Stock Market Analysis

Monday, April 18, 2011

US DOWNGRADED!

US market took a surprising hit today as US credit outlook was downgraded from "Stable" to "Negative" on the long term by S&P. The Dow closed 140 points lower.

Fundamentals
In a surprising move citing "...material risk that U.S. policy makers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013...this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer "AAA" sovereigns.", Standard & Poors cuts US credit outlook from "Stable" to "Negative". This caused investors to rush back into the safety of bonds, depressing bond yields across the board as the Dow went as low as 12,093 intraday. However, technical bargain hunting is clearly still strong in the market as traders swooped in and took the market much higher than its intraday low by the end of the day. Yes, in a market looking for strength amidst global turmoil, S&P's rating cut certainly does nothing to help.

Technicals
Even though today's beat down was surprising and painful, there is one interesting observation; that the 30/50MA support level has been tested and proven strong. Traders swooped in as the Dow went below its short term 30/50MA support level and took it all the way back up to slightly above the line revealing significant support at that level and that the Dow may not be ready to give up without a fight. In fact, should the Dow make a good positive day tomorrow, it would complete the "retest and rebound" scenario I mentioned weeks ago which will allow the market to move on to new highs healthily.

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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