Buying Interest Returns...

FUNDAMENTAL ANALYSIS
The Dow closed higher for a second straight day since it ditched over 300 points last week. There wasn't any economic releases today so the gains must have been due to bargain hunting along with buying into the great earnings of a few blue chips. Tomorrow's existing home sales number is expected to rock the boat again. Existing home sales measures monthly sales of previously owned single family homes and is published by the National Association of Realtors. Existing home sales didn't used to be an important release before the credit crunch because buying and selling of existing homes adds nothing to the economy despite exising home sales (2nd hand homes) accounting for 80% of all home buying transactions. However, it has gained in importance lately as it is a good indication of the status of the credit crunch. Everyone's waiting for the day existing home sales recovers as an indication that the credit crunch is coming to an end. In fact, bargain hunters are already in the market, sweeping up foreclosure deals. It seems like the worse is behind us... or has it? What's your take on this? post your comments! :)

TECHNICAL ANALYSIS
Not surprising nor extremely encouraging to see a couple of days of bargain hunting after a huge drop. Yesterday's market action formed a small dragon tail formation but it was not backed by a volume surge nor was its tail long enough, making it an extremely weak one. A dragon tail formation is a hammer formation with an extremely long tail, occurring after a series of significant drops. The last dragon tail formation on volume surge started a rally back in 16 Aug 2007 as well as back in 14 March 2007. Right now, the Dow has rebounded off the 50 and 100DMA, but still needs to make a break above the 30DMA before the danger's over. If the Dow should fail again, the next support level would be the 200DMA which the Dow rebounded off the last time in 16 Aug. For now, it is not certain nor is it remotely clear where it might be heading even though the long term trend remains bullish. The question is, when will the rebound happen? Right now? or later at the 200DMA line?


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