Stock Market Analysis

Wednesday, September 08, 2010

Dow Takes Back Some Lost Ground

The Dow recovered some loss ground from yesterday's huge ditch, ending the day up by 46 points amidst mixed economic numbers.

Fundamentals
Today's economic numbers were mainly about consumers and retail. Basically, what all the numbers said today was that consumers are still not forthcoming and there was nothing positively surprising in all of the numbers today. However, investors still bought into the ditch ahead of tomorrow's jobless claims number, speculating on a better than expected jobless claims since last week's Job report was pretty encouraging. Such extended period of uncertainty is typical of all recovery phases as the stock market moves faster than the real economy. Once the real economy catches up, the stock market would then go into a steady trend. It was the same way in the last economic crisis as well with 2004 to 2005 being the years of turbulent as the stock market moved way ahead of the real economy. After the real economy catches up after 2005, a steady bull trend begun and that is what we are experiencing right now.

Technicals
Like I said in yesterday's analysis (which only those who subscribed to my daily report received through email), it is not surprising to see the Dow take back some lost ground after a huge drop such as yesterday's. Today's trading formed an inside day which was completely engulfed by yesterday's trading range, as such, it is to be regarded as nothing more than a sideways day even though the gain was significant. The daily 200MA and weekly 30MA resistance still looks strong and with volume this low, confidence can't be high and the resistance levels are expected to hold as the Dow slowly enters a short term bought condition. As long as the daily 200MA level holds overhead, the intermediate bull trend continues to be in danger.

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

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

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