Cart (0)
business newsPossible Stock Market Bottom as Key Sectors Break Out
During market reversals we typically see small caps and tech move first, followed by big name stocks, energy, and financials.
PRINT
 |
|
During market reversals we typically see the more sensitive stocks move first, which are the small cap and tech stocks. Then a couple of days later we see the brand name stocks (big cap, energy, and banking) follow. It’s these large sectors which provide the power in trends.
Taking a look at the graph below you can see on the far right both tech and small caps are leading the market higher. As of today the power sectors (energy and financials) started to move higher as well. So if things play out I expect the S&P 500 -- which is a basket of the 500 largest companies -- to follow the small caps higher over the next 1-3 weeks. My trading buddy David Banister over at ActiveTradingPartners.com focuses mainly on small cap stock trading, combining crowd psychology and fundamental analysis. His focus is finding stocks ready to explode during bull market advances, which may just be starting...
Click to enlarge
If we take a look at the charts to see how each of these sectors have been performing you will notice that the small caps (IWM) and tech stocks (XLK) broke out one day before the energy and financials did. This is very typical and it also works for playing gold. I have seen gold stocks lead the price of gold bullion up to 7 days before the metal started to move. It’s these little golden nuggets of info which can not only save you money but make you even more when put to work.
Click to enlarge
Mid-Week Trading Conclusion
In short, I feel the market has been forming a base for almost 3 weeks. Just last week we saw the big sectors (financials and energy) reach their key support levels from several months back and that should trigger a sizable bounce. With any luck it will trigger the start of another leg higher in the market.
Editor's Note: Chris Vermeulen offers more content at his site, TheGoldAndOilGuy.com.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
