Stock Market Analysis

Monday, January 18, 2010

Welcome Back From Long Weekend!

Welcome back from the long weekend!

Well, the US market did exactly as we expected last Friday, taking back all the gains of the "suspicious Thursday rally" and more, closing the Dow down a marginal 8 points for the week. From the huge level of participation last week, it is clear that the pullback that is long overdue is currently underway. Strong short term bearish momentum appeared across our short term indicators and bond traders escaped back to the safety of bonds, bringing bond yield down across the board (see Bond Yield Curve). At this point, it is hard to say if this will be a start of a short term or intermediate term pullback. It does have the potential to become an intermediate pullback since that's overdue as well. For now, a test of the 50MA seems certain. How the Dow behave at the 50MA will tell us how deep this pullback will be. If this is the long overdue intermediate pullback, a test of the 10,000 points level seems certain. However, the long term bull trend seems healthy and should lead the market higher after it rebounds. As such, I would actually be looking to buy strategically on the dips using my Star Trading System.

It going to be a relatively quite week ahead with much in the way of heavy weight economic releases. The biggest releases this week would be the leading indicators and Philley Fed on Thursday. I suspect beating consensus won't do very much for the market but not beating consensus could be taken as an excuse to sell off further.

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