Cautiousness Ahead of Heavyweight Releases

The Dow ended in a relatively sideways day up marginally by 5 points amidst mixed economic data released today.

Fundamentals
Investors are bombarded by pretty mixed economic data today. On the one hand, the retail numbers and consumer confidence showed better than expected performance while investors confidence and Chicago PMI continued to move lower (see Stock Market Calendar). In fact, the Chicago PMI, which is considered one of the leading indicators for the ISM index, turned in its lowest level since Nov 2009 even though the number beat consensus. Investors are also clearly cautious ahead of the other heavyweight releases this week; Tomorrow's ISM index and Friday's Jobs report. Bond yields also dipped across the board as investors reallocate into the safety of bonds ahead of the uncertainty. All in all, the theme of the market now is "UNCERTAINTY". There are analysts screaming for the Dow reaching 5000 within the next two years and plenty others with a much more optimistic outlook. Rarely is the market this divided.

Technical
So, what does these all mean on the technical front? The Dow continues to move sideways along its 10,000 points support level as the bulls put up a last ditch effort to keep the intermediate bull trend alive. In fact, these sideways movement has also helped bring the Dow out of its short term oversold condition which opens up the room to downside. This along with the trend of worsening economic data, the odds sure favors a downside breakout. This week's major releases could be the deciding factor on whether the 10,000 points support holds or gets broken to downside.

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

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Dow Rebounds...

The US Market staged an oversold rally last Friday as bond yields reached levels so low its no longer attractive to many investors. As such, we saw a 164 points surge in the Dow and a rebound in bond yields across the board as investors reallocate into equities. Yes, most big funds see-saw between bonds and equities in order to maintain their portfolio's risk exposure and to meet their profit target.

However, what made this rebound different from just another oversold rally is the fact that it occurred at an important support level, the 10,000 points level. This tells us that investors are finding value at around the 10,000 points area and that the rally has more substance than one that occurs at some other areas. We need to see if investors are going to see into the strength on Monday in order have a feel of whether the 10,000 points level is going to hold up and save the intermediate bull trend.

This week is the first week of September, which is a heavy weight week with important economic releases such as the ISM Index and the Jobs report. Both releases came in lousier than expected in the last round which led to a month long bearish sentiment. Lets see if this week changes anything.

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

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Bear Trend Continues Despite Better Jobless Claims

The Dow continued downwards by 74 points today eventhough Jobless Claims surprised positively as gloom sets in on the US Market.

Fundamentals
Jobless claims surprised positively today, turning in a 473K which is lower than the consensus range of 475K to 510K. However, it does take more than one good week to reverse the worsening trend in the jobless claims that have been observed all year. This is also why investors sold into the early strength and reallocated into the already deeply depressed bonds yield.

Technicals
The Dow continued its way down to the 10,000 points zone as the bear trend continues. If the 10,000 points level is broken, the market will laspe into an intermediate neutral trend with support at the 9700 level. Failing which, the market will fall into an intermediate bear trend. As the saying goes, there is no such thing as a triple bottom. If the market make a new low here, we can be sure that the odds favor lower lows rather than a reversal. At this point, there is no indications of strength at this critical area and I am more convinced that the intermediate bull trend is dying and that the market is in real danger of going back into an intermediate bear trend.

So, are we still able to profit from such a volatile market without sweating? Yes, if you use a volatile multidirectional trading method such as my Ride The Flow System which has made about 5% this month so far without watching the market or breaking out in cold sweat.

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10,000 Points Support In Danger...

The Dow continued the short term bear trend to the 10,000 points level as expected as economic data continue to deteriorate, closing down 133 points.

Fundamentals
Economic data continues to deteriorate today as store sales continue to drop and existing home sales take a serious hit (see Stock Market Calendar). In fact, existing home sales took a 27.2% hit, making the lowest level in 15 years on an annual basis. Yes, you can't have a good economy with a lousy housing market. This is why the housing market has been on the top of every analysts' concerns since before this economic crisis begun. All these numbers convinced investors that the economy might be heading for a double dip recession and spurred a rush to the safety of bonds, depressing bond yields across the board strongly.

