US Economy Steps Out of Recession

The Dow gained almost 200 points today as the US economy steps officially steps out of recession.

The US economy steps out of recession at last with the Q3 GDP coming in positive 3.5%. This is the first time Real GDP has treaded positive territory since this recession started and a positive Real GDP number officially ends the recession on the data basis. Yes, unemployment rate has yet to turn around, that's why most people don't feel it yet but it takes time for businesses to pick up again and then when demand continues to grow will businesses start hiring again. And the numbers tell us that businesses ARE picking up now, so its just a matter of time.

The Dow's rebound today off its 50MA is extremely critical and coincidental to the GDP number. This rebound from a short term oversold condition occurred with good trading volume which makes this an extremely positive rebound. In fact, this could give the Dow the energy it needs to break the 10,000 points cleanly this time round.

For now, the Dow turns short term neutral trend within an intermediate and primary bull trend.

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Dow Visits 50MA As Expected...

Like a tame baby, the Dow tested its 50MA as I have expected it to, closing down by 119 points to end at 9762 points.

Yes, the market has rarely been this predictable. In fact, its really when greed and fear is at their highest when the market is most predictable. Resistance levels will play out and support levels will be visited. Overbought markets will consolidate and oversold markets will accumulate. Nothing is more predictable than that. Today's market action brought the Dow back into a short term oversold condition once again, supported by its 50MA and with its put call ratio above 1. All these tells me that this is once again a high probability accumulation point for the Dow. In fact, everytime the put call ratio goes above 1 over the past 6 months, buyers would step in shortly after. A put call ratio reading above 1 indicates that more put options are traded than call options. See daily put call ratio from our Option Trader HQ.

What does all this mean? Simply this is not the time to be newly short. The Dow is going to linger around the 50MA for a few days, no doubt, going slightly above or below the line, before making a decision whether to break upwards or downwards. For now, odds certainly favor a upside breakout.

All of today's economic data turned in worse than expected and some high profile analysts are already calling this the end of the 6 months rally and some are even calling a continuation of the long term bear trend, which of course no longer exist under the Dow theory. Well, the tendency to over-react is human nature afterall and prevalent during volatile market conditions. Real traders play it cool and trade by the trend, not the numbers.

For now, the Dow now turns short term bear trend within an intermediate and primary bull trend.

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Dow Corrects to 30MA as Expected...

Without any surprise, the Dow yielded under more profit taking today closing down by 104 points at 9867 points.

Like a tame little baby, the Dow did exactly as I expected it to, correcting down to its daily 30MA line. The 30MA is an extremely important short term support for the Dow, breaking which, it will test its intermediate support which is its 50MA. With the 50MA so close behind and the market being far from short term oversold, testing it seems inevitable. As strong a psychological resistance level as the 10,000 points ought to be, we should see the Dow go into a deep short term oversold condition before it musters any strength to challenge the 10,000 points level again. But take heed, challenge and break it the Dow will, its just a matter of time.

For now, the Dow remains in a short term neutral trend within an intermediate and primary bull trend.

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GDP Week

Last week was a negative week as expected with the Dow turning down a marginal 23 points week on week.

The 10,000 points resistance zone still hasn't caused the kind of consolidation that I have initially expected. In fact, the Dow merely went largely sideways, skewered on the 10,000 points level like BBQ meat. Short term bearish momentum continue to rise but is still way from being short term oversold. The daily 30MA and 50MA are also following tightly behind, creating a very interesting situation. Even though I expect the 10,000 points level to be a level of psychological resistance, as it has already proven to be, I don't really expect the Dow to break below its 50MA on such a consolidation. However, its 50MA is now so close behind that even a correction down to that level won't justify the resistance offered by strong psychological resistance levels. Could the Dow do something like it did back in June? For now, what's clear is that short term risk remains high due to uncertainty with a far higher level of certainty for the long term.

Advance estimates of Q3 GDP on Thursday (see Stock Market Calendar) is going to be the hot number this week. So far, GDP has been in the negative territory and investors are certainly waiting for a positive number for Q3. In fact, consensus is calling for a positive 3% versus last quarter's -0.7%. Yes, investors really would love to see the economic recovery truly reflected as a positive GDP number and if it does, it could provide the stimulus for the Dow to go from the recession market of below 10,000 points to the growth market of above 10,000 points.

For now, the Dow has lasped into a short term neutral trend within an intermediate and primary bull trend.

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Another Futile Attempt

The Dow gained 131 points today as traders made another futile attempt at breaking the 10,000 points level cleanly.

