Saturday, November 20, 2010

Stock Market Analysis - Nov 20, 2010

This week, I have decided to bring forward a unique, easy to understand, graphical and matrix based method of Financial Market's Analysis. This method is currently a work in progress. It will ultimately be used in conjunction with computational analysis techniques with pre-defined risks and profit objectives. I will try to explain this Market Matrix over the coming weeks.

Synopsis - Market Analysis
This pyramid combines four major aspects of stock market analysis and gives out the conclusion, based on detailed matrix analysis.
Financial Market's Pyramid
Market Matrix Analysis

This Matrix gives a pictorial representation of the internal market strength, indicators and suggested turns. Based on the current picture, we have many neutral to bearish signal, as evident from Red and Yellow colors. These color codes are based on my historical analysis and market scores. This Matrix is used to come up with the above mentioned conclusions.

Market is neutral to bearish. Although the wave structure is not clear, the kind of optimistic sentiment that we are seeing right now, does not suggest that we have seen the low for the correction. 
High Probability Scenario: Decline into a low next week or after Thanksgiving. Nature of decline will govern the nature of low (long term low or short-term low)
Low Probability Scenario: Rise to a new high before decline. Or instead of a larger decline, we only get a shallow decline and then make a new high
Risk Management: Keep stop above high (in case market decides to run up) or keep stops above downtrend proprietary Moving Average.

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