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Thursday, November 10, 2011

The Whipsaw Stock Market (Wall Street)

I am loving my classes at OptionsAnimal. I passed my Level Three test and am now studying bear call and bull call spreads in Level Four. It is very exciting to be doing this in a controlled, campus-style type of education, with tests required to move to the next level. It is VERY different than watching videos and thinking, "oh yeah, got that," and then forgetting it two days later. The "live" classes, the archived DVD's, and the Community make it all very educational. And I am meeting other traders, more advanced than myself, who are helping me and explaining things personally when I have doubts or questions. A gift!

One of those traders is Kris Maynard, who has not only introduced me to a "mentor" - a trading guru who lives right in my neighborhood - but is directly helping/ corresponding with me. This is the information he shared with me this morning, but written yesterday when the market dropped like a stone on news from Italy.

I have just been reviewing the past 12 1/2 weeks of market activity, specifically focusing on the DJIA.

We have had 62 trading days of which only 2 were basically flat. 36 days were up and of those 22 days were up greater than 100 points. There were 7 days in which the DOW had an advance of 200+ pts. and 2 in which the DOW was up over 300 pts.

Down days, although fewer at 24, had a much higher percentage of severely down movements (18 days) with the average down day amounting to a decrease of 190 pts but there were 2 days of more than a 400 pt. decrease and 2 of 300.

The longest winning streak was 5 days (SEPT 12-16) and the longest losing streak was 2 days. No wonder we have been feeling whipsawed. This has made trading a trend almost impossible, at least for me. Even so, the average is up 688 points over that time - but we could lose a great deal of that today.

The point of all of this is, while we must remain cautious on the up days, there is some gratification that the down days have been unable to create momentum beyond a 2 day streak, and overall, the market is up during this very demanding period of trading. It has required us to sharpen our skills as traders which will serve us well in the days to come.

I see no reason at the present to believe that this craziness will end anytime soon.

# Amen, Kris. I don't see it ending soon either!

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