Dow Starts Retreat

As expected, the Dow started its retreat, closing down 93 points at 10332 points despite optimistic forward looking data.

Both leading indicators and Philley Fed data continue to support a recovering market going forward (see Stock Market Calendar). In fact, Philley Fed outlook has not been higher even during the pre-crisis years! However, as a technically driven toppy market, traders sold off into the news, setting the Dow up for a revisit to the 10,000 points region like I have been talking about for the past few days. Yes, this is a healthy and necessary retreat in order to set the market up for higher highs.

For now, the Dow remains in a all out bull trend.

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Options Expiration Week Ahead

The Dow ended the week up a total of 247 points or 2.46% last week as investors take the Dow out of the 10,000 points blackhole.

But is it really safe now? On a long term basis, yes. We have announced a primary bull trend months ago and if you have followed on that, you would have made significant gains by now. How about the short term? Well, last week's rally left the Dow once again in short term overbought condition and short term bearish momentum is once again rising. I would expect a revisit to the 10,000 points again this week so that the Dow can get out of overbought condition again and also establish the 10,000 points as a new short term support level. Once that is done, the bull trend can continue.

This is options expiration week and leading indicators week (see Stock Market Calendar), so do expect a fair bit of volatility.

For now, the Dow remains in a all out bull trend.

Retreat Begins...

The Dow ended its 6 days rally with a 93 points retreat today, forming a short term evening star signal. Yes, it seems like the retreat that I have been expecting is coming just that few days earlier than expected. Like I mentioned yesterday, this retreat is inevitable and healthy for the market and whether the 10,000 points area becomes the next short term support level is critical for whether the market moves higher.

Today's ditch came on the back of a better than expected jobless claims number (see Stock Market Calendar), further reinforcing the fact that it is a technically driven market right now. Markets become extremely technical driven when its bottomy or toppy. This is definitely an intermediate term toppy market where a lot of uncertainty and profit taking takes place.

For now, the Dow remains in a all out bull trend.

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Running Out of Short-term Steam

Another largely sideways day for the Dow, closing up by 44 points, making it the 6th consecutive positive day. Not unusual for the market to trade largely sideways for a few days following huge single day rallies or ditches. Even though volume was seriously lacking today, today's market action remained largely bullish as the Dow made new highs for the year. The Dow also entered short term overbought condition today and with investors obviously being cautious, I would expect the Dow to actually go sideways for a couple of days more before actually turning downwards and retest the 10,000 points level again. This retest is extremely important in order to establish it as the new short term support level. That will also help ease the Dow out of its short term overbought condition for new highs.

For now, the Dow remains in a all out bull trend.

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Dow Breaks Out For REAL!

The Dow broke out of the 10,000 points resistance zone as expected with a huge 203 points rally, closing the day at 10226 points.

Yes, this is the resolute, clean, breakout that makes a breakout. Volume was also encouraging and rally was broadbased. Not only did the Dow breakout of the 10,000 points zone cleanly, it also defeated last month's high all in one day (the 2 criteria I mentioned yesterday). This is an extremely important breakout that will promise more upside to come. The market broke out as G20 nations committed to continued support for world economy until recovery is certain. Obviously many people still think the recovery isn't certain. Well, we always need late comers to the party in order to throw leftovers to. We are certainly not one of them.

The Dow is still way off short term overbought and MACD has just crossed into positive territory, this gives plenty of room to upside before the Dow retreats and retest the 10,000 points again as I have mentioned yesterday. I expect this to be a strong positive week with some consolidation next week. Enjoy the bulls!



For now, the Dow remains in a all out bull trend.

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Quiet Week Ahead...

Unemployment rate reported in higher than expected last Friday at 10.2%, beating consensus of 9.9%. In fact, that was the highest unemployment rate since 1983. However, that didn't stop investors from keeping the Dow above water on Friday, closing the week up by 310 points ( 3.20%).

Last week's market action has once again been largely technically driven with investors pouring in at the 50MA line, driving the Dow onto the 10,000 points level again. Other than a lack of volume, last week's market action has been extremely encouraging with the Dow still way off short term overbought level, giving it plenty of room to move to upside. So, is the 10,000 points over? It will if the Dow beats last month's high and then retreat to rebound off the 10,000 points level again. That will set the 10,000 points level as a support level and leave the Dow with plenty of upside. This is a quiet week ahead with no major releases (see Stock Market Calendar). Last week's numbers paint a clear picture; the economy is recovering but it takes time for firms to start hiring again, which still leaves plenty of good news for the future to drive the Dow higher. I actually think it is a good thing.

For now, the Dow remains in a short term bull trend within an intermediate and primary bull trend.

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Profit Takers Still In-Charge

The Dow started the month optimistically, closing up by 76 points on better than expected ISM index.

The strong follow up that we are hoping to see did not happen,instead, all we saw was that profit takers were still very much in control of the situation, beating down the market right after today's FOMC Announcement. Yes, profit takers were merciless in securing positions in cash even though the Fed did everything right, destroying what is to be a strong follow up day. Yes, if the market ended as strong as it was before the Fed announcement, investors might have enough confidence to start coming back in again. That didn't happen. This puts the Dow in an extremely perilous position jammed sideways between its 30 and 50MA. The good thing about today's market action is that it left the Dow with a reversal of its short term bearish momentum so its pretty much neutral now. There are obviously bulls in the market but they are just not as shrewd as the profit takers.

For now, the Dow remains in short term neutral trend within an intermediate and primary bull trend.

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