Stock Market for Beginners

In the last week, we’ve had a series of breakdowns through support levels. The previous lows of 1480s were tested and broken on Thursday and Friday. The market has entered a very volatile state, and you can expect it to remain this way for a while. Indecision from investors permeates the market at the moment.

On Friday, the market spent most of the day down very little and was almost unch at one point. The majority of the sell-off occurred in the last half hour of trading because many traders didn’t want to hold positions over the weekend. The selling capitulated in the last 15 minutes when technical traders realized the S&P was going to end the week below support. Furthermore, because the market was at support levels at the beginning of the trading day, there were many weak buyers looking for a quick rebound that were stopped out or forced to sell by the close because of their quick losses.

Stock Market Strategies for Beginners:

• Price is currently testing support at the previous high of 1461 in late February.
• If price breaks through there, look for further support at the 200-day moving average at 1448.
• If price falls through that as well, there won’t be any additional support until the previous low in March of 1363.
• Keep an eye on the RSI as it approaches the 30 level, which indicates an oversold market. You can see that the last time the RSI fell under 30 in March, the market rebounded soon after.

The weekly chart patterns ended very bearish last week because of the Friday sell-off and we need a major rally in the upcoming two days before the end of the month to have the monthly charts look better. But if I am right and the majority of the Friday sell-off was due to special circumstances, we should get most of that sell-off back within the next couple of days. If I am wrong and we have broken down in the weekly and monthly pattern in the S&P 500, we could have an extremely scary and volatile August.

In general, it seems that the underlying economy is still strong and can push this bull market up further. Look to buy upon confirmation of a rebound, especially if price bounces off support. Remember than in volatile markets like these, it’s crucial to practice solid risk management strategies.

<< Previous Stock Market Overview - July 22nd <<

>> Next Stock Market Overview - August 5th >>

Share This