Stock Market Analysis

Wednesday, October 17, 2007

Bullish Inclined Mixed Day...


FUNDAMENTAL ANALYSIS
What a mixed day today as the Dow ended down marginally by 20.40 while the Nasdaq composite gained by a significant 28.74 points. There are certainly tons of reasons for this mixed action both on the fundamental and technical front, however, why did I say that today is a "Bullish Inclined" mixed day? Well, that's because there are plenty of good news to look forward to versus the "Bad news" so far. The "bad news" is, Consumer Price Index rose 0.3%, the biggest increase since May. This is compounded by the fact that real weekly earnings have gained only 1.3%, lower than the current inflation rate suggested by the core-CPI index of 2.1%. Such an increase certainly reduces the possibility of another rate cut at the end of the month (well, we all know that it is probably not going to happen by now, don't we?) Well, the good news is, as I have mentioned, that the core-CPI has risen only 2.1% over the past year, which is within the Fed's "comfort zone" of keeping inflation within 2.5% (analysts estimates... unofficial). Another good news is that despite this earnings season being widely speculated to be a disappointing one, companies continued to report better than estimated earnings generally (other than a couple of disappointments). If good news continues to roll in from the earnings front, the market could recieve a short term boost. Well, to conclude for today, even though the housing front still looks terrible and Uncle Ben's speculating a slow down in the economy over the next few quarters, there are still plenty of good news and good company performance to keep investors happy for now.

TECHNICAL ANALYSIS
Similarly, the technical front also supports the view of a bullish inclined mixed day. The Dow went all the way down to its critical short term support line, the 30DMA, and then bounced right off to end up significantly higher, forming a huge spinning top formation along with a volume surge. This formation, following a few consecutive drops, signals a possible selling climax (possible because selling climaxes usually takes place after a much more significant pullback). A selling climax suggests that all remaining sellers have jumped in and it is time for the buyers to take over for a bargain. Of significance is also the fact that the Dow has also entered the short term oversold region, giving it all the more reason to be able to stage another run from this point. Our internal screening also turned up significantly more bullish reversal signals than bearish signals across the universe of stocks, increasing the possibility that the market might be staging something. From these indication, I would certainly be preparing my account for the up side. :)


Dow Technical Chart by Best Charting Software TC2007!

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4 Comments:

Anonymous Anonymous said...

Jason,

When you say you are preparaing for upside, what do you look for before you are certain it's time to put in your money?

Thanks,
Rav

7:01 AM  
Blogger Founder, Master 'O' Equity said...

Thanks for tuning in again. :)

We are certain when definite signals of a rebound turns up.

7:06 AM  
Anonymous Anonymous said...

Thanks for prompt reply!

What are some definite signals to look for? Thanks.

Rav

7:10 AM  
Anonymous Anonymous said...

The internals looks pretty strong today.

Rav

12:07 PM  

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