Profit Taking Continues into Earnings Season

The Dow gained a marginal 7.86% today as profit taking continues in this great earnings season.

Yes, lets go back to basics and remember that the market is a discounting mechanism, not a feedback mechanism. As such, all future expectations would have been priced into the market before it actually happens and then if it does, profit taking sets in, resulting in a largely sideways market. If results come in worse than expected, the market will take back those gains that were priced in previously, resulting in a drop.

One good thing we see today is that advancers are now above decliners at last, giving a shade of strength to this short term toppy market. Since earnings releases so far are largely better than expected, we could see this market go sideways a bit more before bouncing off its daily 50MA for new highs.

Even though short term outlook is still very healthy, lets remember that the Dow is now at its weekly 200MA + 11,000 points psychological resistance level, so, lets not be surprised to see some struggle at this level before the Dow do a real breakout.

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