Stock Market Analysis

Tuesday, September 04, 2007

Up Up and Away!

option trading
No surprise today as the Dow continued its rally as I have expected.

The ISM Manufacturing numbers came in much lower than the July reading but still comfortably above the 50 mark at 54.9. This suggests a slow down in the EXPANSION in the manufacturing sector. The keyword here is "slow down", fuelling investor confidence that the Fed is indeed going to cut rates in 2 weeks time. Seriously, understanding the way Bernanke works, I personally do not think the rate cut is going to happen this time round either. Bernanke is waiting for a much more serious scenario to happen in the economic numbers before taking that step. That scenario is just not happening yet.

Technically, the Dow is rising with rising short term bullish momentum and still a short leap from being seriously short term overbought, so I would expect this rally to go on for a few days more. Seriously, I would not expect the Dow to go straight up like that. Sometime along the road, it will certain laspe into the familar staircase formation again. For now, let's enjoy the flowers while they bloom. I see mid term resistance at about 13900 where we should see another significant correction.

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