Stock Market Analysis: Major Swings Drive the Market

This week was one of the more volatile weeks that we have seen in some time. With multiple triple digit moves on the DJ-30 it seems that investors are a bit unsure of what direction price is going to move. Even the threat of inflation coming into the economy doesn’t seem to scare the market for very long. After the big 600 point drop on Wednesday due to some inflationary numbers, the market recovered that and more over the next 2 trading sessions. With the length of the bullish market we have seen, it is likely to take some time for the bear market to take hold if that is the direction the market moves.

With this type of market, investors will see various cycles that happen as it establishes the direction it wants to move. Long term trends are not easily changed so we are likely to see periods where the market is cycling up and down. An important thing to watch for in determining if a new trend is being formed is the price pattern making new lower lows and lower highs. This is the basis for a trend. Uptrends make higher highs and higher lows while down trends make lower highs and lower lows. Once we begin seeing this down trend formation happen we are likely to see a more extended move lower. The key here is to remember that we need to wait until we see it happen and not just trade what we think might happen.

Other things that may be contributing to the volatility this week include the CDC coming out with new guidelines about wearing masks. This could have an impact on the economy as it may make people feel more comfortable going to stores and other establishments where they have not been going this past year. Also, a concern with the military and political happenings going on over in Israel may be having an impact on the markets. We will want to keep an eye on these things as they may be a source of market unrest.

Make sure you are using good risk management in your trades and make sure you know where you will be getting out of your trades if they begin to move against you. Today we are going to look at the daily charts of the DJ-30:

DJ-30:

The DJ-30 has definitely broken out of the sideways consolidation we have seen the past month or so. Notice the sideways movement where we drew the flat box and compare it to what we have seen this past week. The amount of movement is significantly higher than what we have seen. Remember, we will be looking for the market to either remain in the bullish trend by making higher highs and lows or to change and begin making some lower highs and lows. Either way, make sure you are following your rules when you are entering and exit your trades.

Bill Poulos is a retired automotive executive, investor, and a financial educator. Bill began his interest in the markets in the 70s, while advancing his way through General Motors. After retiring in 2001, Poulos co-founded Profits Run with his son Greg. A financial education firm, Profits Run’s main goal is showing everyday people tips for trading safely and smartly, including key risk management. Profits Run is located in Michigan, where Bill lives with his wife, Karen of more than 50 years. Bill refined many programs for Profits Run including Crypto Profit Alert, Instant Options Income, Premium Income Alert, 20/30 Wealth Trader, Real Wealth Alert, Earnings Profit Alert, Premium Income Letter, Rapid Income Engine, Forex Profit Accelerator 2.0, Profits Run Coaching, and Profits Run Alliance.

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