The last article left off considering if market will breakout, breakdown or pullback. Market has continued in a narrow range which was the most probable short term pattern pointed out until todays attempted breakout. This was more pronounced in the NASDAQ than the S&P 500.
But the breakout failed and we are again presented with the same possibilities and still looking for clues, except that we now know it could not go up … at least not yet. One thing to watch out for is that at times if something cannot go up it will go down. This may sound simple but there are reasons. Traders that were caught buying above the base during the breakout will be forced to sell by their rules as prices reached their stops. This may bring other selling in if price falls below the base. You can understand this better if you put yourself in the place of the other traders and what they are probably thinking.
We have this one clue now though that sellers were hanging out above this base.
In global events finance ministers from countries including China, Germany and Japan have recently criticized the QE2 program the Federal Reserve has embarked onto spark spending and investment. The central bank announced last week that it would buy $600 billion in Treasury bonds until the middle of next year. The Fed’s program will most likely continue to weaken the value of the dollar, which could benefit large international companies that export goods. The weaker dollar has by nature the effect of raising other currencies in comparison.
This of course could be expected as counties compete for world trade. Lower currency values in the home manufactuing companies country will make their products cheaper after currency conversion in countries with higher currency valuations, so it can boost exports.
Traders and ivnestors should be aware of new IRS regulations starting next year. Beginning in January 2011, brokers and mutual fund companies must report to their customers and the IRS the customer’s adjusted basis in a specified security and characterize any associated gain or loss as short-term or long-term for tax purposes.The final regulations, handed down by the IRS on Oct. 15, were issued under the Energy Improvement and Extension Act of 2008 by Congress.
Brokers and mutual fund companies must include the new data on an expanded Form 1099-B beginning in calendar year 2011. The expanded 1099-B must be filed with the IRS and furnished to customers in early 2012. So in maanging several positions in the same security traders and investors will ned to take vcare to specify which shares they are selling when closing out partial positions to manage gains and losses. If no election is made on which shares to sell the brokerage is to use FIFO (First in first out).
Colorado stock Crocs, Inc.(CROX), made a move yesterday, and is holding fairly well today. It is, as of 1:30 PM ET, forming a continuation pattern.
Trade with a plan.