As impressive as the market rebound at the end of last week seemed, the theaters weren't full. Audiences went to some other movie.
The Dow Jones Industrial Average dropped 7.4% in January. It has rebounded 2.9% so far. But what's missing is the volume, the audience participation. The Dow is still below the 50-day moving average, and without strong volume, its chances are smaller that it will retake that 50-day MA.
To get an idea of the Dow's track record for this time of year, the next 10 weeks have produced only an average 2.3% gain in recent years. Focusing on the most recent 10 years, the Dow did have two decent gains – a 10.1% gain in 2010, and a 6.1% gain last year.
But there were 6 losses in the past 10 years. The Dow's track record is less than 50-50.
The S&P 500 looks similar. The NASDAQ Composite's rebound is slightly stronger, but over the next 10 weeks, the NASDAQ has lost an average 0.6%, with gains in only 13 out of the past 23 years (57%).
The Russell 2000, an index of smaller stocks, has a little better track record, but its recent rebound, while on good volume, hasn't gone far. The Dow's rebound last week just made it to the Fibonacci-important 38.2% retracement level, but the IWM's rebound hasn't even made it that far.
The next few days should show the true character of this market. It may seem like a good time to pick up a few prized racehorses, but don't bet the farm.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, type in www.markettamer.com/seasonal-forecaster
By Gregg Harris, MarketTamer Chief Technical Strategist
Copyright (C) 2014 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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