Are you perplexed, frustrated, and worried about the US stock market’s decline? Hold on. It is during a crucial two-week period during which it should be easier to predict the direction of the stock market.
Friday, September 30, and Friday, October 7, are the two crucial dates. The health and direction of the U.S. stock market should be apparent from the index closing stock price levels.
Why just those Fridays?
Due to the fact that everyday intra-week trading produces more volatility noise than useful information But given that the weekend implies two days with no market action, that daily activity typically ceases by Friday’s closing. Risk without a chance to take action, to put it another way.
Why just those Fridays?
Because all the major U.S. stock market indices closed at the same time last Friday, September 23, at a crucial “technical” (chart-speak for “level”): A probable “double bottom.” According to this weekly graph, every index’s Friday close coincided with its June low.
These two recent weeks fit into that category. They should demonstrate whether that significant double bottom move signals the beginning of a new bull run-up or a sign that things are about to become worse.
Why not limit it to a week? Because one week’s closing might be drastically misleading. Many supposedly “strong” one-week moves have been undone the week after.
The possible scenerios:
First, the significant drawback. Let’s start here as everything we’ve read so far has been unfavorable. That entails lower closures for two consecutive weeks. The result would be that the double bottom failed to hold, indicating that the downward trend is still in effect.
The major pro comes next. This week has already begun to turn downward, and the second week’s closing price above the double bottom low is evidence of an upward turn.
Third, a possible advantage. Similar to the second example, but in reverse. The second week close, however, is merely around or very close to the double bottom low. It would show that the lower levels of the present would not hold, but it would not yet show an upward movement.
Isn’t technical analysis less important than fundamental analysis?
The environment of the stock market is a factor. Currently, the numerous shifting and ambiguous fundamentals lead to conflicting findings. We can determine what Wall Street is thinking and doing by looking at the actual price movements.
Contrarian indicators are frequently found in the stock market. Even when they are well-known and well-liked, they fall short. However, they can be foresighted when disregarded or ignored. With the “double bottom” signal, this is the current condition.
The double bottom indicator is currently of essentially no interest. For news, type “stock market” “double bottom” into the search box. Only two recent articles (other recent ones deal with certain stocks) appear when the articles are sorted by date:
Each’s conclusions are remarkable for being ambiguous: “Yes, there is a double bottom, but it may not be useful.” Any interest in the double bottom indicator has probably vanished given this week’s lower pricing. But if the next two weeks offer us a good indicator, we may give it a lot of weight because of that dismissive attitude.
The bottom line: Today’s widespread negativity makes the stock market ripe for a surprise run-up
The time to hold equities is when “everyone” is gloomy, according to a guideline. The straightforward justification is that despite the weak fundamentals, the sold-off stock prices present a favorable opportunity.