Stock Market Analysis

Sunday, May 09, 2010

Technical Error?

Interestingly, the market failed to turn around last Friday as widely expected if it was indeed just a simple technical error. Perhaps its due to the unexpected rise in unemployment rate as the Dow continued its journey downwards by 139 points.

The cause of last Thursday's historical ditch, which amazingly resembles the Black Monday ditch, is still a matter of speculation. In fact, the explanation that its just a technical error isn't convincing most retail traders as they continued to sell off last Friday despite pockets of savvy investors buying into the ditch. However, we now know how Black Monday ended, yes, HIGHER. That's how I expect the market to continue following this spectacular intermediate term pullback. However, at this point in time, there are still no confirmation on the technical front of any reversals yet. There are signs of a bottom, like the long bottom shadows and exhaustive volume near the 200MA support level, but there is no confirmation yet and so no reason for trend followers like us to jump onto the bandwagon.

This is a quiet week with no big economic data (as are all second week of the month) and a week for investors to really calm down and decide what to make of all these mess right now. Plenty of reasons to be optimistic and plenty of reasons to be pessimistic, which camp will win? Due to the duality of these "reasons", trend followers like myself prefer to numb ourselves to these noises and simply follow what the market does. Remember, there is no room for soothsayers in the market.

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


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