Stock Market Analysis

Monday, May 31, 2010

Welcome Back From Long Weekend!

Welcome back from the Memorial Day Long Weekend! Hope you guys enjoyed your holiday!

The Dow bounced off last week's dragon tail formation and is now once again up against its 200 days moving average line, closing down 122 points against it last Friday.

Markets around the world lapsed into uncertainty as the situation in Europe worsen as the domino effect starts to swing to other European nations. Yes, if Europe does not unwind from this crisis properly, it is sure to affect the rest of the world as well. In fact, the US market is in such a strong intermediate bear trend now that I am inclined to think of any pull ups right now as bull traps. Indeed, the market truly have went way too far ahead of the recovery in the real economy and investors would certainly be tempted to take profit and invest in the real economy instead.

This week is going to be a heavy weight week with the traditional giant economic data such as the ISM index and job reports releasing this first week of June 2010 (See Stock Market Calendar). With most economic numbers already in pre-recession levels, I would not be surprised to see more volatility in the numbers and hence more volatility in the market. In fact, from the way the RSI is leading lower strongly over the past few months, I would see the market being range bound between 11,000 and 10,000 before the market decides which way to move. All in all, the world market is in a state of uncertainty with a few important and potentially destructive financial and political hot spots brewing up. This is a market for the nimble.

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




Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

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