Stock Market Analysis

Thursday, December 03, 2009

Secret Bullishness Today

The US market sold off towards the end of the day closing the Dow down 86 points.

There was no news to trigger the sell off we saw at the end of the day and it can only boil down to profit taking prior to an uncertain jobs report tomorrow (see Stock Market Calendar). Yes, unemployment rate is one of the best indicators of the end of the recession for the real economy and that is one indicator that has not turned yet. Certainly traders who has made a good profit so far would want to take some profit off just to be sure. However, unemployment rate has to turn one day and every jobs report brings us closer to that unemployment rate reversal which would certainly spark off a new rush of buying. I won't want to miss out. We have waited long enough, why bail out now?

Even though equities were largely negative today, options trading was unusually bullish as Put Call Ratio dipped by a huge 21 basis point, suggesting that speculators are actually rushing in on the bullish side. That makes us think that today's sell off may be a faker allowing big time traders to set up using call options for a recovery tomorrow, pocketing a huge profit (see Daily Put Call Ratio Chart).

For now, the Dow is still trapped within that tight short term neutral channel that I pointed out a few days ago. Short term bullish momentum took a hit and

does not look poised for a breakout. I suspect we would get clearer indications tomorrow when the market turns around.

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




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

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