Stock Market Analysis

Thursday, May 11, 2006

Daily Market Comments 12 May 06 by

A SURPRISINGLY Hard drop in the markets yesterday! DJIA Closed down 1.22% and NASDAQ closed down by 2.07% All in one day! This is the hardest drop in the market since the mid January drop. There are little fundamental reasons that I can find to explain this drop except to go with the renewed interest rate hike fears and the extraction of the already priced in optimistic expectation on the fed release. However, if that is true, why didn't it happen the day before when the feds released the news? Oil prices are back up but the market hardly reacted half this strongly when oil prices are way higher than it closed yesterday.

Well, maybe none of these are as important as where the markets might probably go after such a ditch... let's look back in time... when DJIA and NASDAQ did a similar ditch on 19 January 2006, the markets accumulated straight away and closed prices back up where the ditch begun within a few days. Looking back on Mid October 2005, we see a hard series of single day drops which not only did not bring the markets very much lower, but gave it enough reason for a strong accumulation right through December 2005. The same thing happened in End June/ Early July 2005. Even as early as mid April 2005 where we experienced a 3 days hard drop, the markets accumulated and closed prices back up within a month or so.

So, the mystery starts... will the markets behave as it has always been? It's hard to say since a lot of investors all over the world are making similar research even as we speak.

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