As expected, the Dow continues to struggle at the 10,000 points level stacking candles up on the 10,000 points line like skewed meat. When will the Dow muster the energy necessary to break from this skewer? Well, not without revisiting its 30MA. Rebounding off its 30MA has proven critical to helping the Dow break short term resistance levels and to make new highs. In the face of such a strong resistance level, I don't think its going to be an exception. With the 30MA catching up so quickly, I won't even be surprised at a revisit to the 50MA like it did early this month. Short term bearish momentum continue to rise into today's "rally" and volume isn't impressive either. With so many things against the Dow right now, I won't give much credibility to today's rally and will continue to look for more concrete evidence of strength.

For now, the Dow remains in all out bull trend.

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Dow Retreats As Expected...

The Dow retreated slightly by 50 points today as the 10,000 points blackhole continue to exert its gravity on the market.

Yes, expect the market to continue to be technical driven as traders and investors struggle to decide if other traders think its time for the market to move from recession mode into growth mode. Nobody wants to be the fool holding on to a short term pullback especially when its so obvious. This is why short term bearish momentum continue to rise today as the Dow retreats from short term overbought condition. In fact, I won't be surprised to see the Dow actually break lower than 10,000 points this week to muster some strength at its 30MA level. However, make no mistake about it, the Dow is going to eventually break the 10,000 points barrier cleanly and if you have holding power and is not concerned about short term volatility, then all you have to do is to wait for it to happen patiently.

For now, the Dow remains in all out bull trend.

See how I made 52% profit with call options on CREE yesterday in this toppy market!

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Did the Dow Breakout?

The Dow challenged the 10,000 points again today, "breaking" it by 92 points to close at 10,092 points today.

The great 10,000 points challenged continued today as earnings reports continue to roar in optimistically. The Dow once again stood above the 10,000 points level but is that a breakout?

Well, sadly, I won't call that a breakout yet. First of all, volume was extremely light. Volume is an extremely important indicator of breakouts, indicating mass public interest in a single direction but that wasn't what we got today. The majority clearly has not casted their votes yet. Secondly, the Dow is clearly in an area of congestion now, bobbing on the 10,000 points level, seeking for some majority help. In fact, we also didn't see many stocks with bullish entry signals in the market today, signifying that there may not be enough new bullish momentum to follow up over the next few days. I won't be surprised to see the Dow retreat a little back down to its 30MA before trying again for real.

For now, the Dow remains in all out bull trend.

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The Fight For 10,000 Points Continues...

The Dow closed slightly higher than 10,000 points again at 10,062 points, gaining 47 points today.

Yes, the fight for 10,000 points is on right now and don't let it fool you that the 10,000 points resistance zone has been broken just because the Dow closed 62 points higher than 10,000. There are two fundamental principles in technical analysis; Prudence and Significance. The 62 points break was not significant enough to call a breakout and it won't be prudent to assume as such. This is also why I keep using the term "resistance ZONE" and not the common "resistance level". There really isn't a clear resistance level on an exact price in technical analysis as traders trade around a certain price, not AT the certain price. This means that a strong resistance level would exert its influence on prices around that level creating a resistance zone within which more eager traders would take profit before that price is reached and greedier traders would venture to take profit when the level is slightly breached. Yes, we are in that resistance zone right now and even though the market was up again today, internals remain weak as decliners continue to par advancers. With the Dow once again in short term overbought condition, I won't be surprised to see the Dow pull back a little on Friday before trying again next week.

For now, the Dow remains in all out bull trend once again.

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10,000 points LOOOOOMING!

The US market ended mixed with the Dow down 14 points even though earnings and economic numbers continue to be encouraging.

The dollar is down, store sales are up, earnings remain great, so why is the market this weak? Indeed, market internals are extremely weak as well with decliners and advancers almost 1 : 1. There is only one explanation... the 10,000 points! Yes, the 10,000 points level can be deemed the dividing line between a recession market and a strong market. Investors are still not too sure about casting that vote from recession market to a strong bull market yet. This is also why the 10,000 points zone is going to be such a strong resistance level. In fact, don't be surprised to see profit taking way before 10,000 points is reached especially with the Dow now in short term overbought once again.

For now, the Dow remains in all out bull trend once again.

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Afternoon Sell Off... 10,000 Points Closing In...

The Dow finished the day today up a marginal 20 points from an intraday high of 9865 points as traders sell off in the afternoon.

Fundamentals
What was shaping up to be a huge up day ended up with the Dow up only 20 points as traders sell off into the light trading volume in the afternoon. Yes, it is a partial holiday in the US market today, leading to a very light volume day. Who trades on a day like this? Definitely hard core traders who are out for some money which totally explains the afternoon profit taking. The biggest numbers for the week are due only on Thursday and some traders just won't wait that long. The Empire State and Philley Fed on Thursday will be the movers for the week (see Stock Market Calendar) as traders and investors keenly await more confirmation on the state of the economy. Again, I have no doubts that the world economy is now in the recovery phase and some volatility in the economic numbers isn't going to scare me out of my long term positions.

