Range Bound Trading For The Rest Of The Month?

FUNDAMENTAL ANALYSIS
Plenty of reasons to be bearish right now as more and more evidence of a very tricky economic condition develops in the US. There are 3 bad things that can happen to every economy; Recession, Hyper Inflation and Stagflation. Of the 3, recession is definitely the easiest to handle. What I fear is that recession may be a complete understatement because the US economy could instead moving into a dreaded Stagflation! So far earnings growth does not look promising for the coming quarter and more shocking economic data may be released. Many analysts are speculating a rate cut even before the next fed meeting but I think it is a remote possibility as aggressive rate cutting and expansionary monetary policy is going to lead the economy into Inflation, which is much more dangerous than recession! Optimism is out of the windows for now as Santa Claus never came back last month. All eyes may be on the jobless claims number this Thursday (see economic calendar). If jobless claims number exceed expectations, it will definitely tilt the balance deeper into recession or even staflation.

TECHNICAL ANALYSIS
The Dow failed to break above the 30WMA last week, transforming the 30WMA into a strong resistance level along with a gradual downturning of the 30WMA. This is definitely a very bearish pattern. This, along with the Dow getting into a oversold level, I do expect the Dow to test the 30WMA again this week. That next test of the 30WMA is definitely going to set the pace for the rest of the month.


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