Stock Market Analysis

Monday, October 12, 2009

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.




Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

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