Stock Market Analysis

Thursday, August 19, 2010

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.




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

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