Stock Market Analysis

Tuesday, February 02, 2010

Cautious Rebound

The Dow gained 118 points today on the first day of February 2010 as investors accumulate into the "discount".

The Dow did a decent rebound today with optimism reflected in the sudden ditch in the total equities put call ratio (see put call ratio chart) as ISM index beat consensus by a mile. In fact, ISM index is at levels way exceeding the pre-recession 2007 times now. This gives a lot of support for the economic recovery scenario. So, will this result in a turn around in the market?

Even though the Dow did a fairly decent rebound today, today's trading range is still well within yesterday's trading range, which makes it nothing more than a sideways day. There is a little strength showing up in our short term momentum indicators but nothing that strongly suggest the end of an intermediate pullback. Volume was also sorely lacking in today's rebound, suggesting cautiousness. Which means that I am not grading today's rebound very highly and would continue to monitor for better entries. And yes, it is already too late to be newly bearish.

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

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