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Yesterday’s Stock Market Down Day Gives Us New Information – Mike Swanson (01/23/2019)

Yesterday the stock market took a beating as at one point the DOW fell 400 points. There were a couple of bad news items, such as the downgrading of global economic growth by the IMF, lowered expectations by JNJ, and the Trump administration canceling a meeting with Chinese trade negotiators this week, but the market was vulernable to a big one day drop at any moment as it had been going straight up since December the 26th.

That is the big picture and to understand what is happening you have to focus on it and not daily noise.

When the market has a big down day it also shows you where the strength is. Yes, Apple dumped again, because it is now in a stock market laggard so when the market has a fall it does drop bad and we can expect it to keep acting like this for the rest of the year.

But there was some things that went up. And down days show us the strength.

I talked about where the strength now is with Jim Goddard in an interview you can listen to here:


If you recall I wrote about two stocks to trade on Monday. One was NWXP which fell yesterday too, but the trading pattern I showed was just for a possible short-term continuation triangle so it is no surprise that it fell with the market.

But the other one was for defensive railroad stock USDP that is paying a 13% dividend. It actually went up yesterday!

The difference between something like Apple and USDP is that Apple is in a stage four downtrend while USDP is poised to complete a stage one base.

Notice how the relative trend indicator comparing USDP to the S&P 500 is rising to tell us that it is outperforming the stock market.

Generally speaking those are the type of stocks you want to own.

And as I told Goddard it is the defensive stocks and sector doing this even on this stock market rally so far this year.

If you want to boost your trading and understand concepts such as stage analysis in more detail you can use them grab my classic book Strategic Stock Trading.

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