There is lots of economic data out this week. Plus more earnings are coming out.

I will be looking at the Econ Data and like Jim Cramer said Friday, the Key will be the jobs report due on Friday.

On the Market: This is the beginning of the month where money comes to work. So, we will see if that buying action can kick a return to the Northside. Some players may use that bounce to sell some of their struggling stocks and take money out of the game. And others will look to play some lofty issues to the Southside. Stay tuned…

Many players are looking for that sell off that they have been expecting since March 2009. And perhaps that 10% correction is on the horizon and we might be looking for the S&P 500 to touch the January high.

If that does happen there will be a lot of Longs closed out and then Short plays entered. If you are in this game then you will have to watch this action carefully for the Key reversal and be nimble.
Often when a market turns, the strong leaders fall victim to the mood; again you have to be alert.

One of the Analysts that I read puts it this way: If there is an upside day, you can use that to your advantage. Then we turn over and look for the downside. Over time we look for the ABCD pattern to form and see if they are upside or downside.

We would be looking at some that would be over a two-to-three-week period. What you have for the upside is that strong move, and then it comes back, makes a low, bounces, makes a lower high, and then sells off and makes a lower low.

That chases out a lot of owners who think it is going to sell off because it has made a lower high and lower low. As long as it has had a strong move upside, it is still in control and is all contained within that trend. If it holds up with the 60% Fibonacci retracement or that general range, then that shows there is plenty of momentum to continue to the Northside.

On the downside, you reverse it. There is an impulse move to the downside, it bounces, and it sells off and does not make a lower low. It looks like it makes a higher low and moves up and makes a higher high. It looks like things are okay, and at that point you watch carefully. If it rolls over and starts to sell hard, you have your downside play. We will spot more of those when they form up — there are not many out there right now.

He goes on to say: I am not too optimistic about the market continuing its rally at this point. Just a lot of issues all stemming back with the high volume that started creeping up as the market moved laterally.

Last week you noticed that there were big moves in price along with strong moves in volume. And, then a broken trend-line and leaders breaking down in retail and other sectors that have been moving the market North. With that kind of action you keep your eye peeled for some Southside movement. That’s what a market does. Many players have taken good sized gains in here because the see this action coming in.

Look for some to play the bounce this week to lighten up on the Longs, and the play the Short side for a bit. The Rule: always take what the market gives.

Have a great week!

All the best, Red
PS Savvy market observers say, “play the wrong side of an Obama Administration initiative (Jobs and Mortgages now) and you are likely to lose.” Red

Posted by Shayne Heffernan on May 3rd, 2010and filed underEquities, Latest News, Markets, USA.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site