Another Suspicious Bullish Day
The Dow ended the mixed trading day up by 29 points ahead of tomorrow's options expiration Friday.
Why did I say that today is a mixed trading day even though clearly all three major indexes ended in the green? That's because in a true bullish day, we should not only see all 3 indexes up in the green with good strong volume but also bond traders reallocating into equities causing a rise in bond yields and options traders bringing the total equities put call ratio down as call options speculation increases. But no. Apart from the three green indexes, bond yields actually dropped and the put call ratio barely nudged in the direction of call options (see Bond yield curve and put call ratio chart). All in all, there seems to be an uncertain undercurrent to today's "rally" which convinced me to stay committed to the ease off/pullback scenario.
However, one thing about the pullback is that it has been delayed so far long that the respective 30 and 50MA of the major indexes are already catching up with the price and being strong intermediate term supports, they may shorten the depth of the expected pullback to nothing more than a one or two days nudge downwards. If the intermediate bull trend pattern holds, the impending retreat may be a good buy-on-the-dip point. Even though there were no break outs in the traditional sense, the Dow is at a point which is significantly higher than its short term neutral channel and should be re-classified as a short term bull trend now.
For now, the Dow turns an all out bull trend.
Why did I say that today is a mixed trading day even though clearly all three major indexes ended in the green? That's because in a true bullish day, we should not only see all 3 indexes up in the green with good strong volume but also bond traders reallocating into equities causing a rise in bond yields and options traders bringing the total equities put call ratio down as call options speculation increases. But no. Apart from the three green indexes, bond yields actually dropped and the put call ratio barely nudged in the direction of call options (see Bond yield curve and put call ratio chart). All in all, there seems to be an uncertain undercurrent to today's "rally" which convinced me to stay committed to the ease off/pullback scenario.
However, one thing about the pullback is that it has been delayed so far long that the respective 30 and 50MA of the major indexes are already catching up with the price and being strong intermediate term supports, they may shorten the depth of the expected pullback to nothing more than a one or two days nudge downwards. If the intermediate bull trend pattern holds, the impending retreat may be a good buy-on-the-dip point. Even though there were no break outs in the traditional sense, the Dow is at a point which is significantly higher than its short term neutral channel and should be re-classified as a short term bull trend now.
For now, the Dow turns an all out bull trend.
Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!
posted by Jason Ng at 6:26 PM
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