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Choppy Action and a Dead Cat Bounce

Adam Hewison - MarketClub

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This week has been one for the history books and it's not over with yet, we still have today's action to contemplate. So what has the market really accomplished this week? Well, it has frustrated both the bulls and the bears, that's for sure. It's hard to believe that after all of this chop that the Dow is only up 1.18% for the week if it closes where it is currently trading (and less than that on the S&P 500). 

What does all of this choppy action mean? Has the market topped out? Is this a "dead cat bounce"?

Let's just let all the dust settle and see what is going on in the major indices for the week and the month. 

Last week the major indices closed at:

DOW : 16,459.75 down -5.82% for the week.	
Close 8/27: 16,654.51
+ 1.18%

S&P500 : 1970.89 down -5.76% for the week.	
Close 8/27: 1,987.66
+ 0.85%

NASDAQ : 4717.16 down -6.53% for the week.	
Close 8/27: 4,810.92
+1.98%

Last month the major indices closed at:

DOW : 17,689.86	
Close 8/27: 16,654.51
- 5.85%

S&P500 : 2103.84	
Close 8/27: 1,987.66  
- 5.52%

NASDAQ : 5132.10	
Close 8/27: 4,810.92 
- 6.25%

Looking at the hard weekly and monthly numbers, it is very difficult to make a bullish case for stocks. Right now the weekly and monthly Trade Triangles are RED indicating the major trend is down for the DOW, S&P 500 and the NASDAQ. The rally that we witnessed on Wednesday and Thursday, in all likelihood, is a "dead cat bounce" and really no more than a counter-trend move against the prevailing downtrend, in my opinion. 

One thing many professional traders will be watching today is where the market closes. The close today and on Monday could well be the most important closes for the year.

I have said this before and I cannot overemphasize this point - stay disciplined and don't get suckered into the rallies unless they are confirmed by MarketClub's Trade Triangles or another technical tool that you use for making trading decisions. 

Presently this market is trading on perception and whatever the "sentiment du jour" is for the moment.

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