Short Term Neutral Trend Continues...
As expected, the Dow did not have the strength to stage a breakout today and gave back 173 points. Despite the store sales and existing home sales coming in stronger than expected, investors are simply out of steam as much of the enthusiasm regarding the economic recovery has been exhausted in that incredible 2 months rally into an intermediate bull trend.
Trading volume continues to drop as relative strength continues to weaken. The 30DMA test is now imminent. The Dow needs to break either the 30DMA to downside or the 8500 level to upside now as both levels have created a squeeze the size of today's trading range. With the weakening technicals, I speculate that a downside breakout is more probable especially in line with the fact that this intermediate bull trend is way overdue a pullback. That pullback is critical as it would reveal whether or not investors are ready to make a real reversal of the primary bear trend. Investors are playing the waiting game now, waiting for a better re-entry on a pullback while the bears are waiting to resume the primary bear trend. The question is, which force is now predominant? Nobody can tell until we see how low the pullback goes. If the pullback fails to make a new low before rebounding, then we would be witnessing a bullish reversal in accordance to the Dow theory.
Tomorrow's Durable Goods order and Jobless claims might be the catalyst for the breakout as these are extremely important economic numbers that investors are watching right now (see stock market calendar).
Trading volume continues to drop as relative strength continues to weaken. The 30DMA test is now imminent. The Dow needs to break either the 30DMA to downside or the 8500 level to upside now as both levels have created a squeeze the size of today's trading range. With the weakening technicals, I speculate that a downside breakout is more probable especially in line with the fact that this intermediate bull trend is way overdue a pullback. That pullback is critical as it would reveal whether or not investors are ready to make a real reversal of the primary bear trend. Investors are playing the waiting game now, waiting for a better re-entry on a pullback while the bears are waiting to resume the primary bear trend. The question is, which force is now predominant? Nobody can tell until we see how low the pullback goes. If the pullback fails to make a new low before rebounding, then we would be witnessing a bullish reversal in accordance to the Dow theory.
Tomorrow's Durable Goods order and Jobless claims might be the catalyst for the breakout as these are extremely important economic numbers that investors are watching right now (see stock market calendar).
posted by Jason Ng at 7:05 PM
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