Tuesday, November 17, 2009

Inside Day For Stocks

Above is a daily chart of the S&P and NASDAQ and as you can see we have an inside day that has formed. An inside day occurs when today's high is below yesterday's high and today's low is above yesterday's low. What I like about these days is that they usually trigger a trend day or a large range day.

Given my bearish outlook on the market, I'd much rather take a breakout to the downside than to the upside. If the market does indeed break the low of the inside day, that would also coincide with the breaking of the trendline which might trigger a multi day move down. If on the other hand the market breaks out to the upside, I will do nothing as I am willing to miss the trade.


getyourselfconnected said...

I am largely in cash on the sidelines as well as this market is pure crazy. Long gold and silver through various channel since 2001.

Anonymous said...

I am hearing some of these divergences are reminiscent of the 1987 markets before it crashed . Meanwhile, GS is coming out with some interesting statements lol . I am sensing the street is not impressed .

Anonymous said...

I back-tested this 'inside day trading high' rule many years ago, and it works quite well, although it's relatively rare. I'll take a short too if the market turns today.

Anonymous said...

If you were looking to go long what level would you consider nibbling at ?

Kevin said...

Hi Mike,

You're asking the wrong person because I am bearish and it looks like the move down has just begun in my opinion. If I were to get long, maybe I'd wait for a retest of the November lows in the S&P and then I'd analyze the market and see if there is any strength within the various groups.


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