Key Reversal Failed....

Remember what I said yesterday? If the Dow fails at its key reversal day yesterday, it could be in a lot of trouble and indeed, that has come to be. As a technical strategist, when we see an important and possible change in short term trend, we want to very quickly see if the mid term and long term trend remains intact under such a move. A quick glance tells me that the mid term up trend remains intact within a strong long term up trend. However, the Dow does seem a little overdue for a real correction instead of just a simple pullback which we witnessed back in August. For now, I see short term support at the 50WMA level of about 13100, which also coincides round about where the market rally begun in August.

We all know that the stock market does not always reflect the real economy, in fact, the stock market is a really weak economic barometer. The global growth story is strong and intact, US economy is doing surprisingly well with growing jobs, rising productivity, accelerating GDP and controlled inflation. The falling dollar also helped narrow down current account deficit and an improved energy efficiency also reduced reliance on crude oil versus 20 years ago. So, what is the real concern in the economy right now? Well, in my opinion, the market is jittery because we are threading on a lot of new grounds right now... investors have no reference as to the effects of oil and gold at such historical highs as well as the dollar at such historical lows. I continue to have faith in the US economy and with the new free trade agreements, opening up of Vietnam and lowering of corporate tax (hopefully... US corporate tax is one of the highest in the world today), the real economy will continue to accelerate.