Stock Market Analysis

Tuesday, January 26, 2010

Another Sideways Day...

No surprise today as the Dow went into the second sideways day following last Friday's big fall, closing marginally lower by 2 points.

First of all, like I have always said, its normal to see a few sideways days (anything from 3 to 5) following huge single day up or down days. That is exactly what we are getting here. Therefore, no need to crunch the economic numbers or news too much for the "answer".

These sideways days occur as the number of buyers and profit takers par up following huge up or down days. Huge up days encouraged slow investors to buy while quick traders take profit, resulting in a sideways day. Huge down days encouraged shrewd traders to buy into the "discount" and scared investors to sell, again resulting in a sideways day.

In fact, we saw today the exact same trading pattern as Monday's market; Starting out pretty strong as buyers accumulate before profit takers come in in the afternoon to wipe all the gains out. In fact, this is a pretty good sign that there are plenty of investors who are still buying at these levels. The Dow is now in deep short term oversold condition, which supports my 10,000 points support level guesstimation.

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

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


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