A Gray Line In The Sand

Often, they'll get baited into making definitive bullish or bearish comments about individual stocks or the market as whole when they are interviewed by the news media.

But traders know that one of the secrets of success is to take one day at a time and not get emotionally tied to any particular opinion about what the market will do next.

The whole technical mood of the market can swing from one extreme to another very quickly. We've seen that in the past five days of market action. Monday's breakout from a 10-day trading range in the Nasdaq was greeted with with a collective sigh. And they were singing "5000 here we come!"

Then Wednesday and Thursday happened and the music ended.

As Andy Grove said, "Only the paranoid survive."

Today's chart of the day of the NYSE Composite Index (NYA | Quote | Chart | News | PowerRating) shows a trendline that some technicians might consider to be a "line in the sand." The trendline has been in place for 17 weeks and consistently provided support during that time.

With the weakness we're seeing on Friday's session up to the time of this writing, many traders are looking at the possibility of a breakdown below this trendline. If that happens, does that mean that the hopes of a new bull market are crushed?

Nothing is that black-and-white. In fact, a consideration of a huge myriad of technical factors rarely gives even the most successful traders in the world anything remotely resembling a definitive clue about what the market will do next.

Moral of the story: Protective stops on every trade!

Have a great weekend,

Eddie