Stock Market Analysis

Sunday, January 24, 2010

Nearly The Bottom?

Welcome to a new week in the US market! As I have predicted at the very beginning of the year, the US market is going to close nasty for January and my "prophecy" came true within just one week as the Dow retreated 537 points, setting a new low for the year.

Just when sentiments are getting very negative, I picked up some early indications that my 10,000 points support for the Dow may just come true as well. First of all, the VIX surged to within the 30 points area last week. 30 is usually when the market turn around in a primary bull trend (which we are in). We saw the VIX hit around 30 several times over the past half a year and everytime it did, the market turned around. We also saw the total equities put call ratio surge above 1, closing at 1.07 last Friday. Everytime the put call ratio make a sudden dash above 1 within a primary bull trend, the market turns around shortly as well. All these "evidences" seem to suggest a turn around after just a couple of days of drops more, which coincides with my 10,000 points support level scenario.

This is also going to be FOMC announcement week (see Stock Market Calendar). Even though the Fed could not have cooked up anything new this week but to keep rates steady, we would definitely see a reaction from the investment community. Nobody can predict what kind of reaction but you will certainly see a total change in market mood after the 2pm release as usual.

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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