One thing about the stock market is everyone has an opinion. During the day the TV people have various “experts” telling their story on why the general market, oil, gold, technologies, whatever should go up or down. They will bring their bag of statistics and lay them end to end as proof of their conclusion. It is amazing that two experts using the same figures can come up with such totally different answers.

The fundamental approach is to examine all the qualitative data. They want to know all the economic statistics and economists construct elaborate Greek formulas to prove their numbers are right. If they don’t work out the economist can blame the error entirely on a minor figure in the equation.

The technical analyst wants only numbers, statistical comparisons, trends and charts and will create his predictions from these. Sometimes they agree and most of the time they don’t especially in the timing of the prices forecast. One can say ‘up’ and the other can say ‘down’.

Having been a trader on the floor of the exchange where there are hundreds of speculators either executing orders for customers accounts or individual traders buying and selling for their own account (as I was) you will find there is a different method of market analysis for each trader. There are no hard and fast rules.

It is usually figured that when the major indexes back down about 10% to what is called “support” areas the market will bounce off that point and resume its previous trend. Be careful of the word “usually”; it can come back and bite you.

There is one key technical indicator that even many fundamental analysts watch and that is volume. This gives the direction of the market. Back in the 1930s Richard Wyckoff wrote a book analyzing how an increase in volume as the market rose showed that more and more buyers were purchasing stocks and were willing to pay higher prices to get it. If the volume was heavier as the market sank it showed that stock owners were willing to take even lower prices to get out. We are seeing the latter phenomenon today.

Major trends change very slowly. At this date the cautious traders and advisors are at a loss as to the true direction so the basic rule of trading is: “When in doubt, get out”. Most investors freeze, do nothing and let their money slowly disappear if the bear is in charge.

The market will tell us shortly which way it is going. Be ready with either a buying or exit strategy.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2006 All rights reserved.

Copyright 2006 Albert W. Thomas All rights reserved. Author of "IF IT DOESN'T GO UP, DON'T BUY IT!"