Stock Market Analysis

Thursday, August 12, 2010

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.




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

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