Hey everyone, Pat Walker here from Mission Winners. Today, I’m sharing a tutorial on how we analyze charts to make informed investing decisions. Let’s dive into the details of our approach.
Market Analysis: Understanding the Broader Picture
Dow Jones Industrial Average (Dow):
- The Dow had a couple of good days with an increase in volume, closing near the highs.
- However, it’s crucial to remember that the Dow consists of only 30 price-weighted stocks. A few stocks moving can make the market look better than it actually is.
S&P 500 (Spiders):
- Unlike the Dow, the S&P 500 includes 500 stocks, providing a broader market perspective.
- Over the last few days, the S&P 500 rallied on steadily decreasing volume.
- Yesterday, despite the Dow closing up, the S&P 500 gapped down and closed near its lows on increased volume, signaling caution.
NASDAQ Composite (NASDAQ comp):
- The NASDAQ comp had an inside day and gapped down yesterday.
- This divergence between the Dow and other major indices like the S&P 500 and NASDAQ comp highlights the importance of looking beyond just the Dow.
Why We Didn’t Buy Yesterday
Yesterday, even though the Dow looked good, other key indices didn’t participate. This broader market weakness was a red flag for us. We use a combination of price action and volume analysis to make our decisions. Here’s a deeper look:
Price and Volume Analysis:
- The S&P 500 gapped down and closed near its lows on increased volume.
- The NASDAQ comp also showed weakness, and the QLD (NASDAQ-100 leveraged ETF) gapped down and fell on higher volume.
These signs indicated a cautious approach. So, were we buying yesterday? No, we weren’t. We refrained from buying because the broader market signals advised caution.
Simple but Effective
Our strategy at Mission Winners is straightforward:
- Observe price movements.
- Analyze volume trends.
- Combine these observations to make better investing decisions.
This approach is not about predicting but reacting to what the market shows us. For instance, seeing a stock or index drop on heavier volume tells us to be cautious.
Real-Life Context
To put it in context, I was the sole provider for a family of six for many years, relying solely on investing profits. This experience taught me the importance of getting it right. Our goal at Mission Winners is to help you make informed decisions and achieve similar success.
I hope this lesson helps you understand our market analysis process better. At Mission Winners, we aim to guide you in making smart investing decisions. Thanks for reading!
