Barry Ritholtz at The Big Picture linked to a report from Jim Stack, where Mr. Stack graphically translated five bear markets in this century to correspond with today’s Dow Jones Index.

Mr. Stack provides charts that show the price decline of these Bear Markets as if they had occurred now, meaning we see the current price of the Dow (as of July, 2007) and follow it down to levels that would have been achieved (as a percentage read) if the Dow had been at current levels when it went through the bear phase.

In the most severe case in the charts (2000 – 2002), the current market would plummet to 7,000 by 2009, falling 50%.

(Graphic courtesy The Big Picture)

Neither Mr. Ritholtz nor Mr. Stack say this is what will happen in the report; in fact, neither make any predictions. The brief, graphical article merely puts past bear markets into the context of today’s market.

Read the post and compare Today’s Dow to Yesterday’s Dow.

Craig at Swing-Trade-Stocks.com is offering a possibly unprecedented opportunity for traders of all experience levels.

He invites all traders to submit strategies, tips, tricks, and experiences so that they can be meshed together into a larger e-book on trading that will be offered free of charge in the future. What’s more is that future readers will be able to comment and add thoughts to what others have submitted, thus creating a seemingly ever evolving text and resource that will be valuable in so many ways.

I just discovered this developing project today and will be creating a few submissions this weekend. I encourage any trader who has found something that works to consider submitting a few tips and tricks as well.

Think outside the box – don’t just provide content that everyone will know. Every trader has a unique take on the markets and a unique sequence of experiences that has contributed to their development as a trader.

When I was starting out, it helped me to read experiences or stories from traders who started like me. I studied the ’superstars,’ and learned from their writings, but what really grabbed my attention was when I was able to talk to, or read from an “average Joe” trader who either traded from home or did so at a small office away from Wall Street. These “real life” stories made a great difference to me and helped me sustain motivation to keep learning and attempting until it all fell together.

There are a lot of smart traders out there, and we all come from different backgrounds and have learned things differently. We all trade differently at times. We all have strategies that work for us… or have not worked for us at all (share those as well).

The link is called “Your Trading Tips” and I would recommend reading it and seeing if you have what it takes to articulate a few tips or strategies you think other traders would find beneficial. There is so much to be said for sharing this knowledge with others.

I applaud Craig for attempting this endeavor and wish him the best.

Is any daytrader feeling sea sick from the ‘ebb and bob’ of yesterday and today? Did today feel like a repeat of yesterday, but only in reverse? If so, you’re not alone.

We do live in interesting times, that’s for sure. Price in all major US Indexes closed just shy of where it opened yesterday, creating a near mirror image on the daily charts of the indexes. The intraday action, however, was not so ‘mirror image’.

Let’s take a broader view:

Nasdaq Index:

S&P 500:

Overview:

The technical downtrend still remains confirmed; price did not achieve any milestone today on the daily charts.

Price remains in the pattern of lower highs and lower lows, and remains below a trendline that is twice tested on the S&P and Nasdaq, and thrice tested on the Dow Jones.

All indexes are below their falling 50 period MA, yet above their falling 20 period MA, indicating a strange technical price zone.

All indexes are (officially) above their 200 period MA, which is the “big” dividing line some major funds use as the determinant for ‘trend.’

The S&P is behaving quite properly in terms of Fibonacci retracements. Price met resistance at the 38% retracement with today’s action. Price recently tested the 50% retracement.

We cannot get bullish on the indexes until price breaks above the trendline, above the 50 period moving averages, and ideally makes a higher swing high.

Until then, the odds favor more downside movement as the ‘wind’ of the market blows southward.

 

I wanted to show a nice setup that developed just a few minutes ago in the Dow Jones ETF – DIA (5-minute chart):

Notice the consolidation and ‘triangulation’ that formed as a result of the convergence of the 50 period MA above and the rising 20 period MA below.

Aggressive traders could have positioned themselves inside the consolidation, but the greatest odds for a successful trade would have occurred at the break of the observed range, which occurred just under $131.30. A stop would have been placed either slightly below the breakout (conservative) or below the rising 20 period MA (aggressive).

Initial target: Upper Bollinger Band (achieved very rapidly) for a quick $0.30 gain.

The more you see ‘idealized trades’ unfold in real time, the better you’ll be at recognizing them and acting upon them with greater confidence.

What do these three stocks or indexes have in common? Each is showing a strong impulse sell move that is just confirming and is underway.

First, let’s look at the Dow Jones Index:

Observations:

• Price is in a confirmed daily downtrend.
• Price failed to muster enough strength to test the falling 50 period MA
• Price rose on significantly low volume – an enormously bearish sign
• The next likely play is to test the rising 200 period MA, at Dow 12,900.
• Resistance appears to be in the Dow 13,400 to 13,500 zone

Caterpillar (CAT)

Observations:

• I have annotated a recent head and shoulders pattern which is resolving itself
• Price rallied to retest the breakdown zone from the head & shoulders pattern
• A strong short sell trade occurs at the test of this area
• Confirmation comes from resistance at $77 from the falling 20 period moving average
• Price is in a technically confirmed downtrend
• A future play would be to test the rising 200 MA at $70

Goldman Sachs Group (GS)

Observations:

• Price has been in a confirmed downtrend for some time now
• Price just completed a ’swing up’ to retest the falling 20 period MA, and has failed
• A specific “Impulse Sell” trade occurred with the new momentum low and the rally to the 20 period MA
• The objective for the “Impulse Sell” trade is the most recent swing low at $160 (stop above $180)
• The New Momentum Low hints that a new price low is yet to come (“NML” at bottom right of chart)
• Price rose recently on a swing-up on lower volume – bearish

I’ll be watching these to see how they play out. Today’s action was discouraging for the bulls. Volume surged into the last hour as funds and traders liquidated millions of shares as a result of the release of the Fed’s Minutes.

With the wind of the market at the backs of the bears, the greatest probabilities for trading success appear to be coming on the short-selling side now.

Do not try to fight the tide until we get confirmation that it has turned.

Be safe.