Stock Market Analysis

Wednesday, January 20, 2010

Biggest Down Day of 2010

As expected, the Dow sold off today, closing the day down a huge 122 points, making this the biggest single day drop of 2010.

Yes, like I said yesterday, the market is going to sell off early today and it did. Yesterday's "fake out" was definitely baseless and none of our short term indicators agreed with that move. Even though store sales recovered sharply this week, the sense of the market being way overbought is still too strong and encourages no optimism. Options traders also made the biggest move back into put options this year, bringing the total equities put call ratio back to almost par at 0.92 (see Daily Put Call Ratio Chart). Bond traders also went back into their safe havens, depressing bond yields across the board over the past few days.

On the technical front, short term bearish momentum continues to rise but interestingly, the market appears to only be moving largely sideways. In fact, we won't be surprised to see a slightly positive day tomorrow. The 30 and 50MA of all three major indexes have already caught up which makes me wonder if the overbought condition would be digested in a short term sideways trend instead?

For now, the Dow turned short term neutral 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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