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Wealthbuilder Market Brief 1st March 2013 (Christopher Quigley)

By: Christopher Quigley

What a market. Even the most experienced traders  that I know are having a difficult time getting a handle on what is happening.  Wednesday’s market action caught a lot of folk napping. Monday’s 216 point drop in the Dow Industrials  convinced many that finally the much anticipated market “correction” had  arrived.

The slight “uptick” on Tuesday was a classic VIX buy  signal but it turned out to be a trap. Those traders who shorted the market on  the 26th were pulverized by the bullish 175 Dow point move on the 27th.

What can we make of such whiplash moves?

For me, regardless of the economy, the movement of  the market is understandable when you assess it through the paradigm of Dow  Theory. The market is powering forward because technically it is very strong.  This strength was first indicated by the 128 point breakout in the Dow  Transports on the second of January. Prior to this the Dow 20 had traded within  a trading line for nearly a year. It was perfectly clear to Dow Theory  aficionados that the momentum and the direction of any breakout from this “range  line” would be highly significant. The 307 point follow through move on the Dow  Industrials on the same day as the Trannies breakout confirmed the trend. With  Dow Theory  “ a trend once in place  continues until both indices confirm otherwise”. Nothing has happened in the  last few days to alter this January bull move. Thus the correct trading  strategy at the moment is to go long on pullbacks not short “potential” tops.

full report Wealthbuilder Market Brief 1st March 2013

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