Lying among my favored "The Intelligent Investor," "One Up on Wall Street," and many others is a book on momentum investing, "How to Make Money in Stocks" by the legendary William O'Neil. Mr O'Neil is a mentor to David Ryan, multiple winner of the U.S Investing Championship.
In summary, this book talks about
- various chart patterns that will lead to an explosive increase in prices (cup with handle, tight flag, etc)
- stocks that react accordingly usually have the attributes of C.A.N.S.L.I.M
What is more interesting to me is that the book claims to be able to tell market topping just before a major decline. Re-reading what was said in 2000-March, it cited 3 days (not consecutive) of warning signs. The only takeaway for me is to be careful of
dojis, and stay focus on volume increases (even though the example wasn't really obvious!) that result in a drop... this is highly confusing and definitely happening all the time.
The 3 indexs, SP500, DJ and NASDAQ is lay down below:
I can only note that towards the end of July, the Nasdaq and DJ were inversely correlated.
On the whole, I could only point out 2-August as a possible red flag.
August 8-10 was extremely worrisome, but like how the market will often make a mockery of us, August 11 was a bullish movement.
Volume for the past two weeks wasn't spectacular, the last trading day, 19-Aug, was a typical hammer but there wasn't any discernible trend going on.
Predicting market movement is as tough as nails.
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