Stock Market Analysis

Sunday, June 20, 2010


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!


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