Stock Market Analysis

Wednesday, June 22, 2011

Another Juicy Bull Trap?

The Dow headed towards its daily 30MA as I have predicted, closing upwards by a huge 109 points today.

Better than expected redbook and existing home sales supported the market today as bargain hunters continued to pour into the market. This caused a small rise in the bond yields across the board as investors reallocated back into equities. However, the magnitude of the bond yield gains isn't big enough to suggest a strong sense of optimism even though the market did rally considerably. In fact, total equities put call ratio was higher today as traders start moving back into put options for protection. FOMC will make its announcement tomorrow which means another volatile day in a market that is still weak and scared.

The Dow moved towards its daily 30MA as predicted with good rising volume. The Dow would most probably move sideways or even slightly downwards tomorrow following such a strong day and will then have to decide where it wants to go in the face of the daily 30MA resistance level. If it continues above the 30MA line decisively and remains above it, then this intermediate correction would be over and the market would be ready for new highs. However, odds still favor the Dow failing at the 30MA and then test the 200MA support at about 11,750 before this intermediate correction is ready to be over.

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