denotes change of direction.
Wow, this past week, many investors who thought they were invested in "hedge funds" found
out they weren't! See my page on Alternative Investments.
While the weekly charts indicate a slowing of upward momentum, the daily charts put in
rising trend lines at which I believe to be an unsustainable angle. Usually, this indicates
where one should exit positions. See Turning Points.
In my opinion, traders working off daily charts are seeing sell signals in many stocks, not
just in Dow components, and moving to cash while those working off weekly charts are seeing
pull backs looking for new support points, ideally forming higher lows, enabling adding to
positions and raising stop-loss points.
Stock market indexes really are very misleading (see Inside the Dow) and one would be well
advised to think in terms of a 'market of stocks' rather than 'the stock market'.
In an index, such as the S&P 500 for instance, except in extraordinary circumstances, not
all the components are rising or declining in unison. Rather some are trending upward, some
downward, and some laterally. Depending on how the index is calculated, some issues have
more influence than others. All of which leads to general confusion.
I believe a sound approach in the selection of which stocks to take into position is a
combination of relative strength and significant trend lines (see Market Timing/Trade
In the case of INTC and HD, these components, on a weekly time frame, have gone through a
period of decline, followed by a period of consolidation, then an upward breakout and
currently are pulling back. If they are truly in the process of forming a rising trend, a
higher significant low point should come next.
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!