No Such Thing As Triple Bottom

The Dow failed to do the rebound that I mentioned last week which is very important but instead broke below its 30MA once again, leading to the big drop today by 268 points.

The US market was put on severe pressure before market due to poor performance in the Asian markets. Yes, that's how the 1989 episode started as well with weakness starting in the Asian market before reflection on the US market. US market opened deeply in the red and was pushed further into the red by an incredibly weak consumer confidence number. Consumer confidence not only failed to meet estimates, it was way lower than the consensus range of 61 to 65 as well, turning in at 52.9. Consumer confidence pulled back primarily due to consumers not getting their jobs back. Unemployment rate hasn't improved much even though the economy is in the recovery phase. Concerns in Europe also serves to keep companies and investors cautious. Yes, this is uncertain times indeed.

Even though the Dow's steep decline was largely surprising, my Star Trading System has prepositioned me with three profitable bearish signals a few days ago when strong bearish signals started appearing in some stocks. This goes to show that there is actually a lead up to today's decline and it was not at all as surprising as it looks. The Dow failed to complete its reversal and is now back into the large volatile channel it was in before. In fact, the S&P500 made the lowest close of 2010 today. As the saying goes, "There is no such thing as a Triple Bottom". The S&P500 and the Nasdaq Composite failed to reverse on its previous double bottom and would certainly pave the way for more downside. The Dow won't be spared. After such a strong one day drop, don't be surprised to see the market go sideways or pullup slightly for a couple of days but the trend still favors to downside for now.

For now, the Dow turns a short term bear trend, intermediate neutral trend within a primary bull trend.

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Awaiting the Critical Rebound

The Dow pulled back 148 points today as Existing home sales deeply disappoints.

What was an optimistic start for the market today reversed sharply after Existing Home Sales missed estimates by a mile (see Stock Market Calendar). The mixed store sales data did very little to combat the deeply disappointing housing data and with the FOMC announcement coming up tomorrow, investors were traditionally cautious even though the Fed isn't expected to change rates anytime soon. However, we are not surprised at all with the pullback.

Like I said in the beginning of the week, the Dow needs to pullback and retest the 30 days moving average and establish it as a support in order for the bull trend to resume and to complete a reversal of this intermediate neutral trend. The magnitude of today's pullback is strong but with weak volume which does not give it much strength. As such, I would expect the Dow to rebound as soon as tomorrow. The quality of the rebound is going to be extremely important and with a good follow up on Friday, the reversal will be completed.

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

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FOMC WEEK!

The Dow gained by 2.35% last week, a total of 239 points, in a critical rebound followup off its weekly 50 days moving average and a breakout of the daily 30 days moving average.

As I mentioned last week, the Dow needs to breakout of the daily 30MA in order to break the intermediate correction and it did. It is now just a matter of establishing the daily 30MA as a support level and then we can look forward to the bull trend resuming. Last week has been an extremely strong week in the market supported by good technical indications. So, are we all safe now?

Not just yet.

Like I just mentioned (also mentioned last week), the Dow needs to pullback and re-establish the daily 30MA as its support level first and this pullback is also extremely critical in the sense that the Dow is now up against its weekly 30MA which could pose some short term resistance. Failing to establish a support on the daily 30MA would once again put the market into trouble even though the possibilities are now slim with so many technical indications in its favor.

This is going to be FOMC week with the FOMC announcement on Wednesday (see Stock Market Calendar) and GDP on Friday, both are market movers. Even though we cannot predict the outcome of these announcements, at least we can tell from the charts that investors are happy and optimistic for now. FOMC, short for Federal Open Market Committee, is the body that is in charge of deciding on the monetary policy to take in order to make sure employment and inflation are kept healthy. The committee meet once a month for two days and then announce their decision, commonly known as the "rate decision", on Wednesday afternoon.

For now, the Dow turns a short term bull trend, intermediate neutral trend within a primary bull trend.

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

Dow Breaks Out!

The Dow made an excellent and critical break above its 30MA today, closing up by 213 points.

Even though volume was lower than the recent average, the breakout today is an extremely critical one that put a question mark on the intermediate bear market continuing. However, it is still too early to tell if this is the end of the bear trend as the Dow needs to retest the 30MA and establish it as a new support level.

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

Reversal Pattern Completes...

The Dow ended last Friday up 38 points and up a total of 279 points last week, completing the important follow up that I mentioned last week.

The Dow is now at at the top of its short term neutral channel that I mentioned last week and going by the healthy rebound and the bullish divergence on the RSI and stochastics, I would see the Dow challenging its 200MA line once again this week. The Dow failed to break the 200MA resistance level 2 weeks ago, leading to a dangerous drop and if it fails again this time round, we could see the Dow make another tumble. However, with the strong technical indications that we are getting, as long as the Dow breaks the 200MA resistance zone, we should see it go back up to challenge the 11,000 points level again.

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

Not A Bad Day for the Dow

The Dow ended the day lower by 40 points as the less than encouraging tone in the Beige book caused some disappointment and sell-offs.

The Dow started off on an extremely strong note as investors accumulate into the intermediate term support level. However, the enthusiasm died off in the afternoon as the language in the Beige Book release (see Stock Market Calendar) brought us all back to reality. Yes, reality is that the US economy's path to recovery is going to be slow and tough. In fact, the recovery around the world is going to be slow and tough (except, it seems, for China) as it is going to take time and pain to unwind out of the credit issues that have been accumulated over the decade. Lets also hope that Europe comes up with ways to stop the domino effect from getting any worse.

As a trader, we cannot predict nor stop world events from happening, as such, we keep our focus on interpreting what's going on and how to profit from it.

The market action today is an extremely encouraging one on an intermediate time frame. The Dow bounced off the low made on 25 May, which is the final gate stopping the bears from running amok, and made a higher high and a higher low today, which is definitely a bullish sign even if the day ended negative. If the Dow follows up to upside today, we could see a short term ride to the top of this short term neutral channel at about 10,250. Yes, volatility is the name of the game now and definitely a good time for quick and nimble day trading as we saw today.

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

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

Dow Recovers

The Dow gained a huge 225 points today, erasing the previous two days' losses, as store sales and pending home sales make good headway.

The Dow made an extremely important rebound today on great consumption data (see Stock Market calendar), taking back over 200 points of lost ground in a single day. Indeed, in an economy driven by consumption, consumers spending is extremely important and is what analysts are looking for as the real sign of the end of this recession. However, did today's rally change anything?

Seriously, nothing.

The Dow continues to struggle within an extremely tight volatile channel bounded by its 200 MA and the 10,000 support level. However, today's rally reinforced the credibility of the 10,000 points support even though volume is relatively low. The Dow is once again up against the 200MA line and we will certainly be watching out for a clean breakout before deciding which direction to go on.

For now, the Dow turns a short term neutral trend, intermediate bear trend and a primary bull trend.

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