Overall market direction on a monthly basis is frequently used by long term investors, but it is the first step in helping us project weekly trends, daily trends, and intraday trends. Let's see how the market has moved from last month.

 

The following paragraph and slide are from last months newsletter!

The slide below shows the trend from the market high of around 5000. If the month of August does not make a new high, then the existing down trend would remail valid and would indicate the confirmation of a bear market. A bear market is only bad for investors who hold stock over night. Daytraders who do not hold over night welcome a bear market because both bull and bear markets have excellent money making opportunities.

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NASDAQ Comp. as of Sept. 1,2000. The monthly chart below shows how the month of August hit the down trend line and closed on the high of the month. September 1st broke through the trend line creating a higher high for the candlestick starting in September. This is a positive sign for the continuation of a monthly up trend. Also, notice how the low of August was a higher low staying in an up trend. The market is still trending upward towards its old high of 5000.

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Daytrading requires that you locate the intra-day highs and lows of the NASDAQ. There is no way to simply say "here is the high and there is the low" based upon some formula or indicator, but we can locate them using some tools and methods we have available. For example, in the chart below, after the open, the NASDAQ 100 moved higher, but the new highs were very small indicating to me that the weak open would probably cause downward pressure. The question here is, how does one know which of these three highs is really the top? The answer is "no one knows", at least not until the trend is broken. Assume that you are trading a stock that follows the index closely. Suppose you entered a short trade close to the top of the middle peak. When the downward momentum slows and the price begins to reverse to the up side, cover your short to exit the trade with a tiny or no profit. Enter another short trade at the top of the next peak. This time the price drops and breaks through the lower trend line and continues down for a profitable trade.

Finding the bottom is not so hard when you use a similar technique. As the index moves lower, retracements will usually become larger and larger as more and more traders are finding the lower stock prices more attractive. The key to getting off a trade at the bottom is to enter trades at the low point of the larger retracements and then exiting those trades with a tiny profit to pay for the trade when the momentum does not follow through. Suppose you got off a trade at the bottom of the "larger retracement". Notice the higher low that occurred (just under the larger retracement label). You would exit the trade when the price fell to meet that higher low which would probably yield a tiny profit. Now suppose your next entry was at the true bottom of the day. The index makes a higher low and then continues up for a nice distance before changing direction. You could take a profit here at the next lower high or let the trade ride. The problem with letting it ride is that during the slow part of the day, the index could make a double or triple bottom. Better to take the profit when you can and look to re-enter again at a support area.

One question you might have from above is how do you find the very bottom of the retracement? Our training courses show you how to use the NASDAQ 100 to locate the change in market momenum. Using skill, knowledge, and experience should enable you to enter your trades at an advantagous price. When you enter your short trades at the top and your long trades at the bottom, you can sit back and relax while your trade gains the maximum available while the fear of being stopped out is minimized.

If you Can't immediately understand the various principles when looking at these charts, it is suggested that you enter a training program (such as ours, of course) or read the necessary books to develop these skills. Poor chart reading skills are similar to flying a plane with blindfolds on. Remember, your money is counting on you!!!