Dow Jones Contrarians

If your style of trading is to be a "Contrarian", I would recommend, if you are an index trader who happens to trade the Dow Jones, S P 500, Nasdaq etc Do Not rush to open any trading positions as soon as the index you're trading has dropped or gained only 2% or less in either direction, unless you're just scalping for a few points.

The nature of the US Indices recently has proved that in the case of days where there are a bunch of good or bad news, they seem to over-react to the situation.

Let's analyse yesterday's US market actions as an example:

• The ADP Employment figure came in as 33k which was a shade above the forecast.


• The Initial Claims was 24k worse than the estimated forecast.


• The Productivity-Rev did come in better than it was forecasted.


• The ISM Services was above 50 and better than consensus.

Taking all the above factors into account, "one" would not have expected for the "Dow Jones" to have dropped 344 points (nearly 3%) and for all other indices "S P 500" and others to have done the same. So we can see how the market over-reacted negatively to the Employments News.

I wrote this article specially for the beginner investors, who may use margin accounts for trading. As by having studied their way of trading, I see a lot of them falling into the trap that if an Index or an stock sheds 1% it's time to buy that stock or Index!

UK stock market opens today after the long weekend. For those who may fancy opening a LONG position on the main index, the FTSE 100, it's worth bearing in mind that the index is only about 50 points away from its high of many years. So for my money I would only DAY TRADE it as things are at the moment. While we are on this subject, I would say in my experience the FTSE 100 is one of the better indices to trade and I personally think it is far easier to read the direction of this instrument than for instance the DAX30 or the Dow where "day trading" is concerned.

Lucky-7 for the Dow but only just - as the US 30 index finished in the black for the 7th day on the trot. With the FOMC Minutes due on Wednesday and the PPI figures out on Friday, traders were reluctant to bid the prices much higher today, although the Dow was showing a gain of +30 at one stage.

The "sell off" in the Crude Oil which was expected last week when Iran freed the British Sailors happened today when the price of each barrel fell below $62.00, more than $2.00 below its closing prices last Thursday.

The Dow managed another day of gains yesterday, it finished 20 points in the black - the Nikkei225 lost half a centuary overnight, with the Australian ASX200 finished in the red by a deficit of 20 points - as a result the out of hours US markets have been marked down slightly - the FTSE100 of UK and the Dax30 of Germany are mostly expected to start trading unchanged from yesterday's closings.

Stock Markets across the world have been pulling each other up - overnight the Nikkei went up by another 300 points - as I said watch your CFD bets with this monster - those who went short yesterday would not be smiling this morning.

The Australian ASX200 hit the record high of 6097, partly due to that metal prices have been in a bullish mood of the late and the Australian Index includes some havyweight miners as its main components.

In another few minutes the UK market will open and the expectation is for further gain in FTSE100, although there are some bad news in the papers about the drug comapnies Glaxosmithkline and Astrazeneca - Glaxo is a heavyweight company in the UK index.