Stock Market Analysis

Sunday, October 25, 2009

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.

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


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