Friday, April 8, 2016

Determine Market Trend (8 Apr 16)

Bull Market, Pullback, Correction and Bear Market
(1)     Pullback: -5% off 52W High   (2) Correction: -10% off 52W High   (3) Bear Market: -20% off 52W High

Benchmark
Symbol
% off 52-Wk High
Market Trend
Dow 30
DIA
-2.14%
Bull Market
S&P 500
SPY
-2.50%
Bull Market
Nasdaq 100
QQQ
-5.26%
Pullback
Russell 2000
IWM
-14.26%
Correction
Although your ultimate goal is to use the stock market to build wealth, you must also avoid losing money.  Knowing how to read the market as a whole will help you to prosper during bull markets and protect assets during bear markets.

Long-Term Trend

The “big dog” of moving averages is the 100-day moving average.  If the index is trading above that level, the long-term trend is considered up; generally, the 100-day moving average is seen as a proxy for the long-term trend.

Benchmark
Symbol
Price
100-DMA
Market Trend
Dow 30
DIA
175.66
169.33
Uptrend
S&P 500
SPY
204.50
198.29
Uptrend
Nasdaq 100
QQQ
109.00
106.86
Uptrend
Russell 2000
IWM
109.11
107.36
Uptrend
In an up-trending market, I will lengthen holding times and give my holdings more room to run.  In a down-trending market, I use short holding times and grab profits quickly. 

  Short-Term Trend

Short-term trends can be captured using short-term moving averages.  The 20-day moving average provides you a simple yet effective way for knowing what side of the market you should be trading. 

Benchmark
Symbol
Price
20-DMA
Market Trend
Dow 30
DIA
175.66
175.22
Uptrend
S&P 500
SPY
204.50
204.11
Uptrend
Nasdaq 100
QQQ
109.00
108.18
Uptrend
Russell 2000
IWM
109.11
108.72
Uptrend
If the short-term trend is up, use bullish leveraged ETFs.  If the short-term trend is down, use inverse leveraged ETFs.

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