Dow Follows Up...
The Dow followed up on last Friday's rally, gaining 56 points, as investors rushed after watching world stock markets rally on holiday Monday.
Fundamental Analysis
Indeed, the Dow shot right past 9500 points when the market opened today as investors who missed the rally all over the world due to yesterday's holiday, rushed in. However, since this is still a very weak market, there will always be plenty of investors waiting to take profit on any huge surges and almost immediately, the bulls were beaten back mercilessly by a horde of profit takers. By the end of the day, bulls retook lost ground and brought the Dow higher on higher trading volume back near the 9500 points mark. It seems like investors all over the world are jumping to the beat of worldwide economic recovery right now, but is it time to start tightening ahead of the merciless inflation that we can all expect in the near future? In fact, China has gone ahead of the world in terms of tightening credit policies by tightening lending standards and lending limits. Yes, what China did was what we were taught in our economics textbooks, by why aren't the writers of our textbooks doing what they preached?
Technical Analysis
Very good and praise-worthy follow up in the market today. In fact, the gains can be felt even more strongly if you bought stocks (or options on stocks) that are relatively cheap, below the $50 mark. Today's action brought the Dow up against its 9500 points resistance band again; the level it failed to break late last month. This time round, short term bullish momentum is building up and the Dow is far from being overbought, which gives it a much higher chance of a breakout than last month. The Dow was already short term overbought with bullish momentum fading when it last challenged the 9500 level late last month. The Dow does look good to break the 9500 level this time round, following which, we should see the Dow turn back down to test that same level almost immediately in order to establish it as a support level. The only devil here is the big bearish divergence I pointed out yesterday. If the Dow breaks the 9500 level decisively, that divergence will be negated and the Dow would be out of its influence.
For now, the Dow remains in all out bull trend.
Fundamental Analysis
Indeed, the Dow shot right past 9500 points when the market opened today as investors who missed the rally all over the world due to yesterday's holiday, rushed in. However, since this is still a very weak market, there will always be plenty of investors waiting to take profit on any huge surges and almost immediately, the bulls were beaten back mercilessly by a horde of profit takers. By the end of the day, bulls retook lost ground and brought the Dow higher on higher trading volume back near the 9500 points mark. It seems like investors all over the world are jumping to the beat of worldwide economic recovery right now, but is it time to start tightening ahead of the merciless inflation that we can all expect in the near future? In fact, China has gone ahead of the world in terms of tightening credit policies by tightening lending standards and lending limits. Yes, what China did was what we were taught in our economics textbooks, by why aren't the writers of our textbooks doing what they preached?
Technical Analysis
Very good and praise-worthy follow up in the market today. In fact, the gains can be felt even more strongly if you bought stocks (or options on stocks) that are relatively cheap, below the $50 mark. Today's action brought the Dow up against its 9500 points resistance band again; the level it failed to break late last month. This time round, short term bullish momentum is building up and the Dow is far from being overbought, which gives it a much higher chance of a breakout than last month. The Dow was already short term overbought with bullish momentum fading when it last challenged the 9500 level late last month. The Dow does look good to break the 9500 level this time round, following which, we should see the Dow turn back down to test that same level almost immediately in order to establish it as a support level. The only devil here is the big bearish divergence I pointed out yesterday. If the Dow breaks the 9500 level decisively, that divergence will be negated and the Dow would be out of its influence.
For now, the Dow remains in all out bull trend.
Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!
posted by Jason Ng at 6:14 PM
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