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Monday, July 23, 2012

Wait to Buy Until Stocks Go 5%-10% Lower

Most stocks will likely pull back to their support areas
By Sam Collins, InvestorPlace Chief Technical Analyst


On Friday, U.S. markets were hit with a rush of profit-taking in reaction to a sharp sell-off in equities in Spain. Spain’s stock market fell 5.8% and its 10-year bond yield topped 7%, causing concern throughout Europeand a subsequent sell-off at European bourses.
After four days of gains, the Dow Jones Industrial Average fell 121 points to 12,823, the S&P 500 was off 14 points at 1,363, and the Nasdaq was down 41 points, closing at 2,925. The NYSE traded over 1 billion shares and the Nasdaq crossed 565 million. Decliners were ahead of advancers by 2-to-1 on the Big Board and by over 3-to-1 on the Nasdaq. 
Dow Chart
DJT Chart
Trade of the Day Chart Key
For four days last week, the Dow Jones Industrial Average forged ahead, and on Thursday, it appeared to break the boundary — the bearish resistance line (red dash) — that had restrained it for three months. But there was just one small technical problem: The Dow Jones Transportation Average had failed to break its resistance line and confirm the breakout. ... Continue to read.
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