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How to Identify Relative Strength When Buying Stocks

Another Volatile Session On Wall St As Investors Digest Awful Housing Data & Latest Fed Meeting

Technically, the fact that both the Dow Jones Industrial Average and the S&P 500 Index closed below their respective 200-day moving average (DMA) lines suggests the market may retest its recent lows. Looking forward, the 50 DMA line should now act as resistance and this month’s lows should act as support. Since the June 15, 2010 follow-through day (FTD), this column has steadily noted the importance of remaining very selective and disciplined because all of the major averages are still trading below their downward sloping 50-day moving average (DMA) lines. This week’s sell off simply confirms that view. Trade accordingly

Adam Sarhan June 23, 2010

Stocks Close Below 200 DMA Line

Technically, the fact that both the Dow Jones Industrial Average and the S&P 500 Index closed below their respective 200-day moving average (DMA) lines suggests the market may retest its recent lows. Looking forward, the 50 DMA line should now act as resistance and this month’s lows should act as support. Since last Tuesday’s FTD, this column has steadily noted the importance of remaining very selective and disciplined because all of the major averages are still trading below their downward sloping 50-day moving average (DMA) lines. This week’s sell off simply confirms that view. Trade accordingly.

Adam Sarhan June 22, 2010

US Stocks Negatively Reverse After China’s Currency Becomes More “Flexible”

It is also important to note that it was encouraging to also see the Dow Jones Industrial Average and the benchmark S&P 500 Index rally above their respective 200-day moving average (DMA) lines last week. The 200 DMA line should now act as support as this market continues advancing, while any reversal below that key technical level would be a worrisome sign.

Remember to remain very selective because all of the major averages are still trading below their downward sloping 50 DMA lines (which is the next area of resistance). It is also important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.

Adam Sarhan June 21, 2010

New Rally Confirmed; Stocks Close Above 200 DMA Line

Friday, June 18, 2010 Stock Market Commentary: Stocks ended higher this week, confirmed their latest rally attempt, and the benchmark S&P 500 index and the Dow

Adam Sarhan June 18, 2010

Stocks Edge Higher After Retesting 200 DMA Line

The major averages confirmed their latest rally attempt on Tuesday, June 15, 2010 when they produced a sound follow-through day. Looking forward, the window is now open for disciplined investors to begin carefully buying high-ranked stocks again. Technically, it was encouraging to also see the Dow Jones Industrial Average and the benchmark S&P 500 Index rally above their respective 200-day moving average (DMA) lines. Looking forward, the 200 DMA line should now act as support as this market continues advancing, while any reversal would be a worrisome sign. Remember to remain very selective because all of the major averages are still trading below their downward sloping 50 DMA lines. It was somewhat disconcerting to see volume remain light (below average) behind the confirming gains. It is important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.

Adam Sarhan June 17, 2010

Stocks End Mixed As Dollar Edges Higher

Remember to remain very selective because all of the major averages are still trading below their downward sloping 50 DMA lines. It was somewhat disconcerting to see volume remain light (below average) behind the confirming gains. It is important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.

Adam Sarhan June 16, 2010

Stocks Score A FTD, New Rally Confirmed!

The Nasdaq composite confirmed its latest rally attempt and produced a sound FTD which means the window is now open to begin buying high-ranked stocks again. Technically, it was encouraging to see the Dow Jones Industrial Average and the benchmark S&P 500 index close above their respective 200 DMA lines. However, the fact that volume receded compared to the prior session prevented the DJIA and S&P 500 from scoring a proper FTD.

At this point, the S&P 500 is down -8.5% from its 19-month high of 1,219 and managed to close above resistance (200 DMA line) of its latest trading range. Looking forward, the 200 DMA line should now act as support as this market continues advancing. Remember to remain very selective because all the major averages are still trading below their downward sloping 50 DMA lines. It was also disconcerting to see volume remain suspiciously light behind Tuesday’s move. It is important to note that approximately +75% of FTD’s lead to new sustained rallies, while +25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.

Adam Sarhan June 15, 2010

Stocks Flirt With Resistance

The benchmark S&P 500 Index marked Day 14 of its current rally attempt and is currently encountering resistance just below its 200 DMA line. The Dow Jones Industrial Average marked Day 5 of its latest rally attempt while the Nasdaq Composite marked Day 3. At this point, the window is now open for the major averages to produce a sound follow-through day (FTD) until the recent lows are breached. Furthermore, it is well known that a market should not be considered “healthy” unless it trades above its rising 200-day moving average (DMA) line. The fact that all the major averages are below both their 50 & 200 DMA lines bodes poorly for the near term. That said, the bears will likely remain in control until the popular averages close above their important moving averages. Trade accordingly.

Adam Sarhan June 14, 2010

Another Volatile Week On Wall Street

The benchmark S&P 500 Index marked Day 13 of its current rally attempt while narrowly avoiding undercutting its 5/25/10 low thus far but failed to score a proper FTD due to the light volume that accompanied Thursday’s strong move. The Dow Jones Industrial Average marked Day 4 of its latest rally attempt while the Nasdaq composite marked day 2. It is well known that a market should not be considered “healthy” unless it trades above its rising 200-day moving average (DMA) line. The fact that all the major averages are below both their 50 & 200 DMA lines bodes poorly for the near term. That said, the bears will likely remain in control until the popular averages close above their important moving averages. Remember, we have seen these very strong light volume rallies in the past only to fail a few days later. Trade accordingly.

Adam Sarhan June 11, 2010

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