Market Action You Should Keep an Eye On

This week, there was some market action that you might want to watch.

The chart above dated Thursday, March 11, 2010, is a weekly chart of the S&P 500. Notice that the recent trading volume during ‘up’ or positive weeks has been lighter than the trading volume during ‘down’ or negative weeks. That may mean the rally from last year could potentially run out of steam soon. Notice on the chart how the trading volume has declined as prices have increased.

There were some other interesting divergences this week as well. The Dow Jones Industrial Average[1] did not reach a new high even though the Dow Jones Transportation Average[2] did. That’s known as a non-confirming signal which historically has occurred around market tops. Although history does not always repeat itself, indicators such as trading volumes are important to monitor.

If you’re not using exit strategies[3] in your portfolio and you’re investing in equities, I’d suggest keeping an eye on things. Exit strategies are designed to lock in a profit or prevent a significant loss by determining at what predetermined point an investment will be sold. Although having a particular investment strategy does not ensure a profit or guarantee against loss, the market is looking a little top heavy from where I sit.

Securities offered through USA Advanced Planners (Member FINRA/SIPC). Advisory services offered through USA Wealth Management. USA Advanced Planners and USA Wealth Management are affiliated companies. The opinions expressed herein are those of the writer and not necessarily that of the above noted affiliated companies. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. The information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.

This information is education in nature and, therefore, is not intended to constitute investment advice and should not be interpreted as a recommendation to purchase, sell or hold a particular security. Prior to making any investment decision, the services of an appropriate professional should be sought as investment related recommendations are dependent upon the personal situation of each individual investor. Investing in market related securities involves a risk of principal loss