Stocks drop on GE earnings and outlook

qqqq0411.pngThe stock indexes fell throughout the day on Friday. The news is attributed to the earnings miss by GE, but more important was the less than optimistic outlook going forward. I pointed out the momentum divergence on this blog a few days ago, suggesting some pullback was in order. I also drew some potential support lines in the last post. Of course that support did not hold, as new information entered the market on the GE news. One cannot expect support based on previous swing points to hold when new information enters the market as the fundamental background has changed and the market has to assess that change. Momentum did not turn up at those support areas. Price on the Nasdaq/QQQQ is now sitting at the bottom of the uptrending moving average lines with momentum now slightly below the short-term oversold level. The trend still appears to be up as defined by the moving averages and market structure, so will prefer to trade the long side unless and until the trend turns back down. I still do not believe in putting in resting orders to buy in this case, as in the previous case, as I would rather wait for momentum to turn up, even though trade location will suffer. Even if momentum turns up at support, the next bit of new bearish information could enter the market and turn momentum back down. Nothing is certain. One can only weight the odds and use good money management when the market does not agree with the trade.
And, sorry this post was so late. Tradestation charts were not working for much of the weekend.

Leave a Reply

Your email address will not be published. Required fields are marked *