Technicals
Even though the Dow was up only 20 points today, it still managed to make a new high for the year, which is extremely important in the continuation of the bull trend. Breaking the September highs shows that the bull trend is still intact and that last month's high isn't going to be a resistance level leading to a double top formation. But we are not yet out of the danger zone. With the Dow this close to last month's high, there are still chances that it might just collaspe and form that double top all traders fear. The Dow went as high as 9931 points before being beaten down today. This tells me that traders are indeed ready and willing to take profit near the 10,000 points level and that it will be a strong resistance level. The Dow is once again in short term overbought condition, casting shadows on the possibility of staging a decisive breakout. The 10,000 points zone could prove to be a challenge.

For now, the Dow remains in all out bull trend once again.

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Welcome to a new week!

Welcome to a new week, and yes, US stock market is OPEN on Columbus Day Monday.

The Dow had a great rebound week last week, gaining a total of 377 points or 3.98%. The main driver last week was of course the better earnings and jobless claims. However, volume was seriously lacking as investors continue to be cautious. That did not stop the fact that short term bullish momentum is still rising and that the Dow is still a long way to go from being short term overbought, setting up the stage to challenge the 10,000 points. I expect the 10,000 points to be an extremely strong resistance zone and that we will not see a one touch breakout. Investors should be ready to ride a volatile 10,000 thunderstorm and traders might want to take short term profits.

For now, the Dow is now in all out bull trend once again.

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Jobless Claims Beats!

The Dow surged 61 points today as Jobless Claims turned in far better than expected.

Fundamentals
After being wallopped by a barrage of worse than expected economic numbers this week, investors were relieved to find the Jobless Claim turning in far better than expected. Indeed, as I mentioned yesterday, investors definitely need a foothold after this month's dismal employment numbers and that this may be the catalyst needed to power the Dow all the way to 10,000 points. Jobless Claims this week turned in at 521K, beating consensus of 540K by a mile. In fact, today's number took jobless claim's 4week average line, which is the indicator most analysts watch, down to the lowest level of the year. Even though it is still way higher than the pre-recession levels of about 350K, its still a significant improvement that points to a brighter tomorrow. Earnings of companies continue to beat estimates today, casting an optimistic sentiment on the rest of the earnings season.

Technicals
The Dow's 61 point rally was an important one on strong volume. Today's rally followed up on the rally 2 days ago, which is essential to the integrity of this intermediate bull trend. Should today turn out to be a dismal down day, the intermediate bull trend could be at stake. For now, bullish momentum continues to rise with plenty of room left to short term overbought. As long as the Dow breaks last month's high, there will be no more resistance on the way to the 10,000 points level.

For now, the Dow remains in short term neutral trend, intermediate term bull trend and primary bull trend.

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Earnings Season Starts...

The Dow started the earnings season with a small profit taking day, correcting marginally by 5 points.

As expected, most of the earnings announced this first day of the earnings season were positive. However, that didn't stop investors from taking some profits off the table of these great stocks such as YUM as much of this expectation has already been priced into the 2 days rally the past two days. Even though there were traders selling into the better earnings, volume is extremely light, suggesting that such profit taking activity isn't widespread. Another piece of concern is tomorrow's jobless claims. After a dismal jobs report this month, investors certainly need a foothold to regain some footing. Consensus is for a much lower number of 540K. If it matches or beats, we can be sure of a smooth journey to the 10,000 points level.

A small low volume doji candle was formed today on the Dow suggesting inactivity due to digestion in the market. Digestion or "wait and see" usually occurs after strong rallies and the Dow already had a good 2 days rally. Short term bullish momentum continues to rise but is still far from being short term overbought. This gives the Dow plenty of room to upside, paving the way to the 10,000 points level as long as the 30MA holds.

For now, the Dow remains in short term neutral trend, intermediate term bull trend and primary bull trend.

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I am BACK!

I am back at last to where blogspot is accessible. Yes, I spent one week in a country where blogspot was banned. Glad to be back.

The Dow gained an encouraging 131 points as store sales and redbook turns out positive, setting the stage for an optimistic earnings season.

Both Store Sales and redbook, measuring consumer spending, turned up better than last week which suggests a recovery in the consumer market. This is definitely a great way to set the stage for the earnings season as more and more traders jump in ahead of the earnings season. How the earnings season turns out is anyone's guess but the technicals certainly suggest that investors are greeting it with a lot of optimism.

The Dow broke out and stood atop its 30MA once again, which is the Dow's short term support level. Bullish momentum is also beginning to build up and with the Dow way off overbought condition in a strong intermediate bull trend, it does look set to challenge the 10,000 points level this time round.

For now, the Dow remains in short term neutral trend, intermediate term bull trend and primary bull trend.

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