Technicals
The Dow headed for the 10,000 points level as predicted and rebounded off it to close at 10,040. With the pessimism going around and plenty of room to go before a short term technical oversold level is reached, there is little reason why the 10,000 points level can hold up. After the 10,000 points level is breached, the next immediate support level would be the July low at about 9700. Failing that, the market will reverse into an intermediate bear trend.

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Head And Shoulders on Weekly Chart

The Dow followed up on the bearish continuation pattern last Friday, closing down 57 point, ending the week down 89 points in a relatively sideways week.

On the weekly charts, the Dow is clearly in a congested area all of 2010 and has completed a fairly wide weekly head and shoulders formation, with head on the weekly 200MA, which puts the odds to downside. A head and shoulder formation is a price chart formation with three peaks; a lower peak followed by a higher peak and then a lower peak one again failing to make new highs. It is a powerful bearish formation which started the bear trend back in 2007. The big bear trend of 2007 also started with a strong weekly head and shoulder formation with lower peaks made on the week of 18 July and 14 December and a higher peak made on the week of 11 October.

The current head and shoulder formation isn't as sharply formed as the one back in 2007 so its still too early to tell if it will have the same effect but for now, the odds definitely favor to downside. This is also supported by the rapidly declining economic numbers which seems to say that the economy is not yet ready for self-sustenance. However, for now, the intermediate bull trend remains intact as long as the 10,000 points level hold up which is providing immediate support.

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

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Start Of New Bear Trend?

The Dow revealed its true nature and intent today as it took back all of its gains of the previous two days, closing down by 144 points.

Fundamentals
Economic numbers continue to turn in worse than expected today. Jobless claims turned in higher than expected at 500K, marking the highest level of jobless claims since late 2009. The Philley Fed, which is a leading indicator for the heavyweight ISM index, turned in far worse than expected as well. Consensus is expecting a positive 7% to general business conditions but it turned in NEGATIVE 7.7% instead which is way outside of the consensus range of -0.6% to 10%. All of these numbers continue to tell the tale of worsening economic performance, leading investors to jump right back into the safety of bonds, lifting bond prices and depressing bond yields to recent lows (see Option Trader HQ).

Technicals
What does a lot of bad news + a nice strong down day with strong volume mean? A VERY Bearish day. In fact, the Dow has completed a bearish continuation pattern today after two days of short oversold rally. As such, odds now incline to downside especially with the daily 200MA and daily 30MA acting as resistance now. If we see a follow up over the next couple of trading days, the intermediate bull trend will be broken. Total Equities Put Call Ratio has also persistently turned in slightly above and around par, which is typical of short term bear trends. From the way odds are stacked against the bull now, I would personally think the end of the intermediate bull trend is imminent and that this is definitely not a good time to start accumulating.

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

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Oversold Rally?

The Dow staged an oversold rebound today like I said it will in my member's newsletter, closing up by 103 points.

Fundamentals
The reason why I think this is a classic oversold rebound is because today's economic numbers turned in worse than expected once again but the market rallied broadly on good volume over almost no reason at all. In fact, index futures are already pointing downwards right after the close. The really important numbers to look forward to are Thursday's Jobless Claims, Leading Indicators and Philley Fed, all of which are capable of moving the market and all of which is anyone's guess with the current trend of worsening economic numbers.

Technicals
An oversold rebound on good volume and made less credible by the strong pullback by the end of the day. Well, I do see one good thing about this rebound and that it occured after a nice bottom side hammer candlestick from yesterday and that it is made right on the Dow's daily 50MA. This means that tomorrow's market action would be critical to determining the nature of today's rebound. If the market followup to upside, I would have no doubt that the 50MA holds and the market's continuing upwards but if the market fails to follow up and pulls back, then today's candle is simply a bull trap that does nothing but kill those who believes in it. So far, since the other major indexes have already broken their short term supports, I would say that there is more downside possibility than upside. As such, swing traders should be cautious about deciding an entry right now but wait for further confirmation.

