Stock Market Analysis

Tuesday, June 29, 2010

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.

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


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