The Dow to Surge -- Be Prepared

by Ian Harvey

March 28, 2015

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The Dow Jones Industrial Average (DJIA) finished in the red for an eighth straight trading day -- its longest losing streak since August 2011 – but historically, the situation could prove beneficial to the alert trader.

The major cause of this continued downward momentum seems to stem from President Donald Trump's legislative disaster Friday, after the healthcare bill to repeal and replace Obamacare was pulled due to a gridlock, with telecom and financial stocks bearing the brunt of the selling pressure.

However, relief could be on the horizon, as based on history the DJIA has historically outperformed following a seven-session losing streak -- with the most notable returns occurring at the three-month mark. The Dow, when this occurred, has averaged a post-streak three-month gain of 2.7% and has seen an increase in volatility over the near term.

And the Dow hasn't had a nine-day losing streak in more than 30 years. This incident occurred in early 1984 where the Dow had an 11-day losing streak, dropping 4.7% over the course of the trading period. So therefore, expect the Dow to surge in the near-term.

As well, the S&P 500 Index (SPX), and the tech-heavy Nasdaq Composite (COMP) have also suffered in the past week.

Last week’s fall of 1.4%, its biggest weekly loss since the November election broke the support line of the S&P 500 at 2,350, and this downward movement continued again yesterday. The significance of 2,350 is that it formed the base of a right triangle with resistance at the 20-day moving average at 2,368.

However, the potential to rebound for the SPX has been given some blows in the past three days of trading – but if the S&P 500 cuts through the resistance, the tides will turn, and for those that are prepared this could be a great stock-buying opportunity.

Many investors are anticipating continued low volatility levels, even after the S&P 500 finally fell 1% in a single session.

If you are unsure of how to play and profit from the upcoming future in the stock market, turn to Stock Options Made Easy recommendations (which continue to produce great consistent profits for their members) to help simplify the situation – either as an added strategy to what is already working for you, or, to play it as a standalone.



Best of Trading,
Ian Harvey
Director of Stock Options Made Easy


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