Market Mixed On Falling Oil...

FUNDAMENTAL ANALYSIS
The Energy sector led the way down today as oil retreats further into the $122 zone due to higher than expected gasoline and distillate inventory. The rest of the market was largely mixed as profit taking sentiments continue in the market, resulting in the Dow retreating by a slight 12.37%. Moody's talk of downgrading Ambac's credit rating does put a slight pressure on the financial sector but that has no leading effect on today's market action as the financials were down a mere 0.4%. The profit taking sentiment in the market started as the market went into techical overbought condition and realization that there may not be any more rate cuts to come. Such profit taking sentiments generally are short term and as long as oil continues to go down to a reasonable level, the market will continue its way up. However, how low is reasonable? A retreat back down into the level where it was back in March could be the level sufficient for the market to resume its rally as that was the level investors found confidence to push the Dow higher for a full 3 months. Recession talkers were disappointed today once again as the ISM services index continue to beat expectations, turning in a 51.7, indicating a growing service industry. When the ISM services index is above 50, it indicates expansion and a reading below 50 indicates contraction in the service industry. ADP non-farm payroll also turned in higher today, casting more optimism for the coming Jobs Report. With this much optimism in the market today, why wasn't the market up? That's because energy sector needs to fall back down to a level in line with the current crude oil expectation before steadying up a little for the market to go up with much lesser resistance. So far, the worst of the economic crisis is definitely over, the economy is recovering without a shadow of a doubt (albeit at a slow rate)and crude oil seemed to have reached a peak as it staged the biggest retreat since January (although it could still move higher due to geopolitical reasons). So far so good... nobody can predict the future but it does look a little rosier than it did a few months back.

TECHNICAL ANALYSIS
The Dow really staged an encouraging hold up today as it ended the day flat. Like I said, the bulls do have a couple of days to reverse this breakdown before traders catch on with the trend and enters a self reinforcing cycle of bringing prices lower. That point has not yet been reached and if the Dow could reverse up at least 100 points over the next few days, we might just see the Dow rebound. On a longer time frame, the Dow certainly looks set for an intermediate bear trend as a double top formation takes shape. It is still a very uncertain pattern technically at this point in time but it does look more inclined to downside.


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