Monday, September 3, 2012

The Battle for 1400...L&C

There is always a war going on within the market between the bulls and the bears. No, not Spain versus Russia or any other interpretation that only serves to confuse the average layman. It is the struggle to gain wealth by directing the stock market to your thinking about the economy. Within this conflict is the tools that flows big money.
Individuals no longer affect the market. The market moves from institutional money There are two camps to activation. The larger uses the basic supply and demand stats. The fundamentals of a companies product. The other is technical. Analysts watch charts with support and resistance lines to the price of a companies stock. They have many other indicators like volume (which I use)MACD, RSI, channels, etc. In a free market these two factors determine the trend, however markets are no longer free because government intervenes either directly or indirectly. This makes trading very difficult because you can be right and still be wrong due to some unforeseen intervention. This is the status of the US market at the moment.
That being said, there are other factors that affect the market. When the review of the market is given as news of the day, it focuses on the three main indexes, Dow, S&P and NASDAQ.
This is another, however, generally not talked about problem. These indexes are constantly being updated and changed. The reasons are many, but only one is talked about in the media. They say that to keep these indexes relevant and reflective of the economy, it is necessary to purge "old" industries like railroads and replace them with modern economy tools like technology. They do this also because of mergers or the buyout of a company that is going private.
What They Don't Say
is that many times these older companies are declining in value which will bring the index down in value and that is the real hidden reason that they adjust these indexes. This past week is a perfect example.
From Kitchen To Garage
including the clothes on your back come from this hallmark store. It is a staple for Malls, an anchor to shopping centers and I'll go one step further. I wager that each one of you, dear readers has something purchased from this store, but it was kicked out of the  S&P 500 Index this past week. Who? SEARS.
Because sales are down, profits are negative and this will lower the index average. You see, the people behind these indexes know that if the market falls below a support level, well, then there could be a correction or worse from the selling coming out of the technical camp. This is the behind the scenes battle to keep the market above the recent psych 1400 level. It needs this to become resistance in order to go higher.
This nothing new. In fact if you look at the oldest index, the Dow 30, you will only find one original member:GE. This is market manipulation and it is no different than the Fed, ECB or any other central bank or government action.
LIARS and CROOKS: Both political parties addressing the public about the platform of the opposing political party concerning Medicare. They both have distorted the truth about what their opposition plans to do with the health agency.