Ian Woodward's Investing Blog

The Dreaded Spidery Legs Syndrome

How often have you been stopped out of what seemed a very safe “stop” at the
open or during the day only to find that the security you were in came right back
and went higher?  I call it Spidery Legs Syndrome.  I am always careful to look at
chart patterns that display this symptom as it gives a clue to beware of being
stopped out at an unreasonably low level, and if it is a prevalent problem I tend
to skip buying the stock.  Sad to say it happened to both the Nasdaq and the NDX
today, and that can be translated to include the QID, but it goes with the territory.

spidery

Just two nights ago, I suggested that an Early Warning Sign that could trigger a
cascade into a correction of the Bear Market Rally would be a sharp 50 point
drop in the Nasdaq.  It opened today 30 points down but recovered as did the
NDX which fell 25 points, shown below.  Both finished essentially flat, so be on
the lookout for another attempt at these shenanigans again!

ndx

This may be a shot across the bow, especially as the other Major Indexes of the
DOW,  S&P 500 and NYSE all had sizable drops of  ~ 2.0% to 2.5%.  we have had a
nine week 40% rally which has recovered some of the drastic freefall; On the
other hand, an occasional back and fill is very healthy if this Bear Market Rally is
to continue.

However, there is no question in my mind that the Bears are stirring and may be
getting the upper hand.  I have featured the two charts below several times before,
so they need no explanation, other than to point to the “Stirring of the Bears”!

yellow

black

If these two charts do provide the underlying details that give us clues to rallies
and corrections, we may have a leg up on most in the future.  Stay tuned and be on your toes.  To be forewarned is to be forearmed and can help you both on the upside and downside.

Best Regards, Ian.

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Disclaimer: Commentaries on this Blog are not to be construed as recommendations to buy or sell the market and/or specific securites. The consumer of the information is responsible for their own investment decisions.