A super easy indicator for identifying the bottom. (July 12, 2012)
SP-500
I’m Dan Fitzpatrick at StockMarketMentor.com. In today’s video I want to do a real quick one to take a look at the S&P. I’ve got a Fibonacci retracement here from the April high down to the June low and right now, where we are on this pullback here is just about right dead nuts on the 38.2 percent line. You don’t have to know that much about Fibonacci at all; I think it’s over used by some underutilized by others, but I do think you want to look at these basic levels here. Today S&P came down to this level and bounced, but before you just go rushing out to buy or to sell and say, “Oh well, the next one here is the 23.6 number look at an indicator, it’s really, really simple, I look at a lot both up and down, and that is the highs and lows and I’m not talking about closing I’m talking about intraday. This is what I mean, even though the S&P has hit, what I would view is a Fibonacci support level, we still have a series of lower intraday lows, okay, there’s one, there’s a high, that’s what starts the sequence and then one, two, three, four, five days in a row we’ve had lower intraday lows; so if you want to use this as a timing indicator you can just wait for the higher intraday low. It’s not the perfect trading signal, it’s very, very rudimentary, but it does pay to use it. In other words if you want to bet that the S&P is going to turn around, the way you do it is give up the first day, just say, “You know what I’m not going to catch it on the exact bottom, that’s okay, but I will catch it on the next day.” Case in point, back here; if you had seen this moving lower and you say, “You know what? I’m going to wait for a higher intraday low before I buy,” then by definition you’re not buying on the day that the intraday low is printed, unless you’d like jump in there right at the end of the day or something. You’d have bought on this day, which would have given you a pretty nice move higher. So now, we’re down here. Do you want to buy tomorrow? Well, perhaps, if the S&P prints a higher intraday low, then this is the time to buy. If the S&P continues to print lower intraday lows, well guess what? Then it’s not the time to buy. So try using this basic, basic, basic format of tracking intraday lows to assess the maximum power of the bears and the maximum power the bulls. You can also do the same thing with intraday highs, but what I’ve found throughout my years of trading, is that the lows tend to be of more informative, both up and down, because, generally speaking, most investors, most traders, will never short a stock, they’ll only buy. Is that right or wrong? It just is, there is no right or wrong. Most traders don’t short stocks, so what we want to do is assess the actions of most traders. If they start stepping in at a higher level than they did the prior day or the day before that, or the day before that, that means something. So back to here, if the S&P prints a higher intraday low then this $1325.41, that’s the time you want to consider stepping in and starting to buy. Now members, I’ve got a video dedicated to the Buzzin’ Dozen, that’s the 12 stocks that I talked about last week and we’re going to go through them all pretty clearly and so it’s a special Strategy Session for you tonight. I want you to get over there and check it out now. Free Chart