Today, in yet another hostile day on Wall Street, the Dow Jones Industrial Average once again ran away from 12,200 – a.k.a. the RedZone. Up to this point the Dow is hanging onto a paltry 3.6% gain for the year. The 15-51 strength indicator betters that by 313%, gaining 11.4% so far this year. Here’s how the action looks.
Now, everyone knows that it’s impossible to “time the market” – the act of buying at the lowest and selling at the highest in any particular year. But that’s not required to make money or be successful. The cliché is: Buy Low and Sell High – that is, to make money. And that’s easy to do in a volatile market like this one.
Every time the Dow approaches the RedZone is gets scared and can’t hold it. Anything above the action zone midpoint (11,245) is over-valued territory. That’s the time to sell or short stocks. Reason being, there’s simply no reason to go long on overvalued stocks in a broken market with an economy on a downward trend. That’s the reason the Dow sells off once it gets to the RedZone. It makes perfect sense.
That kind of volatility is a trader’s delight. It makes it easy to make money.
Stay tuned…