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

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Intermediate Bull Trend In Danger

The Dow dropped 350 points last week as investors got continuously bombarded by weaker than expected economic numbers both in the US and overseas. Jobs market data continue to worsen with a much higher than expected jobless claims following a poorer than expected jobs report the week before. All these showed that the US economy is not yet ready to start on its own without strong government intervention and led to investors revaluing equities across the board.

Last week's drop was also supported by a continued decline in bond yields (see Bond Yield Curve) as investors reallocate to the safety of bonds along with a strong short term bearish divergence on the RSI. All these tell us that the new intermediate bull trend is now in danger. In fact, the Dow is trading once again below its weekly 30MA on the weekly chart which eradicates any short term bullishness.

There are also a few important economic indicators this week that may set the market into a deeper bear trend; The Empire State Index on Monday, Jobless Claims, Leading Indicators and Philley Fed on Thursday.

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

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Major Selloff

The Dow tanked a grand 265 points today as investors were greeted with poorer economic numbers worldwide.

Fundamentals
Although investors have seen resilient to poorer than expected economic data from the US lately, today's poorer economic numbers from Europe and Asia woke investors to the reality that perhaps it is a global slowdown we are looking at. In fact, investors were so pessimistic all of a sudden that they are still selling off into the futures. In fact, with the futures still pointing downwards, we can look forward to a lower opening on Thursday.

Technicals

A selloff in the Dow after such resilience shouldn't be surprising. What's surprising is the magnitude of the selloff. The Dow cut right through its immediate support level at 10,500 and headed straight for the critical daily 30MA short term support level on strong volume. What I don't like about today's selloff is that it also created yet another short term bearish divergence on the RSI which could prove threatening to the 30MA support. Yes, such are the volatile times we are currently in where market sentiments can change quickly and dramatically overnight. The 30MA support must hold up in order for the bull trend to continue. A breach of the 30MA level would threaten this new intermediate bull trend and put the market once again into a wide volatile channel.

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

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Market Survives FOMC

The Dow rebounded from deep intraday losses after the Fed kept interest rate targets unchanged, closing slightly down by 54 points.

Fundamentals
The Feds decided to keep interest rates unchanged at 0% to 0.25% even though they have been talking about the possibility of lowering it all the way to 0% in today's FOMC Announcement (see Stock Market Calendar). FOMC, Federal Open Market Committee, accouncement is when the feds announce the result of their meeting on monetary policy every month. Investors are obviously pleased with the rates staying unchanged as the market rebounded strongly following the announcement although it did not have the time to go back all the way to breakeven for the day. Trading volume also came back strongly after weeks of declining volume. All these goes to further reinforce the resilience that we have witnessed in the market so far and give credibility to the reversal.

Technicals
Today's market action continue to take the Dow slowly off the short term overbought condition without affecting prices much. A sure sign of strength. There's still nothing in the indicators to doubt this new intermediate bull trend. Immediate support level will be at about 10,500 with immediate resistance at about 11,000.

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

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Bull Trend Remains Intact

The Dow battled against the bears to take back deep intraday losses last Friday, closing yet another sideways day down a marginal 21 points.

Fundamentals
The US market continue to show resilience against lesser than ideal economic numbers last Friday as the Dow recovered from a deep intraday loss of over 150 points to close down only marginally by 21 points. Last Friday's jobs report was lesser than ideal because more nonfarm payrolls were lost than expected, sinking the market early in the day. However, the resilient bulls saved the day once again as a surge of late buying took the market all the way up towards the breakeven point, ending marginally lower. This is going to be a quiet week with no major economic data being released (see Stock Market Calendar) and a good time for investors to digest last week's numbers and what it means for the future.

Technicals
Volatility remains the theme of the market as once again we witnessed big intraday movements of over 150 points. There are no strong signs to doubt the new bull trend that is in place now even though the market remains in a short term overbought condition. Again, lets not forget that the Dow is used to trading in short term overbought condition for extended periods of time. Looking at the weekly chart, we can see that the Dow has completed a reversal and is once again trading on top of its weekly 30MA which once again is a bullish sign.

