S & P Index and Crude Oil Market Trends: Next Steps?

by The Smarter Wallet on March 20, 2009

The stock market may look like it’s recovering right now, and investors are feeling just a wee bit relieved that we’ve picked up a little from the market’s highly publicized 12 year lows. But is this a true recovery or what you’d call a “dead cat bounce” — or a fake bounce?

My Investing Techniques: How I Buy Stocks

As an investor, I employ several techniques to determine when to purchase stocks. Here are a few of those strategies:

1. I buy shares regularly and accumulate them over time. I perform what is called “dollar cost averaging”, which simply means that I automatically invest a certain amount of money into mutual funds each month, on an ongoing basis.

2. I buy shares when I’ve got extra savings I can afford to put into the market for the long term.

3. I buy shares when I rebalance my portfolio.

4. I buy shares when the market is lower than usual.

Now in most cases, as a long term investor, I don’t typically pay that much attention to when I buy stocks or funds. Especially since I prefer to use the underlying fundamentals of the market as a guide for determining my next moves. If the market is down, I try to act like a contrarian and buy at generally lower prices. After all (I used to tell myself), this is for the long term so I’m not going to attempt to catch the stock market bottom.

Do you believe that now is as good a time as any to make stock purchases? If the Dow Jones were at 8,000, that would still be much lower than where it has been for many years, when the index was hovering in the vicinity of 12,000 points. So wouldn’t it make sense to buy in?

Prediction: S & P Index Will Retest Market Lows

These are solid questions that many investors have been wondering about lately. But recently, I’ve been studying the markets in a different light, trying to get a handle on techniques that are more generally employed by technical analysts. And what they seem to be saying these days is that despite the oversold nature of the markets, the recovery over the last few days is probably not sustainable and will result in a retesting of the lows (or the currently established stock market bottom).

So should I buy right now? Fundamentally speaking, yes, with your eye on the long term. But technically speaking, probably not. I’d prefer to wait and see what happens — there could be better price points in the horizon! Let’s see how the trend develops over the next few days.

I’ve been checking out this new way of looking at the market by studying the rules of stock technical analysis, thanks to resources from INO.com. I’ve been watching INO.com’s videos and tools to gain a better understanding of market movements. Here is one such video from INO.com that demonstrates the use of their Market Club charting tool. The discussion here is about the recent market activity involving the S & P index and Crude Oil market.

Click this link or the image to watch the video.

S & P Index, stock market, trends, INO.com

The Crude Oil Market Trends Upward

The stock chart in the video presentation suggests that the equity market will retest its lows. On the flip side, there are charted trends pointing towards a possible upside in crude oil prices. The video further explains that as the U.S. dollar deteriorates, crude oil prices are expected to rise. So if you’re a trader, there appear to be opportunities developing for going short on the equity markets while going long on crude oil. Anyway, that’s my interpretation of what’s going on. Please note that this is just an analytical exercise. It’s up to you to determine whether it’s worth the risk to follow these predictions.

INO.com’s Market Analysis Tools and Resources

If you’re interested in learning more about market trends and technical analysis, check out INO.com’s investment resources. You can subscribe to use their Trend Analysis tool for free (to track your stocks). You can also watch free investing and trading videos at INO TV Free.

For more sophisticated active traders, their Market Club premium service is available. They just released a new version of their Market Club application (a charting tool for traders) and I’ve been impressed with the new features and slick design.

Here are a few more related links about INO’s investment videos to whet your interest:

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