In the Wake of Incredible Volatility

We have seen some incredible volatility as of late, not to mention the front page headlines and massive news coverage of this “crisis” story.  So what do we do?  What areas are good to be in and where is the market likely to head?

Well, I am not going to predict what the market is going to do over the next week or month but here is the basic technical picture and what it is telling us.  Not much as changed since my last market blog, except that we now know the market does not know how to price the current news into the market – one day we are down 700 points and another we are up 400 points, and the we are down 400 points on the opposite news that dropped us a couple days before (yes, I am simplifying here).  So we see a massive price range covered over the last couple weeks.  And yet, our technical outlooks remains the same:

DJIA Resistance levels:

11 500     12 000      13 200

DJIA Support Levels:

10 500      10 000      9 000     7 500

Today we closed below 10 500.  We closed below a few days ago but could not hold it.  I have added a new resistance level at 11 500 with the sharp run up several days ago.  

The overall trend is still down and if we stay below 10 500 expect the lower support levels to be tested.  If we begin moving back up, expect resistance at the resistance levels mentioned.  Old support have a tendency to become new resistance levels, so as we drop below support levels those levels will then potentially become resistance.  This is not always the case, as nothing is with trading, but with markets like this it is always good to have certain levels to watch so you can remain cool headed and know your action plan ahead of time.  Structure your trades so you are taking advantage of the information the market has given you.

In terms of sectors to be in longer term, banks have been the strongest performing sector, followed by footwear and soft drinks in the last month.  Brewers have also been strong year to date but not as much in the last month (hmm, bad market=drinks).  If you want to get in to something, these are the sectors that are performing at the moment.  Risk still could be high in banks so use stop losses.