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

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Cautiousness Ahead of Jobs Report

The Dow moved sideways today, pulling back a marginal 5.45 points ahead of tomorrow's Jobs Report.

Fundamentals
The Dow held its ground today in the face of higher than expected jobless claims but with extremely thin trading volume. Apparently investors are apprehensive about tomorrow's jobs report and the few those are still in the market are secretly optimistic from the way they held the market against the jobless claims numbers, probably due to the positive ADP report earlier this week. How the jobs report will turn out is everyone's guess. However, it does seem from the resilience so far that a better than expected jobs report might help the Dow break out of its current 10,680 top for greater heights while a lousier than expected number could probably not cause much panic as we have seen how strongly the market has held up against poor economic numbers so far.

Technicals
So, its a sideways day today with the Dow still in short term overbought condition. However, like I always said, lets not forget the Dow is used to trading upwards under short term overbought conditions. So far, the short term bearish divergence that we have identified last week has not proven to be a threat to this new intermediate bull trend. There is now no strong reason to doubt that the market is once again in an all out bull trend, unless the daily 200MA fails to hold prices up.

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

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Factory Orders Declines...

The Dow corrects slightly after yesterday's huge rally by 38 points on weaker than expected store sales and retreating factory orders.

Fundamentals
The ISM index on Monday already indicated slowing growth in the manufacturing sector and today's factory orders continue to confirm those numbers by turning in -1.2% versus estimates of -0.5% (See Stock Market Calendar). In fact, it fell right out of the consensus range of -1% to 0.1%. However, even though these numbers are retreating, it is only normal in the grander picture of things after such an explosive growth coming out of the recession. In fact, major economic indicators were way higher than pre-recession levels and the recent retreat only brings back down to more sensible levels. That is probably why we didn't see the kind of panic selling associated with poor economic numbers.

Technicals
So, did the Dow do anything significant today? Not really. Like I always said, it is normal for the Dow to go sideways or slightly in the other direction following huge single day moves. Volume is also much lower than average today which gives little strength to today's pullback. For now, the base of the up candle formed yesterday will serve as short term support. As long as it is not breached, the short term bull trend continues to be intact. The only thing that keeps technical traders from jumping in right now is the strong short term bearish divergence formed on the RSI, without which, there will be no doubt that this is the kind of reversal we saw back in February.

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

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A New Month... A New Trend?

Another new month arrives with heavy weight economic numbers such as the ISM index and the Jobs report (see Stock Market Calendar) to be released this week.

Fundamentals
The Dow put up a strong fight last Friday, taking back early losses, closing sideways by 1 point. Market opened deep in the red last Friday as the second quarter GDP turned out worse than expected. Consensus was expecting a 2.5% GDP but it turned out at 2.4%. Even though it was disappointing for a start, investors decided that it really isn't that bad and bought into the weakness as the Chicago PMI and Consumer sentiment beat estimates. However, last Friday's market action still looks very dubious on both the fundamental and technical front. On the fundamental front, the bond yield curve (see Bond Yield Curve Chart) dipped significantly suggesting a rush back into bonds from equities (since there were no new releases) which isn't a sign of strength. This means that investors are concerned about this pullback disintegrating into another significant leg down. So what are the possibilities on the technical front?

Technicals
Even though market did a strong showing last Friday, I am concerned with an extremely strong short term bearish divergence formed right now on the RSI and Stochastics. This, along with the fact that the Dow has barely cleared the gravitational field of its daily 200MA and that it is now at a significant 10500 resistance level, makes a real case for concern whether or not the Dow will get knocked down by the daily 200MA once again like it did back in June. We will monitor how the Dow do at its daily 30MA which is short term support. This also mean that the daily 30MA level is no longer automatically a good accumulation area. Volatility is still the theme for the year and all investors should stay cautious and nimble.

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

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