Stock Market Analysis

Tuesday, April 27, 2010

Panic, Panic, Panic

The Dow ditched by a huge 213 points today as the Greek debt problem sent waves of panic across the trading floor.

Soveriegn debt problems always cause worldwide panic as memories of the Russian debt default comes back to the minds of the long time veterans. We saw the same thing in the Dubai problem as well. However, we do not see the Greek debt problem being of that scale and certainly would not have that kind of world wide impact. I certainly do think that the Greek debt issue is merely an excuse for investors to finally decide to get out of an extremely short term over extended market.

Like I mentioned two days ago, the market is still short term over-extended and it is now pending a strong intermediate pullback like the one we saw back in January. I was wondering what might be the catalyst for such a pullback and this Greek debt problem might be it. Investors were in all out panic; Bond yields collaspe across the board as investors reallocate, VIX shot up by over 30% and trading volume was way higher than average. The Dow is once again at its 11,000 psychological level which now coincides roughly with its daily 30MA. If this level fails to hold, short term support will be at its daily 50MA level of about 10,750.

For now, the Dow returns to a short term neutral trend within an intermediate and primary bull trend.

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