Stock Trading Predictions & Technical Analysis: WARNING

Sunday, November 1, 2009

WARNING - CIT files for bankruptcy

I will be watching carefully what happens tomorrow morning as the news of CIT's bankruptcy could trigger the market to fall sharply and consequently carry the whole market along with it. In that event I may sell all my positions and look towards taking short positions. I'm not saying this will happen and the market may move higher tomorrow, but I'm just warning to be on the lookout. This week is critical to where the market will be heading for the remaining of the year and beyond. A sharp fall of the Dow Jones will give us a STRONG SELL SIGNAL. If we then get a confirmation, you can expect the market to become much more volatile and possibly close to what we've seen in 2008. You may see the days following the confirmation big bounces back up as attempts of recovery, but will be considered failures if the Dow Jones stays below its 50 day MA. I hope this is not a double dip recession as some analyst feared. Tomorrow will be a very interesting day filled with a lot of action, and possibly a lot of volatility. I'm not sure how the market will react to CIT's bankruptcy, but I don't feel very optimist of seeing the Dow Jones hold up. Coincidentally most trends seem to reverse after a 4th pullback, where the Dow Jones is now. Anyways, as I've said before I'm not predicting anything and for all I know the market could move strongly higher tomorrow, but I'm just warning to be on the lookout in the event of a sharp move down, and how you should react. Tomorrow and this entire week is a critical week for the market. Update 8:30pm: Please note that the Dow Jones Pre-Market Futures are currently relatively high at +29.00 points, so the market's reaction could be positive. All will be answered tomorrow.

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TECHNICAL INDICATORS

BUY SIGNAL: Indicates the possibility of the start of a new up trend or the continuation of the current up trend. This signal may be often given in the early stages of a potential new up trend that was preceded by a down or sideways trend. Such signals do not always succeed and may fail at time.

BUY: Indicates that the current up trend is already in motion and a BUY SIGNAL was already given earlier. A BUY does not necessarily indicate that the stock will continue higher from here, but simply that the stock is trending up. The further into the trend you decide to take a long position, the more risk you have of seeing it reverse back down sooner rather than later.

STRONG BUY SIGNAL: Indicates a stronger, more significant and reliable signal than a BUY SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG BUY: Indicates that the current up trend is already in motion and that STRONG BUY SIGNAL was already given.

SELL SIGNAL: Indicates the possibility of the start of a new down trend or the continuation of the current down trend. This signal may be often given in the early stages of a potential new down trend that was preceded by an up or sideways trend. Such signals do not always succeed and may fail at time.

SELL: Indicates that the current down trend is already in motion and a SELL SIGNAL was already given earlier. A SELL does not necessarily indicate that the stock will continue lower from here, but simply that the stock is trending down. The further into the trend you decide to sell a position, the more risk you have of seeing it reverse back up.

STRONG SELL SIGNAL: Indicates a stronger, more significant and reliable signal than a SELL SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG SELL: Indicates that the current down trend is already in motion and that STRONG SELL SIGNAL was already given.

HOLD: Indicates that traders who already hold this stock, should hold on as long as the trend persists. This signal is usually given during an up trend for which it would be considered too risky to take a long position at this point.

STRONG HOLD: Indicates that the current trend has been in motion for a while and rarely deviated away from the trend. Although the stock may continue higher, there may not be enough potential up side to trigger a BUY SIGNAL. This type of indicator usually means that the stock has very strong support levels which may have been tested but not broken.

WAIT: Usually given during a sideways trend for which we are waiting for a move that would trigger a BUY SIGNAL or SELL SIGNAL. This could also indicate uncertainty and the risk that would be taken if you were to take a long position at the current level. Taking a long position after giving a WAIT indicator is considered a gamble.