Stock Market Analysis

Thursday, March 10, 2011

Middle East Boils Up...

The Dow took a hit along with the rest of the world on Middle East turmoil, closing down sharply by 228 points.

Fundamentals
Even though crude oil continued to retreat on short term profit taking, world markets were still hit today as turmoil in the Middle East spreads to Saudi Arabia.
To add fuel to fire, US jobless claims announced today turned in sharply higher than expected, spreading fear throughout the market right off the gate. Investors
rushed back into bonds, depressing bond yields across the board and options traders rushed back into put options, raising the total equities put call ratio
sharply above par. All in all, market was ruled by fear today, perhaps too much fear?

Technicals
The 228 points correction in the Dow was a sharp and unexpected one, bringing the Dow all the way down to its intermediate support level on the daily 50MA.
We definitely hope to see some support around this area especially tomorrow. Like I mentioned to paid subscribers yesterday, this correction may work out
in the same fashion as the one we saw back in November 2010 and back then, the 50MA kept the intermediate bull trend intact. In fact, when total equities
put call ratio spike the way it did today, it usually goes back up the other way the very next day. In fact, index futures are already pointing upwards. The 50MA
support is now critical. Failing at this level could mean a free fall all the way to 11,500 where the intermediate bull trend would really be put to test.

For now, the Dow remains in a short term neutral trend, intermediate bull trend and 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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